When we speak to financial institutions about owning their own credit card program, we hear the same concerns over and over again:
- “The risk is too high.”
- “We don’t have the bandwidth.”
- “It’s too expensive.”
- “We’re using an Agent Bank partner.”
These misconceptions often stem from experiences with outdated, legacy solutions in the market – systems and processes that have unnecessary complexity, high costs and limited control. The scope of owning a tailored credit card issuing program can seem intimidating, but the concerns we see most often can be easily resolved with the right partnership.
So, how can banks launch their own credit card program for their customers without the operational and financial burdens?
Myth 1: Owning a credit card program is too risky
Credit card issuing risk varies significantly depending on the target customer segment and lending approach. The risks are indeed higher for subprime issuers, who specifically target high-risk customers with high-interest rates and fees, or from large national issuers that rely primarily on single-product customers rather than building deeper connections with existing customers.
The risk has consistently proven to be much lower for banks adopting a relationship-focused approach. CorServ enables banks to actively participate in the credit decisioning process, leveraging their deep understanding of the overall customer relationship. This strategy not only reduces the risk of credit and fraud losses but also significantly strengthens customer loyalty and trust.
Myth 2: Program management is complex, expensive and time-consuming
Managing a credit card program independently can indeed seem overwhelming with technology, staffing, compliance and operational management requirements. CorServ removes the complexities and takes the heavy lifting out of our clients’ hands through our comprehensive turnkey issuing solution.
We provide banks with modern technology, analytics and reporting, credit underwriting best practices, and fully compliant and complete program management. This means there is no internal need for a client bank to hire additional staff or invest in new infrastructure.
Myth 3: The profit is not worth the investment
Due to the perceived complexity and risk, many financial institutions underestimate the profitability potential of a well-managed credit card program. A tailored, comprehensive product set, covering the full spectrum of customer needs across consumer, small business, and commercial segments, can significantly enhance profitability while deepening customer relationships for the bank.
Commercial credit cards are the most profitable and the fastest growing card products, yielding an average return on assets of over eight percent. Furthermore, CorServ creates custom proforma scenarios that enable banks to select which credit card products they want to offer, based on their strategic objectives and the needs of their customer segments. Banks that strategically offer tailored credit cards to their customer base can significantly boost profitability and enhance customer loyalty.
Myth 4: Agent Banks are the best partner for credit card issuing
On the surface, Agent Bank partnerships may appear convenient due to minimal operational demands. However, this ease often masks significant drawbacks, including limited profitability, loss of customer control and strategic risks that banks frequently underestimate. Under typical Agent Bank credit card programs, banks earn a negligible percentage of the profit on the referrals they make. Customers are essentially referred away, which means banks relinquish control over customer relationships to the issuing partner, potentially harming customer loyalty. Banks have no input in underwriting decisions and may have to provide loss guarantees for certain customers and products. This exposes banks to significant credit and financial risks without corresponding control and transparency over credit decisions or portfolio management.
In contrast, CorServ’s modern credit card issuing program provides banks with full ownership of interchange, interest and fee income, participation in credit decisioning, and complete access to customer data. Partnering with CorServ provides greater profitability, strategic control, and ownership of customer relationships compared to traditional Agent Bank models.
Don’t be misled by myths.
Owning your credit card program is not just feasible but it is strategically important. CorServ empowers community and regional banks to:
- Launch profitable and competitive credit card programs quickly and efficiently
- Retain full control of your customer relationships and access to all data
- Minimize risk through relationship-based lending and proven program management
- Enjoy significantly higher profitability compared to legacy Agent Bank arrangements
Learn more about CorServ’s programs at: https://www.corservsolutions.com/payment-card-solutions/
CorServ Business Inquiries: