Finding a Credit Card Program Your Bank Can Own
In our previous blog, we identified business customer relationships as an essential target audience for community banks. Historically, loyal business relationships spanning multiple bank products are often the most profitable. The next step to deepen these relationships is clear: finding a business credit card issuing program your bank can fully own and manage to provide profitable credit cards to your customers that compete with national card issuers. In this blog, we’ll dive into the disadvantages of typical Agent Bank programs and the complexities of direct credit card issuing, both of which can cause community banks to lose customer relationships. We’ll also introduce a solution that can give you more benefits without these pitfalls.
Limitations of Typical Agent Bank Programs
Since most banks don’t issue their own credit cards, they often refer customers to other banks offering an Agent Bank program. In these programs, the referring bank earns a modest referral fee for each credit card application and may receive a small share of the interchange fees. However, this model yields limited returns and hands over valuable and profitable relationship customers to the Agent Bank. Additionally, the referring bank doesn’t influence credit decisions affecting their customers.
Challenges of Direct Credit Card Issuing for Banks
Another option banks may consider is becoming a credit issuer by partnering directly with a credit card issuer processor. In this model, the bank retains full control of its profit and loss (P&L) and credit decisions. However, this option presents challenges for most banks as it is expensive and requires significant scale, specialized credit card expertise, and advanced technology. Banks must invest in their own underwriting systems, fraud prevention measures, and compliance processes to succeed as a direct issuer, making this route costly and complex, with implementation timelines over 12 months.
CorServ’s Optimal Credit Card Turnkey Program
There is a better option for banks wanting to implement business credit card issuing into their products and services. As highlighted in our previous blog, a significant 69% of small businesses are expected to acquire a business credit card within the next two years. Community banks are in a prime position to gain immensely by offering this high-margin financial product, but the traditional options have significant drawbacks. This is where CorServ’s solution presents the optimal choice.
CorServ provides a turnkey program designed specifically to enable banks to offer a profitable credit card program that they can own. This innovative solution allows banks to launch their own branded credit cards for businesses and consumers, giving them ownership over the P&L while ensuring a program launch within 120 days.
Beyond these advantages, participating banks retain ownership of interchange fees, loan interest, and other fee income while partnering with an issuing bank for network sponsorship, risk management, compliance, and servicing. Banks using CorServ’s program average over 6% ROA without adding staff or infrastructure. They also participate in credit decisions on applications that don’t receive automated approvals and gain transparent access to detailed program data, reporting, and a comprehensive servicing portal.
Community banks have a unique opportunity to boost their services and protect valuable customer relationships by taking ownership of a credit card program. Without credit card offerings, these banks risk losing relationship customers to competitors who provide business and personal cards. CorServ’s turnkey solution offers an attractive, hybrid alternative to Agent Bank programs and complex direct credit card issuance. CorServ provides banks with branded credit cards, ownership of their P&L, and increased ROA, without the need for significant investments.
Download the full guide or contact CorServ for more information about starting a credit card program.
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