New Credit Card Solution Helps Credit Unions Get More Value Out of Their Marketing Spend

Credit unions that have denied a prospect’s application for a credit card have a new resource to help prevent the applicant from turning to another financial institution for their credit needs.

Fintech firm RAI Partners helps credit unions preserve customer relationships even when a credit card application doesn’t go through.

After all, marketing departments at credit unions can spend significant funds in an attempt to entice a person to apply for one of their credit cards. But a prospect who is a prime candidate to grow with an institution may have a credit profile that doesn’t align with the company’s current appetite for risk.

In that scenario, the institution may reject the person’s credit card application. In turn, the prospect may take their business elsewhere, and the credit union’s return on investment for their marketing spend likely takes a hit.

But RAI Partners can help prevent that situation from unfolding. We spoke with Brian Scott, Chief Growth Officer with RAI Partners, to learn more about the challenges credit unions face in growing their customer bases and how they can overcome them.

An issuer’s return on marketing investment may drop if it can’t turn prospects into customers.

Credit unions and banks can send information to RAI Partners about a customer when they’ve denied their application for a new credit card. The company will review the application and extend an offer to about 90% of those people to allow them to open a credit card, according to Scott.

“Our goal is to serve more members for credit unions or customers of banks through a credit card,” Scott said. “When we approve a card, it has that bank or credit union’s brand on the card, so they get that person looking at their brand all day. But we own all of the risk of that card account — it’s on our books.”

A credit card issuer may provide additional products to help customers manage spending and cash flow. Within the issuer’s organization, employees may share the same goals but differ on the best strategies to achieve them.

That’s why a program such as the one RAI Partners offers can be so valuable. It can help issuers keep marching toward goals that track their ability to attract and retain customers while helping them stay within the boundaries of their risk management policies.

RAI Partners not only keeps prospects from turning to competitors but also works to protect established customer relationships that issuers may have grown dissatisfied with.

“We can take a portfolio of credit card loans that a credit union or bank has and review the accounts that they don’t want anymore because they’re no longer profitable or a good credit risk,” Scott told us. “And we can take many of those accounts off their hands.”

That practice allows issuers to maintain relationships with customers who have grown less creditworthy over time. The services RAI Partners offers can also assist companies that have acquired or merged with another issuer that employed underwriting standards that led them to offer credit cards to riskier borrowers.

For consumers, a new credit card can be the first product they open with a particular financial institution. Someone who submits an application for a credit card with a bank or credit union may turn to that lender for a bigger loan, such as a mortgage, in the future.

“But if you decline them for the credit card, they’re never going to join your credit union,” Scott said. “We provide a way that they can still become a member, and it allows a credit union or bank to cast a much bigger net in terms of who they want to go after.”

Credit unions spend heavily to attract new credit card applicants, but much of that investment goes to waste when nearly half of those applications are declined. Scott noted that, on average, credit unions reject close to 50% of the applications they receive.

By working with RAI Partners, issuers not only improve their chances of converting applicants into members but can also strengthen their bottom line.

“If we can approve those declined applications, then we’ll do a revenue share with the credit union,” Scott explained. “When that card gets used, the credit union makes money. So it’s taking something that was previously just an expense and turning it into a revenue stream for them.”

Collaborating with a company like RAI Partners can also allow an issuer to connect a cardholder with the card that most suits their lifestyle.

Credit unions reject around half of the credit card applications they receive.

Scott told us his company is aggressive about moving people from a secured card to an unsecured one, and it is constantly working to shift cardholders to the next card that aligns with their economic needs.

Most credit card issuers rely on traditional factors when reviewing applications. RAI Partners takes a different approach: it looks at where an applicant is in their financial journey and estimates their future earning potential when evaluating creditworthiness.

By projecting a customer’s lifetime value, issuers can gauge how much revenue that person may generate over the long term. If those projections shift, RAI Partners gives issuers a way to bring a cardholder back onto their books later.

“We hope the cardholders never know that we exist,” Scott said. “We want to create a positive experience for the credit union whose brand is on the card.”

Banks and credit unions that issue credit cards tend to see better results when they discover more creative ways to serve cardholders and make their marketing dollars go further.