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A Credit Card Built Community-Strong

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At the annual Lithium Technologies LiNC conference in April, I heard about an innovative approach to credit cards in the Banking industry that is built on the core ideas of social business: a community-driven credit card from Barclaycard USA. This is a solid business product that makes sense to customers, supports the business, and combines financial responsibility with the engagement of its customer community.

This is more than just an attempt at shifting customer support to online, but a redesign of well-known product (a credit card), where customers have become stakeholders. They have transparency to the success of the product with visibility of the P&L statement, input into P&L decisions and by educating each other to become more financially responsible.

I spent 30 minutes with Paul Wilmore, Managing Director for Consumer Markets, Barclaycard USA to talk about what makes their model different and what they are learning from this new product model designed around social business principles.

If you are not familiar with Barclaycard or the Barclays Group, it is a storied history dating as far back with the foundation of the original group in 1690 in London to its founding membership in the international Visa credit card network in 1977, the first UK bank to be on the Web in 1995, and partnering in the first ever global ATM alliance in 2001. Ring is a young new offering barely past its first year of operation, but strikes me as something substantially different in many ways. There was some news about it last year, but we can now have a better understanding of it after its first year of operation.

Rawn Shah: Tell me a little about yourself and Ring as a quick introduction, Paul.

Paul Wilmore: I’m responsible for all our credit card business that goes out to consumers here in the US. Today, I represent probably about 25-30% of our business. The rest of our business is mainly co-branded credit cards, so we issue the credit cards for US Airways, L.L. Bean, and other national brands like that.

Barclaycard ring is one of the things under my responsibility, which is what I spoke about yesterday, which is our attempt to use social media and community to differentiate ourselves in the marketplace.

RS: So how many cards is that separately? What is the population size [of your credit cards issued] in the US?

PW: Overall, we probably have I’d say about 1.2 million cards under our Barclaycard brand business. [Barclaycard] Ring is still in pilot phase, so we are about 11,000 folks in our community.

RS: That is still a pretty large community.

PW: We just celebrated our first year anniversary. We’re very excited about it.

RS: I remember looking at the presentation, it was saying about … you started about a year before that?

PW: Six months before that. We actually started in the Summer of 2012 and we were in marketing in six months. We had a beta in December 2011 and then we launched out public site in April of 2012.

RS: So can anyone sign up for it now?

PW: Anyone can sign up for it. You have to apply for the credit card, and you have to be approved to be part of the community.

RS: Who approves you to be part of the community?

PW: We underwrite a credit card application like we do for all our credit cards and if you are approved then you join the community.

RS: So it is not the community that approves you, and then you join it.

PW:  The members don’t really do that. We as a company are really stewards of the community, right? And one of our jobs as stewards of the community is to allow people into the community that have good financial risk. And that’s our job.

RS: Would you say they are the same category of financial risk?

PW: Yeah, I would say our underwriting standards aren’t any different for this community as they are for our other cards. But our hope is that through interaction in the community, a cardholder’s behavior is actually better than their credit score.  So, for instance, if we had someone, just generically say, if we had a 700 FICO [credit score] outside of the community and a 700 FICO that was strongly engaged in the community, I expect the 700 FICO in the community to perform much better, from a loss perspective.

PW: It’s hard to tell and I’m not necessarily sure that it is their score that will change. My hope is that it is the sense of responsibility to the community that will help change behavior.

Since the community shares in the profit of this program, the community members themselves feel an obligation to other community members to make sure they are paying their bills on time, not going delinquent, and things like that. […] We have had a couple of cardholders go into bankruptcy and we had some decent sized losses on those accounts. It’s amazing that when we let community members know this, they asked, “how come you guys would ever let that person in?” and “How dare that person sign up for this card knowing that they were likely going into bankruptcy.” “Where is that sense of responsibility?” They are actually acting more like shareholders.

RS: Let’s say they go bankrupt; are they still part of the community?

PW: That’s a good question. Well, we’d actually close their account. So if you’re bankrupt, we close your account. So you would not have access to the gated community. Because the way you get into our community is through our servicing site. So you sign in through your credit card [web site] and that is your gateway into the community. So by default, if someone goes bankrupt, we close their account and they are no longer able to get into the community.

RS: But that seems more of a technicality. Maybe part of the road to recovery is that: [the ability to stay in the community]

PW: That’s a very interesting question. We have had a lot of discussion about that in the community. The same is true if someone applies and they are declined—what do I do with that person?

Today, they are not included in the community. We try to give them as much as possible on the road to credit education, [and] show them ways they can improve their credit health. But I think in the long-term, we may try to make the community more inclusive, [by] having a broader range of products.

Today we have only the one product, but if I introduce more products like a pre-paid card, it may allow me to significantly increase my population and be more inclusive of a much broader set of individuals.

RS: So what do individuals typically do in the community?

PW: A variety of things. There are a lot of discussion threads where most community members start. In fact, we’ve had recent ones about, ‘What do I need to do to get a credit line increase?’ Other members will say, “I got one and here’s what my financial health is, so I called in and asked for this…” So they are helping one another out with how the program works. We’ve had discussion threads around, ‘Where is the best place to get financial planning tools?’ So it is a self-help from an education standpoint.

We have also had a lot of members post ideas. We have an ideas section in the community where we ask members, ‘Tell us how we can make the program better.’ And some of the responses are very simple, ‘I’d like card to be blue instead of orange, metal instead of plastic.’ But we have also had some really interesting ones. One of the ones that comes to mind, a card member said,

‘I service myself on the Web every month. I never call into you guys. I know if I call in it costs you guys $3-$5 every time someone calls in. So as a member of this community, if I don’t call in every month, can you give the community a $5 credit?’

Fascinating concept, and he’s right: we shouldn’t be subsidizing all the other people who call in ten times a month. And so it’s that type of mind frame that is great to get that perspective from your customers. In most banks, they never give their customers a forum or encouragement to give them that feedback and that’s what this community is all about. It’s engaging your customers in a different way.

[Note: I will continue this conversation with Mr. Wilmore further in the next part as we explore the implications of sharing the P&L statements with the community.]