Credit cards helping you save-that sounds like a oxymoron! Are banks trying to become more customer centric!
Debit & credit cards are different silos within banks-Credit cards operates as a separate P&L and often the Debit card reports into the Liability business head. And of course it is rare for the silos to talk to each other in any business! So how on earth can these businesses become more Customer centric!
Credit card companies in the US that once were a vehicle for out-of-control spending are now helping consumers stay out of debt. Citi and MasterCard Worldwide announced that Citi will implement the consumer application in the U.S. of MasterCard inControl – a service that gives cardholders the ability to set spending controls and receive real-time information about their accounts. By itself this is nothing new, Quicken & others have been pushing this service for a while now.
Interestingly, MasterCard’s announcement comes days before the final provisions of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, the most comprehensive overhaul of the credit card industry in history, goes into effect today, August 22.
Dan Ariely the Behavioural economist has spoken about a “self control” credit card.
But is it practical to expect a financial institution to gustily embrace such a concept especially when they earn billion in “interest charges”. Is there an opportunity out there for a bank to be truly “customer centric” without “breaking the bank”!!
Here, from Dan Ariely’s Predictably Irrational is the idea of a” self-control” credit card:
A FEW YEARS ago I was so convinced that a “self-control” credit card was a good idea that I asked for a meeting with one of the major banks. To my delight, this venerable bank responded, and suggested that I come to its corporate headquarters in New York.
I arrived in New York a few weeks later, and after a brief delay at the reception desk, was led into a modern conference room. I began by describing how procrastination causes everyone problems. In the realm of personal finance, I said, it causes us to neglect our savings-while the temptation of easy credit fills our closets with goods that we really don’t need. It didn’t take long before I saw that I was striking a very personal chord with each of them.
Then I began to describe how Americans have fallen into a terrible dependence on credit cards, how the debt is eating them alive, and how they are struggling to find their way out of this predicament. America’s seniors are one of the hardest-hit groups. In fact, from 1992 to 2004 the rate of debt of Americans age 55 and over rose faster than that of any other group. Some of them were even using credit cards to fill the gaps in their Medicare. Others were at risk of losing their homes.
Now the ground was ready and I started describing the self-control credit card idea as a way to help consumers spend less and save more. At first I think the bankers were a bit stunned. I was suggesting that they help consumers control of their spending. Did I realize that the bankers and credit card companies made $17 billion a year in interest from these cards? Hello? They should give that up?
Well, I wasn’t that naive. I explained to the bankers that there was a great business proposition behind the idea of a self-control card. “Look,” I said, “the credit card business is cutthroat. You send out six billion direct-mail pieces a year, and all the card offers are about the same.” Reluctantly, they agreed. “But suppose one credit card company stepped out of the pack,” I continued, “and identified itself as a good guy--as an advocate for the credit-crunched consumer? Suppose one company had the guts to offer a card that would actually help consumers control their credit, and better still, divert some of their money into long-term savings?” I glanced around the room. “My bet is that thousands of consumers would cut up their other credit cards-and sign up with you!”
A wave of excitement crossed the room. The bankers nodded their heads and chatted to one another. It was revolutionary! Soon thereafter we all departed. They shook my hand warmly and assured me that we would be talking again, soon.
Well, they never called me back. (It might have been that they were worried about losing the $17 billion in interest charges, or maybe it was just good old procrastination.) But the idea is still there-a self-control credit card-and maybe one day someone will take the next step.
Big organizations have a lot of fear concerning peoples' privacy, but book publisher, event organizer and industry luminary Tim O'Reilly thinks it's time to throw our old models out of the window and re look at privacy afresh. "The old model of privacy isn't taking into account any of the trade offs, and clearly people are willing to make those trade offs," he says. "Google maps on your phone sends your location to someone else's server every time you look something up, for example." O'Reilly's position on privacy is a very important one, at this point when the future of privacy is being debated.
"Technology is taking us a direction where more and more is known about us. It’s hard to be completely anonymized. I think we need a complete fresh look at what trade offs we're making and why. A good example is health care privacy. It's true that there are some diseases that still have stigmas around them, but our need for privacy is mostly about adverse selection from insurance companies. The problem we need to solve is adverse selection due to pre-existing conditions, not to treat the info like it's toxic waste. If we look at the benefits of using the information - they are incredible.
"One thing we can do is look at places where people have given up a fair amount of privacy and feel ok about it. The financial arena is one of those places - it's ok to do data mining for fraud prevention.
What do you think?
- Should we as a society be sacrificing privacy for the sake of innovation and more relevant services?
- What is the role of Marketers, especially in India, where data privacy regulations are nascent or not there at all?
- Can Analytics play a role in uncovering more insight in the data and making the marketing more relevant thereby crowding out the irrelevant messages ?
- Should some industries lead the thinking on data privacy? After all Telecom services, Banks & Retail probably have the largest customer databases. Should Marketers in these businesses think ahead and establish “high ground” in how they treat their customer information?
- What about data sharing across industry- Co branded credit cards have used data across Retail , airline and other sectors to launch customized offerings? I Mint has done the same as a coalition loyalty program that has multiple participants-Banks , retailers, Airlines etc.
- How should the CTO/CIO think about this? What kind of customer privacy safeguards can be built into the technology roadmap?