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Credit Card Customer Retention

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13 June 2011
Zilvinas Bareisis

Benchmarking Study Results

Abstract

Customer retention is a critical activity for most financial institutions. However, as Celent’s and Oliver Wyman’s study of credit card issuers demonstrates, there is a considerable diversity in retention operational practices and performance results, with retention rates ranging from 10% to 50%.

In this report, Credit Card Customer Retention: Benchmarking Study Results, Celent explores customer retention performance and practices among ten credit card issuers and a UK bancassurance player. The study participants represent a diverse group of card issuers from the UK, Spain, and the US. They range from small to very large issuers, and include a mix of bank issuers and monolines, a finance division of a major UK retailer, and a consumer loans joint venture.

The study found that all participants were focused on reactive retention, with only 45% also engaged in proactive retention. While most deploy specialised resources, the degree to which the unit is dedicated to cards retention varies widely across the issuers. Likewise, there are important differences in the operational tools deployed by the issuers, such as decision-making aids, customer segmentation, save tools and agent incentives. Performance data is not always robust, and many issuers have only a qualitative understanding of the value of retention. One of the biggest improvement opportunities for most issuers is to ensure that "outlier" retention (e.g., written and "out-of-hours" requests for issuers geared up for an inbound retention model) is actively managed.

"The majority of credit card issuers have grown to appreciate the importance of customer retention," says Zilvinas Bareisis, Senior Analyst with Celent’s Banking Group and author of the report. "As a result, customer retention area is in transition with many respondents either actively changing their practices or recognising the opportunity to improve."

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