Rebuilding The Profitability Of Your Credit Card After Covid-19

The ongoing COVID-19 pandemic has affected all most all aspects of society. If you compare, you will find that the impact of COVID-19 pandemic on the credit card sector is mild than other sectors. However, the profitability of this industry is severely affected. Lower international travel will severely affect the fees related to foreign currency. So, how to make it normal? Let’s know about this in detail.

The importance of intelligent cost management

With a distressed revenue lever, it can be very hard to pull out. So, this is where cost management strategy will cone to play. There is no doubt that the decision will have to be made, but it is important to keep an eye on prospects while doing this. Savings are very hard to get, and, in some cases, you may need to hire experts to help. So, how can you get the savings? To understand this, you need to focus on two major factors. These are:

1. Reward program costs and
2. Card scheme fees

Understanding the rewards cost

One of the most crucial parts of the credit card proposition is the point-based reward programs. Such programs are quite effective in attracting as well as retaining the customers. Cost reduction option generally focuses on lowering the earn rates or increasing the points to redeem the rewards. Under this method, efficiency gains need to be prioritized and can be easily achieved in different areas, for example:

1. Well-planned reward program covering the financial drivers.
2. Perfect targeting of the various offers and incentives.
3. Lowering customer gaming along with behavior that affects the value.
4. Conducting cost-optimization and assurance activities.

If initiated perfectly, the efficiency program can lower the cost by around 10 to 15 percent. It won’t affect the market competitiveness and customer proposition.

Understanding the card scheme fees

When a debit, prepaid, or credit card is used, the acquiring bank and the issuing bank pay some fees to the card scheme with which it is connected; for example, it can be Mastercard or Visa. Both Mastercard and Visa are the most profitable organizations. So, what can you do to lower or contain the costs?

Some of the leading banks in Australia, Europe, and America have taken some remarkable steps for this. Banks have primarily focused on:

Creating an administrative center of excellence

Bringing some particular responsibilities into one center of excellence will offer better control and understanding.

Know what you are paying and explore the quick-win savings

Make sure you are not paying for what you are not getting. You can take the expert’s help here.

Negotiate the improved terms

The bank’s biggest saving can be achieved by negotiating the terms with the card scheme.

Issuers can now easily increase the cost efficiency factor without lowering staffing levels. Getting this done is a no-regret action. However, if you find it difficult to understand, don’t hesitate to go for expert help.