Within an increasingly competitive payment card landscape, community bankers are evolving their lending practices to serve an expanding pool of consumers in a risk-responsible way. By layering alternative data — including utility, telecom, mobile phone and specialty finance payment data — with traditional credit data, bankers are better positioned to make faster, more informed decisions from the point of application throughout the entire credit card lending lifecycle.
As of Q3 2024, there were approximately 600 million credit card accounts in the U.S., with the average number of roughly 3.9 credit cards held per person.
Most consumers have one or two preferred cards in their wallet that they consistently choose first: their top-of-wallet cards. This decision is often driven by factors like rewards and points programs, and the reality is that it can be difficult for smaller financial institutions to match what their much-larger competitors offer in terms of rewards, cashback incentives and travel perks.
To compete, bankers are challenged to elevate their card programs to gain a top-of-wallet position with their customers. A key consideration for bankers is affordability, which has become even more crucial as outstanding balances on bankcards in the U.S. increased 5.8% from December 2023 to 2024 to $1.08 trillion.
Given this, bankers must take steps to make smart affordability decisions when determining line assignments and setting card terms, and they must do it quickly. Today’s consumers expect fast decisions, especially from their own banks, which means having access to instant, reliable data is essential.
When it comes to credit line increases, many card issuers still rely on a manual, reactive approach. By adopting a more proactive, automated and data-driven strategy, bankers can significantly differentiate themselves. Those that leverage verified employment and income information can proactively run streamlined portfolio reviews and determine which cardholders are best suited for line increases. With reliable data at hand, they can make these decisions more confidently while providing customers with a reason to keep that card top of wallet.
Expanding the Customer Base Through Alternative Data
As financial institutions look to grow, intelligent use of alternative data enables them to identify and serve responsible consumers who may have been overlooked through the traditional credit score process.
Accurate, timely employment and income information, education data and telco and utility data are helping lift nearly 8.4 million U.S. consumers into scorable credit bands without increasing risk to banks. This enables more consumers to secure financial products and services, including credit cards, and is leading to an increase in credit approvals across all credit bands. This level of data intelligence has the potential to expand the borrower pool by bringing creditworthy young adults, gig workers and other consumers who may lack traditional credit histories into the market.
As card usage increases, so do the risks associated with debt and default. Utilizing alternative data has a positive impact on debt management as well; bankers can better determine appropriate credit limits while offering more personalized and responsible lending options based on each borrower’s unique needs and circumstances. Access to more complete consumer financial profiles enables bankers to minimize default risk during a period of rising credit card balances and dependency.
Incorporating these data sets into decisioning along with a traditional credit report allows lenders to better evaluate a potential borrower’s financial position, which allows bankers to make faster, more informed decisions for the customers they serve. In an increasingly competitive race to capture top-of-wallet status with U.S. consumers, those financial institutions that leverage the latest tools and resources are the ones best positioned to succeed.
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