Making Loyalty Pay

Up until three years credit cards didn’t factor into GNB Bank’s profitability picture much, says Shane Tiernan, senior vice president and chief of lending at the bank. It was your “basic, plain-Jane” offering, explains Tiernan, who notes management’s take on cards at the time was more as a service to customers rather than an income producer for the bank.

That perception was put to the test, however, when GNB acquired another bank with roughly the same number of cards outstanding but a portfolio twice as big. “They had rewards, we didn’t,” Tiernan says, and it turns out that made all the difference. A closer look at the numbers and a portfolio consultation with ICBA Bancard’s Julie Hanson confirmed Tiernan’s conclusion: structured properly a rewards program could not only turn a profit for the bank, but strengthen customer ties. Particularly, if Tiernan followed Hanson’s advice and not only offered a rewards program for consumers, but expanded the bank’s product lineup to include a business credit card option.

“That piqued my interest because we had a number of businesses that used the card. It also gave us an opportunity to penetrate the market further by offering a business rewards card. The fact that small business cards yield an additional 50 basis points in interchange fee income didn’t go unnoticed either.

Proof in the Pudding

By most measures transitioning from a vanilla card offering to one with a competitive rewards component has served the bank well. “We were a little worried about a rewards program because redemption comes out of our income, but even on net basis it appears to be pretty profitable.”

“We haven’t really increased the number of cards outstanding at this point in time so apples to apples we improved revenue between $25,000 to $35,000 a year,” Tiernan says.

Call (800) 242-4770 to learn more about ICBA Bancard's credit card programs.