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Why bring card processing in house?

While outsourcing continues to be a trend this year, in terms of card processing there are far-reaching business and financial advantages to bringing the process in house. On the one hand, the economics of outsourcing can be competitive when looking at the low cost per unit in post mature market segments like consumer credit cards

Cards represent a significant opportunity to drive brand consciousness and product differentiation for consumer and corporate customers. That said the ability to control and tailor those card products give a financial institution the ability to more effectively compete for new business and retail existing customers.

For instance, banks and financial institutions with in-house card processing can be innovators in the field and deliver premium products, which leads to greater brand loyalty, leadership and protection. Banks that outsource card processing rarely have access to new products on an exclusive basis. Instead, they must wait in line with all the other processor customers for new products to be rolled out. In contrast, banks with in-house card processing systems manage their own product roadmaps and are better placed to gain coveted first-to-market positions with innovative, customized and high-value products. In the case of the lucrative high-return card segments such as corporate, loyalty and gift, the first-to-market position is an important competitive and financial advantage.

With respect to customer engagement, banks can offer more relevant, attractive and useful card products with in-house card processing’s flexibility to tailor products to consumer demographics. With respect to merchant relationships, an in-house processing strategy presents a powerful means for banks to protect and enhance these relationships through high-value and ‘sticky’ services. For example, using integrated in-house processing systems, banks can make card services available through the same set of merchant screens, interface and single sign on. For mid-tier merchant services, this can involve completely handling all their merchant banking, paying them for their credit card transactions every day and helping them manage their exception and dispute processing. While for large corporate customers to whom banks are providing all treasury cash management functions, banks can deliver a merchant program through the same interface and portals. Merchant attraction, growth and retention are key, not only to a successful card program, but for a successful top and bottom-line.

Directly owning and managing the relationship with card customers through in-house processing presents a set of compelling business, financial and strategic advantages. As a result banks achieve greater brand relevance, value and loyalty across all segments -- from consumers or small business, to mid-sized merchants and large global corporate customers.

Lynn Holland

Vice President Product Management

ACI Worldwide