How to replicate the US’s credit card success

Credit cards are one of the most popular methods of making payments and accessing unsecured borrowing in the US, accounting for 37% of consumer purchasing in 2021.

86% of Americans use cards for at least some of their purchases, compared to two thirds of Brits (66%). However, since the cost of living crisis, credit card borrowing has surged across the UK and is now at its highest since records began, with borrowing now at a staggering £59.5bn, helping consumers cover the cost of rising food, clothing and energy bills.

With demand growing for credit card borrowing across Britain, we take a look at how to replicate the credit card success seen in the US.

Identifying Market Differences

It’s important to really understand the unique factors influencing the credit card markets in the US and the UK, what makes them similar and also what challenges and differences they face. Consumer spending habits, cultural differences, regulatory frameworks, and financial literacy will play a huge role in the long term success of an organisation’s offering.

Cultural differences

There are inherent cultural differences in how consumers in the US and the UK use credit cards. For instance, while Americans are more comfortable with credit card debt as a part of a society with strong capitalist values, UK consumers historically take a more cautious approach to borrowing. This could influence the demand and usage patterns of credit cards in the UK.

Spending habits

Spending habits significantly differ across these two markets. Understanding the goods and services that UK consumers spend the most on can help tailor rewards and loyalty programs, increasing the attractiveness of credit cards.

Financial literacy

The level of financial literacy can also differ between markets. In the US, credit cards are a well-understood financial tool, while UK consumers may have different levels of understanding or comfort with them. Education initiatives could be necessary to ensure consumers understand how to use credit responsibly.

Regulations

The regulatory landscape for financial products varies significantly between the US and UK. UK credit card issuers must adhere to both UK-specific and broader EU regulations. These include rules around credit agreements, interest rates, charges, and data protection.

Economic Factors

Economic factors, such as the level of disposable income, employment rate, and inflation rate, could also influence the credit card market. These factors might affect consumers’ ability and willingness to take on credit card debt.

Digital adoption

The level of digital penetration and consumers’ acceptance of digital services can also differ. The UK has a high level of digital literacy, which has the potential to be leveraged to offer digital-first credit card services.

Understanding Members’ Banking Needs

With any financial product, to ensure early adoption and success you need to truly understand the needs of your members.

Flexibility

UK consumers might prefer credit cards with flexible interest rates or interest-free periods for certain types of purchases or balance transfers. Issuers need to understand and cater to these preferences.

Incentivisation

Understanding what types of rewards and incentives are attractive to UK consumers is key. These can range from cash back on purchases, travel rewards, retail discounts, or even charity contributions. It’s crucial to align these incentives with the spending habits and interests of the target market.

Digital services

With the rise of digital banking and e-commerce, UK consumers now prefer credit cards that come with robust digital services, whether it’s with their local credit union of a large global bank. This can include online banking, mobile apps with budgeting tools, fraud alerts, and digital payment capabilities.

Security

Given the global rise in digital fraud, UK consumers may have a strong preference for credit cards with strong security measures and robust fraud protection services.

Customer service

Quality customer service is also a major need for credit card customers. This can include 24/7 customer service access, prompt and efficient problem resolution, and personalised customer care.

By conducting market research, utilising big data and actively seeking customer feedback, credit card issuers can gain a deeper understanding of these needs and preferences. This will enable them to design and offer credit card products that are highly attractive to UK consumers, thereby increasing their chances of replicating the success of credit cards in the US.

Strategic partnerships

Collaborating with partners such as local banks, building societies, and other financial institutions across the UK is a fantastic way of increasing awareness and expanding your customer base fairly quickly. By choosing your partners carefully you can also build trust amongst consumers which is vital for a new product offering.

Card issuers

By partnering with established card issuers you can leverage advanced technologies like AI, machine learning and blockchain for credit scoring, fraud detection, and improved customer service.

This could reduce the costs and complexities of setting up independent systems for card issuance, customer service, or fraud protection.

Established issuers are already compliant with UK and EU regulations. By partnering with them, credit card issuers can ensure that their products also comply with all relevant rules and regulations, mitigating legal risks.

Partnerships can allow for the seamless integration of the credit card services with the partner institution’s existing financial services. For instance, customers might be able to manage their credit card account through the same online banking platform they use for their bank account.

By forming strategic partnerships and alliances, credit card issuers can accelerate their entry into the UK market, enhance their credibility, and better meet the needs of UK consumers.

Digital Integration

On a weekly basis, 40% of American consumers are choosing to go digital with their payments, with the UK following suit. With sophisticated integration of apps and online banking services, the UK must replicate this in order to see the success of the UK market.

With over 5 million Brits using digital only banking, digital integration needs to be prioritised for consumers now and in the future.

Mobile apps and online banking

In an age where smartphones are ubiquitous, having a user-friendly mobile app and online banking is vital. Consumers want to be able to manage their credit card account, view transactions, make payments, and set up alerts from their personal devices.

Managing accounts instantly at their own convenience is a core need for many accounts, and online services via app or website answers this.

Digital wallets

With the rise of digital wallets like Apple Pay and Google Pay, credit card issuers should ensure their cards can be easily added to these services. This allows customers to use their credit cards for contactless payments using their smartphones or smartwatches.

Security

As digital integration increases, so does the need for robust digital security measures. Implementing multi-factor authentication, encryption, and timely security updates can help ensure that customer data remains secure.

At Optimus Cards we provide white label credit cards to your financial institution, just the way you want them. Get in touch today.