Fearful of taking on more risk in today’s economic environment, banks are choosing to focus on keeping current credit card customers rather than acquiring new ones, according to direct mail data from Chicago-based Mintel Comperemedia.
Mintel’s data shows that banks are sending more mail, but fewer credit card mailings. Although direct mail offers from banks (such as for checking accounts) to both existing and potential customers climbed to 342 million in the third quarter from 306 million in the second quarter and 315 million a year earlier, Mintel saw credit card mail volume fall to 1.86 billion from 2.04 billion in the second quarter and 2.44 billion one year before, stemming from a decline in credit card mail offers.
Banks reach out to existing customers
That is largely due to a shift in focus. “Banks are really looking for deposit dollars, and they’re trying to retain the customers that they currently have in house,” says Mintel Comperemedia President Pamela McHugh, noting that current bank mailings fall into two categories: retention mailings and acquisition mailings. With retention mailings, “most of the banks are out there communicating with their existing customers, making them feel safe about their bank,” McHugh says. Meanwhile, instability in the banking sector due to the disappearance of some banks and the acquisition of others means opportunities for those banks that are left still standing. “In this uncertain time, they want to take advantage of mergers” to secure underserved customers, McHugh says.
|Banks increasing mailings, but cutting credit card offers|
The extension of credit is an entirely different animal, however. Credit card acquisition direct mailings fell to 1.34 billion in the third quarter from 1.54 billion in the second quarter and 1.86 billion last year. Credit is getting tougher to get, with banks “holding back on acquiring new credit card customers,” McHugh says. Additionally, “the offers that are going out are becoming much more conservative,” she says.
Direct mail messaging changes
The style of those card offers is also changing. “I have noticed changes to tone and messaging in acquisition pieces,” says Mintel Comperemedia Senior Analyst Lisa Hronek, such as referring to current economic woes in mailings and focusing on how credit cards can function as tools to make ends meet in day-to-day life. “I think we’ll continue to see credit offers reflecting the current economic climate,” she says.
Instead of looking for new borrowers in the current economic environment, banks are focusing their mailings on existing cardholders, with Mintel data showing credit card retention mailings rising to 503 million in the third quarter from 479 million in the second quarter. “It makes sense to turn inward and increase levels of engagement with existing customers, Hronek says. “The issuers are going to look internally and try to find the most stable, reliable customers.” Those cardholders are the ones likely to receive offers encouraging them to charge more and more often — such as “spend and get promotions” that offer the chance to spend “X” and get “Y,” Hronek says.
Still, from a risk standpoint, this approach makes sense, says Dennis Moroney, research director with research and advisory services firm TowerGroup. “Right now, you want to hold on to your best credit risk customers,” Moroney says, adding that banks know the customers they have better than potential customers they may take on. “The decision to make more retention mailings makes tremendous sense.”
Consumers who would rather not get these bank mailings do have the ability to opt out, just as they can for junk mail overall.
Issuers keeping tabs on borrowers
At the same time, Moroney says that banks may be wary of customers seeking credit — even those with good credit scores, whose search for credit could signal knowledge of an impending job loss. That could mean potential problems for the borrower down the road.
In place of spend-and-get promotions, banks are instead extending a helping hand to more troubled cardholders. Hronek highlights issuer mailings that discuss credit counseling and rewards for payments on time, in advance or for more than the minimum amount due — changes that benefit both parties involved, so that the “bank can minimize risk and cardholders can maximize rewards.”
Hronek acknowledges that in order to target only certain borrowers with these mailings, banks must be identifying which customers are at increased risk of being unable to make payments. Still, the mailings aimed at potentially troubled cardholders strive for the same goal as materials sent to more stable borrowers: decreasing the likelihood cardholders will switch to plastic from another bank. When it comes to cardholders’ financial well-being, “I think the customer would be more likely to stick with a bank that takes a more active interest,” Hronek says.
That approach has more immediate benefits for both the bank and the borrower. When it comes to credit card defaults, “I don’t think that’s in anyone’s interest right now,” Hronek says.