Credit card issuers are rolling out an increasing array of
customisable card offerings in an effort to recruit and retain
customers, signalling a growing trend of offering users interactive
and personal choices to make their cards ‘top of wallet’.
Truong Mellor reports.

The credit crunch has exposed significant weaknesses in the
cards portfolios of many of the large card players in the US.
Capital One recently announced that it had set aside $1.9 billion
for bad loans in the fourth quarter of 2007, bumping up its
forecast for full-year charge-offs to $5.9 billion. American
Express, which has traditionally focused on the prime and affluent
segments of the card market, has nonetheless stated it will take a
$440 million charge to boost reserves for bad loans. With the
weakening of the credit market, the challenge for credit card
providers is to create new and innovative offerings to entice new
credit-worthy customers.

Capital One Card Lab

Capital One recently launched a new card scheme that it claims to
be the market’s first truly customisable product. The Capital One
Card Lab is an interactive web tool that lets potential customers
select from a variety of options to construct their own
personalised card package. The Card Lab offers a series of
interactive choices related to interest rate, annual fee, and
reward options, and consumers can select the combination of
features that are most important to them. As choices are made, the
options in the remaining categories are narrowed down, eliminating
options that do not work together. For instance, consumers who are
willing to pay an annual fee can earn rewards faster. This offers a
whole new level of transparency for consumers, who will be able to
see in real-time the trade-offs that are required to create the
card that works for them.The Card Lab also offers the option of
personalising the card itself with unique images and photos.

“Consumers today want control and expect the ability to
customise products to meet their needs,” said Pam Girardo,
spokesperson for Capital One. “Instead of buying music albums in
the store, people are compiling their own online – and rather than
buying a car off the lot, people can now design and purchase the
precise automobile they desire online. We are proud to offer
control to consumers to customise their card – inside and out – and
we believe it will generate loyalty and confidence among our

Aside from the control and flexibility this offering presents to
the prospective cardholder, Capital One can also utilise web data
to gain an understanding of consumers are looking for and which
features are the most popular. From a marketing perspective, it
offers the company significant insight into how it can refine its
credit card programmes to meet the needs of the potential

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Nevertheless, there is a chance that the Card Lab may backfire
if it proves to be overly complicated. A multitude of personalised
options may dissuade potential customers who may find the process
too burdensome. The paradox of excessive consumer choice paralysing
decision-making may also be applicable to financial products.
Whether the average consumer is engaged enough to tailor their
credit card to such a level of detail as offered by Capital One
remains to be seen.

Other offerings

Despite the claims of Capital One to be the first to offer such
flexibility in the credit card market, several other institutions
have launched similar schemes. The Mosaik MasterCard, unveiled in
early 2007 by Bank of Montreal (BMO), offers customers the options
to customise the various rewards offered such as Air Miles and
cashback. Cardholders can choose their own card design as well as
select the interest rate plan that best suits their spending habits
from two options – the No Fee Rate Plan for customers that pay off
their entire balance monthly and the Low Rate Plan that allows
cardholders to carry over a balance. The Mosaik card, now enabled
with MasterCard’s ‘tap and go’ PayPass technology, also offers
features such as a concierge service to help arrange flights and
accommodation and travel and medical protection. The Mosaik card
comes with several popular options, including a US dollar card to
bypass fluctuating exchange rates and a Gold WestJet rewards option
that offers 1 reward mile for every $15 in card purchases.

TD Banknorth opts for interest rate choice

TD Banknorth (TD), the US retail banking division of Canada’s
Toronto-Dominion Bank, has recently launched a series of credit
cards entitled Simply Flexible that offer consumers the option to
select the rate of interest paid according to the amount of their
monthly payment. Cardholders who pay a minimum of 10 percent on
their monthly balance will be offered a low rate of 7.99

“Simply Flexible is a win-win for customers. When they choose to
pay more than their minimum monthly balance, they’re rewarded with
lower interest rates, the option of paying off their balance sooner
and receiving a positive reflection on their credit rating,” said
Tom Dyck, executive vice president of retail product management for
TD Banknorth.

TD has also introduced Cash Rewards Platinum, a new cashback
rewards card, as well as Easy Rewards Platinum, a points reward
card without any limits. All of these new products have no annual
fees, as well as an initial offer of 0 percent interest for up to
six months on eligible purchases and balance transfers. Various
other benefits such as 24/7 emergency assistance, emergency card
replacement, lost/stolen card reporting assistance, car rental
collision coverage, and a damage waiver programme are also

“From our research, customers told us they would like to have
greater control over their finances and be rewarded for financially
responsible decisions. TD is always looking to improve upon the
customer experience, and our new line of credit cards provided us
with an opportunity to respond to customer feedback while enhancing
relationships with existing customers,” said James Gaffney,
executive vice president of card services at TD Banknorth, in an
interview with CI’s sister publication Retail Banker

One of the most serious knock-on effects of the subprime crisis
in the US has been the steep increase in bad credit card debt,
which TD has been fortunate enough to largely avoid. Additionally,
TD has been able to circumvent the mortgage subprime-related
writedowns suffered by its US peers, reporting a 44 percent rise in
fourth quarter profits and a 24 percent increase in net income for
fiscal year 2007. Its targeting of financially cautious credit
cardholders is wholly consistent with its conservative risk-reward

This range of products was designed to appeal to low-risk
customers, and TD has also launched a marketing campaign intended
to educate consumers about the control they can exercise over their
credit. “We are promoting our suite of credit cards to our current
customer base in our New England and mid-Atlantic footprints with a
multi- media advertising campaign that includes television, print,
online, direct mail and in-branch marketing. Our credit card
advertising will target our current customer base; however, both
customers and non-customers may apply for TD Banknorth credit
cards, and both will have access to the same offers,” added

The Simply Flexible range of cards will go head-to-head with a
new offering from Discover, the fourth largest credit card issuer
in the US. Its Motiva card, introduced last March, has been
designed to give consumers cash rewards for good credit management.
Each time Motiva cardholders make on-time monthly payments six
times in a row, they receive their next month’s interest back as a
pay-on-time bonus.

Garanti Flexi takes off in Turkey

The Visa-backed Flexi Card issued by Garanti Bank has been offering
consumers the opportunity to customise their cards since February
2006. The Flexi card allows cardholders to create a unique product,
tailoring the interest rate, reward scheme and annual fee to their
own specifications. During the online application process,
applicants can adjust more than ten parameters, giving them over
9,000 different possible options for their Flexi Card. These
features can also be modified from their initial settings with a
simple text message.

In addition to customising the Flexi card’s financial features,
consumers can also design their own card’s appearance from a
collection of standard templates. There are six standard Flexi
designs, more than 50 clip art images, and the customer can upload
a photograph onto the card surface.

These innovations have not gone unrecognised. In 2007, the
Garanti Bank Flexi Card won the Web Award for Outstanding
Achievement in Website Development by the Web Marketing
Association. The bank, Turkey’s third largest privately owned
financial institution with total assets approximating $25 billion,
has always had a strong focus on customer service. There are
currently 300,000 Flexi cards in use, and Garanti Bank currently
has a total of 6.5 million credit cards across Turkey.

Mehmet Sezgin, CEO of Garanti Payments Systems – the single
service point for all Garanti cards – believes that it is the sheer
flexibility of the programme that has made it successful, citing
the various rewards schemes as a significant factor. “If you look
at Flexi today, it’s only 17 or 18 percent [of users] who prefer
the lowest interest rate option; the majority are going for
different rewards programmes,” he told CI. In particular, Sezgin
highlights the popularity of the bank’s Bonus multi-merchant
loyalty scheme, which has already been licensed to three other
Turkish banks.

Prior to its launch, Garanti had spent 12 months developing the
product with marketing and focus groups. Additionally, the Flexi
Card has been very helpful for the bank in terms of helping it
understand its customers and the type of rewards they are looking
for, according to Sezgin. “One of the good things about Flexi is
that it is ongoing live market research for us. Rather than doing
market research on an offline basis, having a programme like Flexi
tells us what preferences customers have and how they

Innovation and security

Beyond the customisable financial options for credit card
programmes becoming available, there will be further innovation
with the plastic cards themselves. US-based firm Innovative Card
Technologies (ICT) has been at the forefront of such developments
since 1998, when the company developed a payment card with an
embedded magnifying glass that was issued by several players
including JP Morgan Chase. Since then, ICT has embedded cards with
lights powered by an internal battery connected to an on/off switch
and a card that emitted sounds through an attached speaker.

More recently, ICT has the DisplayCard, a new security solution
developed to combat online banking fraud. The company has embedded
an operating system into the card – the press of a button on the
card activates a battery, circuit, and chip, which then sends an
algorithm-generated passcode to an embedded display. The code is
good for only one use during a limited time, thus proving
possession of the card and guarding against electronic fraud.

ICT developed the DisplayCard alongside Swiss firm NagraID,
makers of electronic transponders for RFID and smart chip devices.
US-based digital identity assurance providers ActivIdentity and
VeriSign have both signed up as distributors for the DisplayCard.
In Korea, the Industrial Bank of Korea will distribute 12,000 ICT
DisplayCards to its employees to authenticate internal systems
logon, while local IT solution provider Innet has already ordered
100,000 units to be fulfilled by the fourth quarter of 2008.

The DisplayCard is already proving popular in South and Latin
America, with Brazilian IT security consultancy firm InfoServer
planning to offer the product to its clients and regional payment
card provider Intelligensa signing on to act as distributor.

Innovations such as these are tapping into a growing need on the
part of consumers to be more financially literate and
debt-conscious at a time when credit card spending in many markets
is slowing down. The possibility of choosing an interest rate that
rewards responsible borrowing is something that issuers are
recognising as one of the best ways to retain profitable customer
relationships, while security innovations such as those from ICT
will help to reassure consumers about the safety of their payments
in the e-commerce space.

All in all, innovations that are brought about by listening to
the needs of the end consumers, rather than just innovating for the
sake of it, are likely to be the most successful overall, as well
in cementing the bond between issuer and cardholder.