David Gremillion, American Bank and Trust
American Bank and Trust overhauls its credit card program into a national industry-revenue generator
By Judith Sears
Headquarters: Opelousas, La.
Assets: $169 million
Retail locations: Five
Full-time employees: 48
Twenty years ago, American Bank and Trust revamped its credit card program by adding business cards, tailoring its offerings and honing its marketing efforts. Today the bank’s credit card program has become a nation-leading credit generator and profit producer.
With some thoughtful attention and creativity, any community bank credit card program can achieve similar stellar results, says Scott Broughton, ICBA Bancard’s senior vice president, card products and promotions. “What other product do you have in your bank that you can charge between 9 to 15 percent, collect an annual fee and have the customer happy to pay it?” he asks.
In 1994, American Bank and Trust’s credit card program was producing so-so results. Back then, it had about 500 cardholders generating $40,000 in annual income, a middling revenue performance. “The program was profitable, but stagnant,” recalls David Gremillion, vice president of consumer and commercial lending for the $169 million-asset bank in Opelousas, La.
Twenty years later, American Bank and Trust’s credit card program has grown steadily and, for the last five years, has accounted for an eye-popping 13 percent of the bank’s annual income. More than 1,700 people carry at least one of the bank’s cards, generating nearly $230,000 in annual income for the bank. The credit card program’s outstandings propelled the bank onto ICBA’s list of this year’s 50 top-producing community bank credit card lenders in the nation.
What accounts for the dramatic turnaround?
Primarily, Gremillion took advantage of extensive training and guidance through ICBA Bancard, the payment services subsidiary of ICBA. The outcome, after a thorough reevaluation of the overall program, was a total restructuring of the bank’s credit card product line.
In 1995, American Bank and Trust began its credit card program turnaround by issuing a true business card for its corporate clients. Although the bank previously had many people using its cards for business purposes, it hadn’t registered with Visa or MasterCard for a formal business card.
The oversight essentially had cost the bank free and easy interchange revenue. The difference is between earning 1.5 percent interchange fee revenue on each consumer credit card transaction versus 2 percent on each business card transaction. “We were leaving money on the table,” Gremillion acknowledges.
Once American Bank and Trust issued business cards, the program’s income stream rose immediately. “The very next month we saw a growth in our income,” Gremillion reports.
Next, Gremillion turned to ICBA Bancard for help in designing a variety of card offerings, each aimed to a specific consumer segment. Previously, American Bank and Trust simply issued either a Visa or a MasterCard, both with the same interest rates. With help from ICBA Bancard’s staff, Gremillion created a mix of card options with distinct combinations of interest rates, fees, reward points and other features. Those options were designed to attract specific kinds of card users.
“We have a plan for every segment of the population,” he says.
Making the pitch
With several card plans in place, Gremillion turned to improving how the bank marketed its cards. Again he tapped ICBA Bancard staff and materials for inspiration to develop different advertising campaigns. He took standard name cards reading, “Hi, my name is …” and adapted them to read instead, “Hi, my rate is 9.95.” He applied the slogan to employee nametags and lobby posters.
To inspire employees to engage in the card promotions and help cross-sell different cards, American Bank and Trust ran a contest that gave employees $5 for each approved credit card application they referred. The bank also gave employees $10 for each new credit card they helped issue in which a balance was transferred from another card. Gremillion and the bank’s staff had fun with the contest, passing out checks at after-hours get-togethers.
Over the years, Gremillion has made good use of ICBA Bancard resources, such as its Automated Card Expert (ACE), a card portfolio analytical tool available online. Gremillion uses ACE to monitor the performance of American Bank and Trust’s credit card program and compare its results to other banks of similar size.
All of this restructuring and marketing has paid off handsomely. Currently, about 34 percent of the bank’s customers hold one of its credit cards. “That’s really good penetration,” says Scott Broughton Sr., ICBA Bancard’s senior vice president, card products and promotions.
So far, American Bank and Trust has only marketed its cards to current bank customers and plans to continue that approach. Gremillion attributes the bank’s very low delinquency rate—about one-fourth of 1 percent—to this restriction, because the bank only issues cards to customers with whom it has experience and a good understanding of the cardholder’s financial picture.
Broughton praises American Bank and Trust’s decision to limit marketing to its current customers. “The way to grow your credit card program in community banks is to get more cards in the hands of existing customers,” he says.
Gremillion reports that one of the biggest hurdles for the credit card program has been dealing with regulatory requirements, in particular the Credit CARD Act of 2009, which created big changes in requirements for the credit card industry. The compliance requirements were daunting for a community bank with a single staff person operating a credit card program, like American Bank and Trust had with Gremillion.
In confronting those regulations, the bank once again turned to ICBA Bancard for guidance and training. “They took the law and how it affected us and put it in plain, simple English,” Gremillion reports. “They went through the CARD Act from beginning to end. ICBA made compliance simple. I don’t know if we could have done it without them.”
Many community banks have hesitated to enter the credit card market because of concerns about fraud, Broughton says. While fraud is always an issue, Gremillion is confident that American Bank and Trust has good protection in place, starting with a fraud protection program the bank obtained through ICBA Bancard. Additionally, FICO’s Falcon Fraud Manager, a widely used solution that ICBA Bancard employs, offers leading-edge fraud detection.
Monitoring card transactions in real time, Falcon quickly identifies card usage that doesn’t match the cardholder’s typical spending patterns and shuts down transactions before higher levels of fraud can take place. “The industry has done a good job of handling this risk,” Broughton says. “Despite some losses, there is money to be made in credit cards.”
Experience has convinced Gremillion that other community banks should take a closer look at the potential benefits of issuing credit cards. “What other product do you have in your bank that you can charge between 9 to 15 percent, collect an annual fee and have the customer happy to pay it?” he asks.
Broughton adds that credit cards also offer a way for community banks to build stronger client relationships. “This is a relationship product,” he says. “It’s one more additional way of locking in that customer to a banking relationship.”
American Bank and Trust’s management is thrilled with what they’ve been able to achieve with their credit card program. Gremillion is quick to give credit to ICBA Bancard for the program’s success.
“We would not be where we are without our partners at ICBA,” he says.
Judith Sears is a writer in Colorado.