It might be a small irony for consumers who have maxed out their credit cards, but their credit card issuers are under financial pressure, too. With every major company and educational institution offering its own credit card, their marketing costs have increased because everyone is going after the same wallet share. They have to find the marketing dollars to grow their portfolios, which sometimes is as difficult as finding the cash to pay the minimum balance.
"This is an industry that measures its success in basis points (one basis point is one-tenth of one percent)," says Dan Montgomery, Director of Operations, Convergys Customer Management Group. "Operational efficiencies are the only way to drive growth."
Reducing operations costs is one way to find the cash needed to invest in marketing, he says. He points out that the merger and consolidation activity in the industry led to the outsourcing of some back office services. "These consolidated companies realized they could maximize efficiencies by not doing everything in-house," says Montgomery. After their outsourcing successes, "everyone has to outsource to keep up," he says.
One of the most effective ways to reduce operating costs is to segment the customer base. "You don't have to treat all customer transactions the same," he explains. For example, the card issuers utilize an outsourcer to cradle their high-value customers and deliver care for lower-value transactions at a lower cost. An outsourcer can leverage economies of scale that include alternate geographic locations, automation, and best practices. Segmentation of customers and transactions allows credit card issuers to focus on the efforts that expand their revenues," he adds.
Outsourcing More Than Call Centers
Credit card issuers are now outsourcing more than their call centers. Montgomery says they are now outsourcing more high-value services including:
- Fraud activity detection
- Credit and collections
- Relationship management (moving from one credit card to another)
- Balance transfers
- Early step welcomes (to find out why new users haven't activated their cards)
Montgomery says credit card issuers may send up to 25 percent of these processes offshore for high-value customers but as much as 50 percent for lower value processes.
Montgomery says the financial institutions "want to provide the best touch point possible for their customers."