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Data for today’s episode is provided by Mercator Advisory Group’s report – Secured Cards: Five Reasons Credit Card Issuers Should Serve This Market.
Five reasons banks should serve the Secured Card market:
- Relatively low risk because of the collateralized credit line, good for all financial institution sizes
- Deposits: Increasing deposits is critical for smaller banks that can’t use asset backed securitization fro lending
- Address New Markets: Issuers can pursue customers beyond high FICO-scored accounts
- Millennials & Gen Z: Both face budgetary challenges which can be alleviated with secured cards
- Balance Portfolio: Balancing receivables with a range of product avoids, “one size fits all”
- Increase Revenue: The ability to increase “net non-interest revenue” as well as “net interest revenue”
creates a base for cross selling
Mainstream programs add deposits and create a feeder group for general-purpose credit cards.
While most credit card issuers chase mass-affluent consumers and those with 700+ FICO Scores, a downstream secured card issuance program with a progression plan for advancing cardholders from secured to unsecured account status can be a strategic advantage.