Getting good financial advice

A credit card is a financial tool," says Jay Singer, vice president of MasterCard Advisors for Asia Pacific.

You, the consumer who has three credit cards in your wallet bulging with store receipts and unopened shopping bags at the back of your closet, repeat it to yourself.

A credit card is a financial tool. A credit card is a financial tool. A credit card is a financial tool.

Really?

As in a "tool" to buy six pairs of shoes and five handbags on one weekend until the plastic melts from the heat of being swiped?

Probably not.

Or as in a "tool" where you treat it like your mortgage, which by the way you fully understand and take responsibility for, otherwise you lose the roof over your head?

That’s more like it.

Believe it or not, banks don’t exactly like the idea of consumers abusing their plastic even if they can bury the poor souls in debt. (They’re bankers, not lawyers.)

"If people abuse their cards, it hurts the industry," says Singer, who has 14 years of experience in consumer marketing, including a decade in card marketing with MasterCard and American Express.

How one consumer uses his card is just one aspect of a picture that involves millions others who have totally different shopping habits and attitudes toward plastic. That’s only from a consumer point of view – but one finds that banks take their cue from consumers.

Consider a market saturated with cards and customers looking for more things than just a free flashlight for their reward points. In these days of excessive competition, how will banks address the issue of attrition, where customers drop them and they’re swamped with inactive accounts, or how to develop brand loyalty? Or what if a bank has just acquired another bank, what’s the best way to convert its accounts? What about in a developing market, how does a bank acquire new customers? Or how does one target the right customers? When is the right time to launch new products? Are a bank’s delinquency and write-off losses at the right level given its portfolio demographics? And in an environment where technology is changing so fast that fraud issues are a big problem, how does a bank keep up without having to built the infrastructure from scratch?

That’s where MasterCard Advisors steps in. It is a global professional services firm focused on the payment industries. Established just last year, this professional services arm of MasterCard International offers expertise in brand, technology, customer relationships, and data and information.

The company is in a unique position to offer such services to banks, being in the payments industry for more than half a century and a leading innovator in technology, plus it has an unsurpassed data warehouse. In the future, according to Singer, such services may even be offered to businesses apart from banks.

Singer says, "The idea is to do it with an intellectual process, not the cookie-cutter approach because no two banks have exactly the same objectives or problems. We don’t provide just one solution."

How do they localize expertise? MasterCard is an American company (which incidentally revolved last year into a private stock company owned by its member banks) doing business around the world – but it’s one thing being a credit card company and quite another being a consulting firm.

"The Advisors team immerses in the local market and we use our country managers to understand the local market. We focus on research and we’ve done research in virtually all our markets in Asia. Our experience in building and operating one of the premier global transaction processing network means we can deliver the full-range of know-how and experience to any project."

Singer describes their expertise as "providing solutions that drive success."

What MasterCard Advisors brings to the table, he says, is a deep industry knowledge, access to a continuing stream of new products and services, and meaningful and measurable results. It offers "solution sets" through each of its practice group. "We offer clients best-in-class" expertise to meet their business objectives. MasterCard Advisors’ current practice groups include marketing solutions, operations solutions, cardholder services, customer relationship management, information technology solutions, research services, and credit risk management.

One of the projects that Singer worked on was with HSBC in Taiwan to reduce the level of voluntary attrition in its credit card portfolio. The Advisors did a "retention project," looking at various reasons why consumers were giving up their credit cards with the bank.

"We looked at it from marketing, operational and data perspectives. We did a diagnostic of all their data, we looked into the factors of attrition." The Advisors team profiled the customers and did a statistical model to help predict which category of clients might leave in the future.

"We analyzed the data, worked with the bank and coached them to develop a statistical model, which is basically a tool indicator, a score. We overlaid that score to create a marketing strategy, an operational strategy to retain customers. The result of the project: we reduced their attrition rate by almost 18 percent."

The portfolio analysis even helped them predict which customers were more likely to give up their cards, and figure out how much cards they helped saved for the bank. "Doing the models was a lengthy process, from about 15 to 20 weeks."

Singer says that depending on the project, a MasterCard Advisors team could be made of one person, like himself, or several people. Today, Advisors has over 150 professionals working all over the world. Heading the Asia Pacific Advisors, Singer has a wide experience in product strategy, acquisition strategy, portfolio management, new product development, marketing communications, market research and project management.

The success of the Advisors projects is due in no small part to MasterCard’s vast third-party data which they get from independent analysts the world over. One of them is Purchase Street Research, the payment industry’s most comprehensive resource for research and advisory solutions, whose analysts "draw on experience gained through decades-old relationships with more than 23,000 financial services firms and leading technology vendors in more than 200 countries."

Another case in the Advisors file involves a large North American issuer that needed to develop a new co-branded product which would appeal to both a prime and under-served consumer and meet the partner’s "in-store spend objectives." Examples of co-branded products are those cards launched by, say, supermarkets or department stores.

"Advisors provided full consulting support for the product launch which included new product concept development, qualitative communication research, value proposition research, creative development of all communication materials, as well as production management and card design."

The team worked on the project for 12 weeks.

The results: Response rates averaged 170 basis points over industry average. New account acquisition exceeded expectations by 20 percent. Over one million accounts were generated within the first six months. Use of the product exceeded the issuer’s expectations, generating over US$1 billion in outstandings. In-store spend levels were maintained to partner’s satisfaction.

Singer describes the Advisors’ methodology as "encompassing strategy-to-implementation." First, the Advisors professionals do a thorough investigation, looking at each project as a "partnership" with the client. They use a strategic, analytical approach coupled with experience and in-depth knowledge of the payments industry as well as country-level know-how.

"Information is valuable only when insight and experience convert it into actions that optimize performance." Advisors works from strategy to execution to deliver measurable results.

"We deliver tailored solutions to achieve immediate goals, increase efficiencies, and improve your bottom line."

Speaking of bottom line, Jay Singer tells us that in many markets, especially the mature markets where people have three to four cards in their wallets, the way to go now for banks is through segmentation.

"In very competitive markets like the US these products, like co-brands or what we call Lifestyle products, are one of the best ways to get somebody’s attention because it’s more focused to a market segment.

"Rewards and the like are still things that issuers must keep in mind. But the low interest rate is what’s going to drive acquisition. But every market is different. For instance, in Taiwan it could be the card design or the bank or its added value proposition. It could be a variety of reasons."

Be that as it may, there is one common thing in any market: A credit card is a financial tool.

Now repeat that three times.