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Full-service bank customers have a tough time understanding the appeal of prepaid cards to the unbanked, and can't relate to feeling comfortable with all those fees. But it sure beats being surprised by them.
March 1
Barclaycard US is courting customers who are frustrated by hidden bank charges with a credit card that lays bare not only its fees but also its profitability for the issuer.
Customers who get the Ring MasterCard will be able to read the monthly profit and loss statement for the product. Barclaycard will also let cardholders vote on changes to the program and show them how adding or removing certain features would affect the card's pricing.
For example, consumers would see the potential savings from turning off paper statements or outsourcing customer service functions overseas.
"Consumers are clearly looking for something different; they are tired of fees and big banks and tired of the black box behind the relationship, and we are trying to change this," says Paul Wilmore, managing director of consumer markets for Barclaycard US, of Wilmington, Del.
The unit of Barclays PLC of London even plans to share profits with Ring cardholders if they reach a certain threshold. The issuer has not yet determined that threshold.
The card, which will become widely available in the second quarter, will be aimed at consumers who are financially responsible but who tend to carry a balance, Wilmore says.
Barclaycard will set up its own private social network that customers will access through the issuer's website. The site will also provide details such as "line items, how much revenue is generated by the credit card, and how much in losses, how many customers defaulted, operating expenses and the net profit line," Wilmore says.
The transparency extends to fees. If the cardholder
"community" votes to lower the late charge, currently $25, they'd see that reflected in the interest rate, which would rise from the starting level of 8% to make up for lost fee income, Wilmore says.
Excess profits could be returned in the form of a customer credit, though that would be subject to a vote, Wilmore says.
There are some precedents for the program. PNC Financial Services Group Inc.'s Virtual Wallet includes a blog where the bank frequently solicits feedback from its users. Based on this feedback, PNC allowed users to link a PNC credit card to the Virtual Wallet calendar view, which originally was linked only to checking and savings accounts.
"Barclaycard has an opportunity to draw people into the business and help them understand it in ways that they haven't before," says Nicole Sturgill, research director for retail banking and cards at TowerGroup, though some consumers may not be sophisticated enough to understand the details of a profit and loss statement.
A bigger issue will be managing expectations, she says. Though consumers will have an opportunity to weigh in on features of the cards, Barclaycard obviously won't agree to all requests.
JPMorgan Chase & Co.'s credit card services division tried something similar in 2009 when it redesigned its Priority Club Rewards Visa by giving its cardholders a forum through a dedicated, private social network, says Brad Strothkamp, vice president and principal analyst for the marketing and strategy group at Forrester Research in Cambridge, Mass.
In Barclaycard's instance, targeting customers who revolve may be problematic, Strothkamp says. Such consumers are typically rate shoppers, who may not care so much about the community aspect of the card. However, that aspect could also promote loyalty, he says.
People seeking rewards from their cards might be more interested in such a program, Strothkamp says. "For a certain part of the population, it is about maximizing the rewards and these people get very involved with the card."
Barclays must make sure a sizable enough community is ready to start interacting on the Barclaycard website, experts say.
And there may not be enough to keep them there once they've arrived, says Stessa Cohen, research director of banking industry advisory services at Gartner Inc.
"I don't know if consumers want to build a community around a product," Cohen says.
The Barclaycard program will also have a more standard social media component, linking it to Facebook and Twitter, where Barclaycard will promote the program, Wilmore says.
