Agent member card programs – 2014 performance results

(February 9, 2015) — One of the more unique methods for card issuing credit unions and other financial institutions to augment their organic/branch card sales growth is to offer agent member card programs to other, usually smaller, financial institutions. The sponsoring organization provides the card expertise and management and most card member services (“3 C’s”) while the agent institution generates new applicant/card accounts. Agents are often selected and offered varying rewards based upon size, number of member households served, number of branches, geographic territory served, and card sales technology they have available at their branches, and thus resources for new card growth potential. The greater potential for growth at the agent organization, the greater fee income that is usually offered.

For doing so the sponsored agent organization received a one-time bounty or reward for each new active account, usually between $25 and $75 (based upon which party does a given solicitation), plus an ongoing negotiated percentage of those new active card members’ net sales (often in the range of 50 to 125 basis points). That is a small investment for the sponsoring agent provider considering the NPV of an average new card account is now over $1,200 over the life expectancy of the accounts. The loan loss exposure and P/L risks are maintained by the sponsoring organization, so the agents involved usually have no credit or interest rate risk to assume, unless there is some pre-agreed “loan, charge off and profit participation” arrangement.

Since 1983, R.K. Hammer CEO Bob Hammer has been involved in creating and managing these agent member card relationships, more than 800 of them to date. Tracking the results of agent card programs each year since R.K. Hammer went private in 1990, they publish the estimated industry results of agent card programs nationally each year, in their year-end weekly series of card metrics/trends.

In the R.K. Hammer Agent Performance Model, 2014 saw an increase in the number of new card accounts created in the branches of some notable agent card programs. Hammer then ranks those into three performance segments: Weak Performers, Medium Performers, and “Best-in-Class.” The results for 2014 are shown below:


“Weak Performers” generated only 7+ new card accounts each month per branch location, or 84/year.
“Medium Performers” generated 13+ new card accounts each month per branch location, or 156/year.
“Best-in-Class” agents generated 18+ new card accounts each month per branch location, or 216/year.

In terms of ranking the card issuing industry into these three segments, it is estimated by R.K. Hammer that only 15% of all agent programs are performing at the “Best-in-Class” level. They typically offer superior sales training and retraining, a wide variety of attractive sales rewards for staff, and competitive research, growing new accounts generated by these agents in 2014.

60% of those in the agent programs Model achieve Medium Performance level, offering some sales training and average rewards, growing new card accounts by a modest annual increase in 2014.

The remaining 35% of agents fall into the Weak Performer category, with little card sales training, uncompetitive rewards and little else, again showing no net gain in new card accounts year-over-year.

Choosing a Superior Third-Party Card Service Provider

For those considering whether to perform all the functions and therefore assume all of the costs and compliance obligations of being a card issuer, or to get another firm to do it for you, consider this:

A veteran third-party provider of card services can be a sensible choice for many, given they often have decades of card experience (which your employees may not); they are experts on all the new regulations (which are changing annually lately); and they have proven marketing expertise (which takes years to accumulate); so you can enjoy higher rewards for accounts generated through their expertise; and they will often pay you a good portion of what you would have made if you owned the portfolio yourself (without all the credit risk and interest rate risk, plus the operating and regulatory compliance costs).

There are dozens of Federal laws and regulations that U.S. card issuers must observe to the letter at the risk of severe financial penalties, not counting numerous National Association rules and regs which must also be followed. How a small card organization with limited resources can possibly keep up with all that is daunting, to say the least. In those situations a successful agent card program just makes more economic and business sense to many, especially for those FI’s without substantial management experience in card as well as the required technology, marketing and compliance expertise which you must employ and regularly update and improve.

For those who go with a third party provider of card services, Hammer suggests doing so with a card service provider whose references date back decades, not an untested start up with far fewer years under their belt (and you should check every reference provided), and whose service levels for their sponsored agents rate them 5-star (in the eyes of those agents and their card members served), and who might even allow you to participate in the earnings of the assets in some manner (not everyone will do that, though). Importantly, if the agent has branch technology capable of pre-screening and/or pre-approving new card applicants in the branches, then that should also boost the payout to the agent organization even higher, as would an agent’s online marketing and technology resources which could exceed even the branch-sourced card business being produced…all pushing agent card profits higher, and for assets one doesn’t even own.

About R.K. Hammer/Card Knowledge Factory®
Since 1990 R.K. Hammer has been a leading international card consultancy. Their practice focuses on assisting issuers to establish and grow their agent programs more profitably, conducting portfolio valuations and brokering card portfolio sales, serving as interim management for issuers in transition, serving as expert witness for issuers in litigation, and training card managers to become high-performing card executives in 50 countries. Founder and CEO Bob Hammer has been involved in consumer finance and card since 1980, serving 19 of the top 20 issuers in the U.S. and super-regionals, plus many government agencies, hedge fund investors in card programs, among others. Hammer has managed more than eight hundred agent card programs during his career.

For more information on R.K. Hammer and their Research and Analysis division, Card Knowledge Factory® go to

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