Challenge:
A PAG client in the US credit card market was not achieving its Year 1 growth and loss-rate projections on a new credit card product. Balances were growing in the lower half of the credit spectrum and activation on higher FICO balances was not happening at a rate to offset the lower credit balance growth.
PAG Solution:
PAG reviewed the Client’s underwriting approach to see if adjustments could be made to the existing account management strategies to stimulate balance growth in the proper areas. PAG found the Client was being too conservative with its initial line assignments and authorization strategies. Average credit lines for 680+ FICO customers were only $1,800 while the Client was blocking nearly 20% of transactions at the point of sale. These higher-end customers simply weren’t using the card: They weren’t being assigned sufficient credit lines to meet their shopping needs and using the card was a hassle.
PAG used refreshed Vantage scores along with other data attributes to quickly build credit lines in a revamped Credit Line Increase (CLI) strategy so those higher-end credit customers could see significant credit limit increase to meet their shopping needs. PAG also rebuilt the authorization strategy to fit the demographics of the Client’s portfolio, resulting in fewer stoppages at the POS without a significant increase in transactional fraud. PAG also designed Reissue strategies so the Client could continue to pursue the right credit growth when the initial batch of cards expired.
Client Benefits:
- PAG was able to increase balance growth in customers with an initial line of $2,000 or greater by 40% while lowering overall Year 1 delinquencies on the portfolio by more than 10%
- PAG complemented the enhanced CLI program by loosening the authorization strategies, enabling higher-credit customers to feel more comfortable using their cards. The resulting model and analysis increased transactions per month on active users by more than 20% with a minimal increase in fraud losses to only five basis points.
- PAG worked with the Client’s marketing team to deliver digital and direct mail messages to inactive customers by promoting its reward platform and mobile application. The results were a 22% increase in first-time use of the card in the next nine months.
- The Client exceeded its Year 1 growth targets and has since seen no substantial risk in fraud or credit losses. Growth continues to trend in the right direction.
- The Client has re-engaged PAG to have a PAG SME on its risk council. That person is helping guide account-management strategies while making sure learnings are being shared with the underwriting team to ensure wins are seen in the initial book of business for future portfolio bookings.
