Like their counterparts in processing and other back-office functions, credit card marketers are increasingly turning to the outsourcing option.
The phenomenon began to spread early this year with the announcement that former Wachovia Corp. credit card executive Jerry D. Craft had started his own company, Card Issuer Program Management Inc. Mr. Craft had just previously worked for First Data Corp. Now he offers his expertise to all comers, while retaining a working partnership with First Data.
Atlanta-based Program Management provides account acquisition, portfolio management, and processing - the last through an exclusive contract with First Data.
PNC Bank Corp. of Pittsburgh launched the low-rate Prime Value card and a cobranded card with General Nutrition Centers, both with the assistance of Mr. Craft and his company.
Program Management is also working with First American Corp. of Nashville and will announce a third client in a couple of months, said Mr. Craft.
"I think there's a trend to more outsourcing," he said. "As banks run 25 to 30 lines of business and as expansion occurs nationwide, they (banks) clearly need the best people they can get" to run their credit card businesses.
Mr. Craft's assemblage of card professionals gives his company more aggregate experience than many banks could get for themselves in a short time. Program Management recently retained the consulting services of Robert Burke, a retired Bank of New York executive.
Capital One Financial Corp., itself one of the top 10 bank card issuers, is offering "value-added alliances" to other banks. While some financial institutions may be leery of exposing their customer bases to a competitor, the Richmond, Va., credit card bank claims it can provide services to "maximize profitability and customer value."
Unlike at Program Management, Capital One's clients would drive their own account-acquisition strategies. Capital One said it would service accounts and use its analytical techniques and testing methods, developed over the last seven years, to increase customer profitability through direct mail and other marketing approaches.
Republic Services Co. generates accounts and manages portfolios for smaller banks, giving them access to the card business without investing in technology and human resources.
Again, the phrase "maximizing profitability" is dropped, this time by Angelo Palumbi, senior executive vice president of the Columbia, S.C., company.
Republic Services, an outsourcer since 1990, manages 400,000 accounts with $400 million in receivables for issuers such as the Armed Forces Benefit Association.
The company provides customer service, collections, credit work - approvals and prescreening - as well as account origination. "We provide credit card expertise to institutions that would not be able to afford the management team necessary to institute these strategies as well as we can," said Mr. Palumbi.
The company's president, Dean R. Dougherty, used to oversee the card operations of NCNB Corp., predecessor of NationsBank Corp.
Other available outsourced services include data base marketing and modeling to reduce attrition.
North American Integrated Marketing uses data base techniques to score existing accounts in terms of profitability and danger of attrition. Steve Gasner, executive vice president of the West Paterson, N.J., company, advises clients to focus on customers that make money for the bank.
"High income generators are getting the most solicitations from the Capital Ones and First USAs," he said.
Mr. Gasner's company acts as an adviser, working with a bank's marketing department to devise a usage and retention strategy. Clients include Bank of New York, Fleet Financial Group, Marine Midland Banks Inc., and Columbus (Ga.) Bank and Trust.
Other sources of such expertise include Acxiom Corp., and Fair, Isaac & Co.'s Dynamark unit.
