How Data Insights Can Drive Credit Card Utilization

According to Alkami’s 2024 Telemetry Data Report, credit card usage is up. The average credit card payment has increased since 2020, reaching $2,376 by 2023. Meanwhile, the number of credit card payments has remained relatively flat, suggesting that consumers are paying more towards credit card bills.

However, the report finds that consumers are not adding new cards to their wallets, which may impact financial institutions’ revenue from interchange fees. Here’s where data analytics in banking can help bridge the gap. Built from more than 15 years of data modeling and analysis, data insights reveal opportunities for new credit card openings and increased card usage to increase interchange fee profits.

Uncovering Credit Card Opportunities with Data Analytics in Banking

To maximize interchange income, financial institutions should encourage account holders to use their debit and credit cards more frequently. Leveraging data insights from transaction data can help scope ways to improve card utilization.

By analyzing account holders’ daily transactions with data analytics in banking, financial institutions can identify key data insights that help drive card usage, such as:

Top-of-wallet cards: Data can reveal which cards are used most frequently by account holders. If a competitor’s card is used more often, it may be due to better rewards, lower fees, or other incentives. Understanding this behavior allows your institution to adjust your offerings to compete more effectively.

Key spending categories: Transaction data can highlight where account holders spend money, both within and outside of your financial institution.

For example, if a significant portion of spending is happening outside your network, this data can be used to tailor marketing strategies that encourage those transactions to shift to your cards.

Recurring ACH payments: Account holders may set up recurring payments, such as subscriptions or utility bills, through automated clearing house (ACH) rather than using a debit or credit card. Encouraging these payments to be made with a card instead can significantly boost interchange income.

Targeted marketing can educate account holders on the benefits of using their cards for recurring payments, such as earning rewards points.

3 Ways to Use Data Insights to Increase Interchange Income

Using data insights, financial institutions can craft targeted strategies to drive higher card usage and grow interchange income. Here are three methods to consider:

1. Revamp your rewards program: Rewards programs can motivate account holders to increase card usage, but not all rewards are equally compelling for every account holder. By analyzing transaction data, financial institutions can tailor their rewards offerings to align with specific account holder personas. For example, offering cash back on grocery purchases or additional points for dining out can directly address the spending habits of key account holder segments, encouraging everyday transactions that increase interchange income.
2. Educate consumers on Buy Now, Pay Later (BNPL) risks: BNPL services have grown in popularity, often taking transactions away from traditional credit cards. In fact, there were 5.17x more BNPL users in 2023 than in 2019. Financial education campaigns that inform account holders about the potential risks of BNPL, such as accumulating debt without realizing it, can help shift spending back to credit cards. Highlight the security and rewards that come with credit card usage to encourage account holders to use safer payment methods.
3. Create credit card marketing campaigns: Data-driven marketing campaigns can be highly effective to increase new credit card users and overall interchange income. Targeting specific account holder groups, such as those with competitive credit cards or those actively shopping for a new card, allows banks and credit unions to deliver personalized messages that resonate.

Success Story: Marketing Campaign Adds 331 Credit Card Accounts in One Month

A recent campaign by a midwest-based bank with $36 billion in assets proves the power of data-driven marketing to impact card utilization. For just one month, the bank launched a campaign to increase credit card openings, targeting consumers who either held competitive credit cards or were shopping for new ones.

Using their digital banking solutions to promote offers across desktop and mobile, the bank delivered personalized marketing messages that encouraged customers to switch or open new credit card accounts with the institution. In just 30 days, the bank opened 331 new credit card accounts.

This demonstrates the effectiveness of using data-driven insights to deepen product adoption, and ultimately grow interchange income.

Drive Interchange Income with Data Analytics in Banking

Interchange income is an often under-leveraged revenue stream for financial institutions.

With the right strategies in place, financial institutions can not only boost their card utilization, but also strengthen account holder loyalty and engagement through personalized, data-driven card programs.