MIAMI, Fla. - Credit unions thinking about selling their cards portfolios might want to learn more about why Wachovia decided to get back into credit cards about 18 months ago and is now looking to expand its cards division.
Steve Boehm, president of Wachovia Card Services, shared the Wachovia story recently at Source Media’s 20th Annual Card Forum & Expo at the Doral Golf Resort & Spa here.
Boehm said the bank hopes the planned expansion of its credit card division will help position the company to take advantage of growing payment opportunities throughout the United States. This new business unit is responsible for product development of bill payment services, pre-paid services, money movement services and other existing payment products.
“Wachovia Corporation is the best, most trusted and most admired financial services company,” Boehm said. “We are a consumer and small business bank with a mission–helping people plan, save, invest and pay for their lives.”
Within Wachovia’s Card & Payment Solution Group, debit and credit cards fall under the card services department, while money movement and prepaid products fall under the payment services department, as it’s important to consider strategy when planning for success, Boehm said.
“The Value Exchange Game is complex,” he said. “2-D is the game everyone has already learned. As for the 3-D model, think of it more like the Rubix Cube.” The 3-D includes payment access, value source and customer situations. The 2-D model includes product and customer, Boehm said. Product consists of credit card, debit card and prepaid card, and Customer consists of student, mass and affluent. In the emerging 3-D Model, each side of the cube has an additional three components. Under Payment Access is card, web and mobile; under Value Source is credit line, deposit account and investment account; and under Customer Situations is “me to you,” extended payments and aggregation services.
Boehm explained that in June 2005, Wachovia began a strategic view of the choices it had to make regarding cards.
“We were beginning to realize cards were very important pieces we needed on board,” he said. “We really wanted to create different payment card products for relationship customers that build loyalty to Wachovia. We viewed our goal as building loyalty to Wachovia. We decided we were going to differentiate with value and service, not price. Our goal is not to maximize profit on card products, but to enhance total relationship profitability.”
“Pick a few spots where you can be critically important to your customers, and invest appropriately,” Boehm advised. “Build meaningful strategic partnerships outside the industry.
Wachovia’s current customer payment strategy has debit cards as the core, Boehm said.
“It’s a product customers use because they can pay now,” he said. “With credit, they pay later. With pre-paid, they pay ahead. With debit, they pay now.”
Wachovia researched and learned that 23% of customers who have debit and credit cards, use credit 90% or more, and 39% who have debit and credit cards always use debit.
