All businesses want to increase the profitability of, and lengthen, the customer relationship — extending the customer lifetime value (CLTV). In doing so, they sidestep the expense, in time and money and manpower, incurred when forced to forge new customer relationships to replace those that have ended.
In the “The Best-In-Class Modern Card Issuer: Driving Customer Lifetime Value Through Innovation,” a PYMNTS and Visa DPS collaboration, 451 executives who fill head of payment roles at U.S. banks and non-bank card issuers gave their insights into what works, and what’s critical, in cementing healthy CLTV in financial services. Among the key findings: partnerships, including with the right processors, can make all the difference in bringing new products and services to those clients that keep the relationship sticky.
Delving into the CLTV, we found that 3 in 10 card issuers report an average CLTV of $1,000, far lower in dollar terms than the 21% of issuers reporting a CLTV average of $2,500.
“High-CLTV issuers outperform their peers by leveraging multiple monetization strategies, offering personalized financial products and employing data analytics to optimize user engagement,” we noted. There are knock-on effects of a strong CLTV, as the issuers can cross-sell new offerings to their clientele, which moves revenues beyond basic banking services, and gives the banks more capital on hand to innovate even further, giving rise to a virtuous cycle that improves the CLTV.
To ensure greater reach and success into their chosen markets, banks (and here we mean banks of all sizes, not just the largest players) must use a digital-first mindset when coming to market. But innovation cannot be an individual endeavor.
Moving toward embedded financial services and products is imperative, and consumers are ready to embrace flexible credentials and other cutting edge features that help them toggle between accounts and pay over time depending on their preferences on a transaction-by-transaction basis.
Thirty-one percent of issuers cite advanced customization as crucial to a best-in-class platform. Seventy-five percent of issuers have indicated that they will seek to upgrade their platforms over the near term, which opens the door for new partnerships to take root.
There’s wide recognition of the values inherent in partnership — and it’s the banks that see that value. As many as 62% of high-CLTV banks or credit unions use co-branded partnerships, compared to 13% of high-CLTV FinTechs. Co-branded credit cards are primarily used by FIs to target high-value customers, where the brands feed off one another, as issuers find success collaborating with well-known retailers, airlines or other service providers.
Issuer processors that offer innovative capabilities to the issuers so that the latter can reassure customers that there’s high security in the background protecting the fund flows. Tokenization and advanced data analytics are emerging as key lines of defense against fraudsters. About 48% of high-CLTV issuers say they chose their main issuer processor because they offer flex credentials, while 53% say the same of EMV chips.
