Picking a new agent card provider

(April 29, 2014) —  There comes a time when some agent card programs elect to pick a new service provider.  Perhaps because of erratic service level  performance at the current provider, or due to new account rewards which seems to be less than competitive market value, because a current contract has reached its contractual period ending,  or even due to an existing provider exiting from that business.

Whatever the reason(s), there are number of preliminary steps one must go through to ensure the change is a smooth one for your card members and meets your expectations.   In managing over 800 such agent card programs over three decades in the card business, R.K. Hammer has some strong opinions about how to achieve the best outcome.

First, says R.K. Hammer, due your due diligence up front, on who to consider for the RFP process.  This involves interviewing leading card services providers, and talking to their references.   Find out why the last three agents left their program, and contact them each to verify.

Next, find out just where your organization would fit in the service providers scale of customers.  Are you in the top 20% tier, the middle, or the bottom 20%?  That will frankly make a difference as to what you may be offered in rewards, and what service levels are met.  This is very important.

Third, have them explain exactly who and at what level in the chain of command will be your primary contact.  The biggest rub many agents state is that the service providers assigned central contact is too low on the management team ranking.  You want someone at the V.P. level, not a new associate with little experience (or influence in the relationship) who may be mere message takers with little authority to make changes you want happen.  The second complaint is that these contacts get rotated or changed far too often.  It’s like starting over all over again with someone new brought in for your account to learn the business at your expense.  Your contract agreement can deal with both these matters.

Fourth, get service provider financial penalties in the contract up front for any failure to perform, usually on any area which touches a card member. Try to get them to pay you a fee or fine after the failure when it’s not specified in the contract – good luck with that one.

Fifth, be sure the agreement states you will see any communication that goes out to card members so many days prior to distribution.  There is nothing worse than your members coming in with some letter which is confusing or negative, and you don’t know the first thing about it.  No advance view by you equals another penalty they must pay.  But it has to be in the contract.

Sixth, many savvy card service providers allow some sort of agent participation arrangement, where you can not only get rewards for all new accounts booked through your efforts or branch distribution network but a split of the post-expense profits as well.  When do you discuss this?  You guessed it, before you sign the agreement which then includes that provision.

Seventh, pick a card service provider with 10 or even 20 years of experience in this space.  Someone has to be a doctor’s first year surgery, just not you.  Your relationship with your members is not just with the card products but other loan and deposit product areas, too.  If a failed card relationship through an inexperienced card service provider or poor service levels, the outcome will not just be revenue you lost, but other relationships with that card member, too.  Stick with experience, or risk paying the price of a bad vendor decision down the road.

Eighth, do a written quarterly service level review, by designing a questionnaire used to point out the good and the bad of your relationship with the card service provider, in each major area of service, and have the heads of those areas in your organization provide input into those reviews.  The important part is not one review, but the trends of grades within consecutive reviews.  And, don’t just send them your grades/opinions of their service, have a specific meeting set with both parties to discuss their implications.  The trends are the most important tool with vendors.  It also shows how important (or not) they think about the value of your account.

Ninth, add an escape clause in your service provider agreement that permits you to reach out to others, especially for poor performance or service levels which are not improved in subsequent quarterly reviews.

Tenth, find an agreeable method of dealing with buying out the portfolio in the event you wish to take it back in house, or more likely, to another issuer.  This contract provision is perhaps one of the more contentious issues, especially if you do not have a precise manner in which the provision is triggered.  Spend time folding this into the final document before you sign.

How much can the service provider pay you for the relationship?  In addition to the up-front signing bonus, you should remember that the NPV of an active card account is often over $1,200.  You be the judge as to what is a fair amount of that for getting your relationship.

So, will your agent card vendor like all of these suggestions?  In a word, no.  But if you carefully construct minimum and expected levels of performance in every important operating area they control in your behalf, you will be better off than had you skipped these important items and got stuck with an unsatisfactory long term contract you have to live with.


R.K. Hammer and company founder and CEO Bob Hammer have managed over 800 agent card programs over thirty years for their clients.  They help client organizations find suitable vendors for this and many other operating areas of the agent card business.  R.K. Hammer’s research and analysis division is also known as the Card Knowledge Factory®. 

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