Visa Study Reveals That Diversified Card Portfolios Drive Long-Term Profit

Companies that offer a diversified range of payment card products stand to extract significantly more value from their customers over their lifetime, according to a new study from Visa DPS and PYMNTS Intelligence. 

Credit card issuers that also offer debit and prepaid cards are 3.5 times more likely to have cardholders with high customer lifetime values than those that only issue one type of card, according to the study.

That means issuers that offer credit, debit, and prepaid card products are better positioned to create long-term profitability and have more engaged customers.

The study defines a high customer lifetime value as one that exceeds $2,500.

A purchase made with a credit card often generates more revenue for a card issuer than a transaction of the same value made with a debit card, all else being equal. That’s primarily due to the Interchange fees on credit card purchases, which typically outpace those a debit card transaction yields.

Most companies that issue cards don’t offer credit, debit, and prepaid cards.

But financial institutions that only offer credit cards may be leaving money on the table, and many issuers are doing just that. The majority of companies, 62.1%, that issue payment cards only issue two of the three: credit, debit and prepaid cards, the new study indicates. 

Another 28.8% of card issuers offer just one of the three types of cards, and only 9.1% issue all three. 

Leading software company Salesforce defines customer lifetime value as a measure of “the total revenue a business can expect from a single customer over their entire relationship” with a company. 

The Visa and PYMNTS Intelligence report takes customer lifetime value (CLTV) further by subtracting costs associated with acquiring and retaining a customer’s business, such as expenses for marketing, rewards programs, and servicing. 

Issuers that aren’t accustomed to measuring their performance by CLTV may want to consider doing so to better gauge the total value they can expect from cardholders. 

“For card issuers, CLTV is a critical metric that reflects the profitability of a cardholder, allowing bank and non-bank issuers to segment their customer base and prioritize strategies to enhance retention, reduce churn, and attract high-value customers,” the study’s authors wrote.

Customers who use their cards frequently for purchases can be of significant value to issuers, particularly when the cards carry annual fees and cardholders pay for big-ticket transactions with them. 

But issuers that don’t offer multiple types of cards may be making it easier for their customers to switch to another financial institution for their payment needs. 

A recent report indicates that, in the U.S., more than 85% of consumers own a debit card linked to a bank account and 72% of adults have at least one credit card.

If a credit card issuer’s customer has to turn to another financial institution to open a debit card, then they may ultimately decide to open a credit card with the debit-issuing company to consolidate their payment tools under one provider. 

The Visa DPS and PYMNTS Intelligence study highlighted that issuers offering credit, debit, and prepaid cards are 3.5 times more likely to have customers with lifetime values over $2,500 than those that issue only one type of card. 

But CLTV metrics may not be enough to persuade issuers to add card types to their product lineup. After all, the length of time a consumer keeps doing business with a particular company can differ greatly from one individual to the next.

And executives at a credit card issuer may have directives to improve key metrics over the course of one year, not over a customer’s tenure with the company. The study found a correlation between offering multiple types of cards and achieving business success in a year.

Among issuers offering credit, debit, and prepaid cards, 78% “reported a good or great year in terms of business performance.”

That number dropped to 73% for companies that only issue credit and debit cards and 69% for those that only issue a prepaid card and either a credit or debit card. The figures fell even lower for businesses that only issue a debit card.

“For issuers still focused on a single product, the business case for diversification is stronger than ever,” the study’s authors wrote. “Developing a roadmap for card expansion — supported by risk assessment, pricing models, and a go-to-market strategy — can elevate both CLTV and brand loyalty.”