to unlocking the financial benefits of loyalty, according to a
recent study from MasterCard Advisors. In this article,
Greg Howes, global solutions leader, and
Philip Lawrence, global solutions leader for
MasterCard Advisors Payment Services, outline the prime
relationships and revenues with existing cardholders is critical to
card issuers’ profitability. The key to enhancing these
relationships lies in distinguishing and understanding both what
cardholders might say about their level of satisfaction and how
they actually behave. Only by assessing both cardholder attitudes
and behaviours in a rigorous and disciplined way can card issuers
identify appropriate strategies and make the right investments to
influence those behaviours to their benefit.
Issuers often rely on internal customer satisfaction surveys as
the basic tool for assessing the strength of their cardholder
relationships. While such surveys are always useful for revealing
customer attitudes and perceptions of the bank’s products and
services, they are only a starting point for measuring true
customer loyalty. To understand what drives loyalty and profitable
long-term relationships, issuers need to understand the larger
context, including questions such as:
• Do cardholders who say they are satisfied use their cards more
• Does higher cardholder satisfaction correlate with greater
• Do satisfied cardholders recommend their card programme to
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• And to what extent do satisfied cardholders tend to buy
additional products and services from their issuing bank?
To address these questions, MasterCard Advisors annually
conducts a Cardholder Satisfaction and Loyalty study, which
provides important insights into this aspect of cardholder
Satisfaction does not equal spend
To understand the
limits of cardholder satisfaction data, let’s look at satisfaction
scores among the top 13 US card issuers (identified in the study,
but shown anonymously here), which vary from 42 percent to 74
percent. Interestingly, the research revealed that those with
higher levels of customer satisfaction do not necessarily
outperform their peers in behavioural measures such as monthly card
spend (see Figure 1). Nor do those with lower satisfaction
numbers always under-perform from a spending perspective.
Cardholders who claim to be satisfied may, indeed, have few
complaints about their cards and be pleased with services they’ve
received. But our research shows that high customer satisfaction
ratings are no guarantee that customers consider the card in
question to be their primary one, or that they will use it more
Measuring performance against your peers
The study documents that cardholder satisfaction can be highly
influenced by many factors, including the demographic and risk
characteristics of the consumers targeted and the way they use
their cards. Issuers targeting a high proportion of revolving
cardholders, for example, can generally expect to have less
To gain real value from measuring customer satisfaction, issuers
should assess their performance against competitors with similar
business strategies, target customers, and range of product
offerings. This is true not only in measures of current
performance, but of trends in satisfaction scores over time. For
example, if a bank has improved its satisfaction scores from, say
40 percent to 50 percent, its progress may be either real or
illusory, depending on how its competitors, particularly those with
comparable strategies, have performed.
Card advocacy is a key measure of loyalty
Measuring and tracking
satisfaction is an important management tool to gauge cardholder
perceptions of the issuer. Satisfaction levels are one dimension of
cardholder loyalty as defined by four critically important
• Card retention
• Card usage
• Likelihood to refer the card to others
• Likelihood to buy other products and services from the same
Among these four key factors, the likelihood that a cardholder
will recommend a card to a relative or friend tends to correlate
most closely with cardholder satisfaction data (see Figure
2). The cardholders in the study who are most likely to
recommend their card to others (customers of Issuer 12 in Figure
2), also have the lowest risk of attrition, say they have more
reasons to use this card than any other card they own, and are most
likely to add additional bank products and services, such as
savings, mortgages, and insurance.
One of the most influential factors on customer satisfaction
appears to be the cardholder’s experience with an issuer’s service
– a call centre, for instance. Likewise, cardholder dissatisfaction
over the outcome of a call experience is particularly consistent
with lower overall customer satisfaction scores.
As shown in Figure 3, when the loyalty factor of “likelihood to
recommend card” is compared to customer service issues important to
cardholders – such as satisfaction with outcome of a call or
overall satisfaction with the representative – the correlation
between these factors is quite high. This correlation reinforces
how important it is that issuers ensure that service interactions
are positive customer experiences.
Primary card designation is critical
Our research also reveals
achieving primary card designation is a crucial dimension for
building behavioural loyalty. While the typical consumer has access
to a number of different cards, most rely on a single card in their
wallet for the majority of their spending.
The primary card ratio – the percentage of an issuer’s active
users who consider its card their primary card – is a key measure
of this loyalty dimension. Among the top 13 US card issuers, this
measure varies from a low of 48 percent to a high of 74 percent.
Once cardholders have selected an issuer’s card as their primary
card, the share of spending placed on that card – generally about
65 percent – is fairly consistent from issuer to issuer (see
Figure 4). What does this mean in practical terms? The more
customers who are willing to select an issuer’s card as the primary
card in their wallet, the greater their spend and the more revenue
for the issuer.
Raising card spend and loyalty
Card applicants were asked to identify specific characteristics
of the card offer that had prompted them to apply for a new card in
the past six months.
By far the greatest number – 45 percent – said their strongest
reason for applying was the card’s lack of an annual fee, while 30
percent were motivated by a low introductory APR, and 22 percent by
a balance-transfer opportunity. However, consumers with these
motives may represent a poor bet for the issuer. When the card
requires no annual fee, the consumer has no reason not to apply.
Possession of a no-fee card implies nothing whatsoever about
loyalty. And when consumers apply primarily to get a low
introductory APR or a balance-transfer opportunity, the odds they
will eventually defect to another card are high.
Rewards programmes, by contrast, motivated 33 percent of all
card applications and can be a powerful tool for enhancing card
companies’ market share and share of wallet. Indeed, next to the
absence of an annual fee, rewards are the most-often cited reason
for new card applications. We see significant opportunities for
market penetration through rewards cards, since only slightly more
than half of all survey respondents indicated that their current
primary card provides rewards.
Another promising, though underutilised, strategy for boosting
loyalty and card spend is to encourage the use of cards for
recurring, automatic payments – for utilities and other household
bills. Credit card usage for such payments remains low, even with
consumers’ primary cards (see Figure 5), because cheque
writing remains the bill payment method of choice. Card issuers
would do well, however, to encourage card use for such payments
because of the additional revenues they can realise, the cost
savings from not processing cheques, and because such payments can
strengthen cardholder relationships.
The right data and strategies
Card issuers need highly targeted strategies in order to sharpen
their investment focus, grow revenues, and maximise profits. .
But first, they must carefully assess cardholder satisfaction
and behavioural data to identify the true drivers of cardholder
loyalty. In-depth research – capturing cardholders’ usage and
retention data, as well as their likelihood to refer their card to
others and their propensity to adopt other bank products and
services – equips card issuers with the hard data they need. By
analysing this data, and benchmarking their portfolios against
competitors, issuers can gain the insights needed to uncover
strengths and weaknesses in their current strategies and adjust
those strategies for greater portfolio profitability.
Greg Howes is a global solutions leader for MasterCard
Advisors, responsible for the company’s benchmarking business.
Philip Lawrence is a global solutions leader with MasterCard
Advisors Payment Services, managing its commerce innovation