Agent Card Programs – 2012 Performance

One of the ways for card issuers to augment their organic/branch card sales growth is to offer agent card programs to other, usually smaller, financial institutions.  The sponsoring organization provides the card expertise and management and card member service while the agent institution generates new applicant/card accounts.  Agents are often selected and offered varying rewards based upon size, number of households served, number of branches, geography, and card sales technology they have available at their branches, and thus resources for new card growth potential.

For doing so, the sponsored organization received a bounty or reward for each account/active account, usually between $30 and $75 (based upon who does the solicitations), plus a negotiated percentage of those card members’ net sales (often in the range of 50 to 100 basis points or more).  The loan loss exposure and P/L risks are maintained by the sponsoring organization, so the agents involved usually have no credit or interest rate risk to assume, unless there is some agreed “participation” arrangement.

Since 1983, R.K. Hammer CEO Bob Hammer has been involved in creating and managing these agent card relationships, more than 800 of them to date.  Tracking the results of agent card programs each year since R.K. Hammer went private in 1990, they publish the estimated results of agent card programs nationally each year, in their year-end series of card trends.

In the R.K. Hammer Agent Performance Model, 2012 saw an increase in the number of new card accounts created in the branches of some notable agent card programs.  Hammer then ranks those into three performance segments:  Weak Performers, Medium Performers, and “Best-in-Class.”  The results for 2012 are shown below:

2012 HAMMER AGENT CARD PERFORMANCE MODEL

In terms of ranking the card issuing industry into these three segments, it is estimated by R.K. Hammer that only 15% of all agent programs are performing at the “Best-in-Class” level.  They typically offer superior sales training and retraining, a wide variety of attractive sales rewards for staff, and competitive research, growing new accounts generated by these agents by 7% annual increase in 2012.  In all his years in the business Hammer recalls that the best agent performer he ever saw produced 240 new card accounts per branch per month, a record that has gone unmatched before or since.

50% of those in the agent programs Model achieve Medium Performance level, offering some sales training, and average rewards, growing new card accounts by a smaller 3% annual increase in 2012.

The remaining 35% of agents fall into the Weak Performer category, with little card sales training, modest rewards, and little else, showing no net gain in new card accounts year-over-year.

Choosing a Superior Third-Party Card Service Provider

For those considering whether to perform all the functions and therefore assume all of the costs and compliance obligations of a card issuer, or to get another firm to do it for you, consider:

A third-party provider of card services can be a sensible choice for some, given they often have decades of card experience (which your employees may not); they are experts on all the new regulations (which are changing annually lately); and they have proven marketing expertise (which takes years to accumulate); so you can enjoy higher rewards for accounts generated through their expertise ; and they will often pay you a good portion of what you could make if you owned the portfolio yourself (without all the credit risk and interest rate risk, plus the operating and regulatory compliance costs).

There are at least 19 Federal laws and regulations that card issuers must observe to the letter at the risk of severe financial penalties, not counting endless National Association rules and regs which must also be followed.  How a small card organization with limited resources can possibly keep up with all that is breathtaking, to say the least.  In those situations a successful agent card program just makes more economic and business sense to us, especially for those FI’s without substantial management experience in card as well as the required technology, marketing and compliance expertise which you must employ.

Go with such a card service provider whose references date back many decades, not an untested start up with less than ten or twenty years under their belt (which you should check, every reference provided), and whose service levels for their sponsored agents rate them 5-star (in the eyes of those agents and their card members served), and who allow you to participate in the earnings of the assets in some manner (not everyone will do that, though).  Importantly, if the agent has branch technology capable of pre-screening and/or approving new card applicants in the branches, then that should also boost the payout to the agent organization even higher, as would an agent’s online marketing and technology resources which could exceed even the branch-sourced card business being produced…all pushing card profits higher, and for assets one doesn’t even own.  A win-win for the smaller FI, or even a larger one whose strategies have taken it in other product directions, rather than card.

About R.K. Hammer/Card Knowledge Factory
Since 1990 R.K. Hammer has been a leading international card consultancy.  Their practice focuses on assisting issuers to establish and grow their agent programs more profitably, conducting portfolio valuations and brokering card portfolio sales, serving as interim management for issuers in transition, and training card managers to become high-performing card executives in 50 countries.  Founder and CEO Bob Hammer has been involved in consumer finance and card since 1980, serving most of the top 20 issuers in the U.S., plus many government agencies, hedge fund investors in card programs, among others. 

For more information on R.K. Hammer and their Research and Analysis division, Card Knowledge Factory® go to R.K. Hammer.com