Can you participate upfront in credit decisions and get paid for taking the risk?

Most agent bank programs will allow the community bank to guarantee certain credit card accounts at a full credit line after the customer has been initially declined. This is a bad experience for your customer as the automated criteria at the agent bank does not consider your relationship with the customer in terms of deposits, products and tenure. The only option for the community bank is to guarantee the line allowing the agent bank to bill the community bank this amount upon customer account default — taking the full risk but possibly not seeing an increase in the bottom line for taking this risk.

Will you have access to all the program data?

Most agent bank programs share some revenue on the credit card program and provide referral fee income for new accounts. However, detailed data on credit card customers, their spend levels, activation rates, marketing, risk and servicing data is not available to the community bank. Data is the new oil in the 21st century as it serves as an important resource to extract value. Without crucial information from the data about its customers, you are at a disadvantage not knowing how to improve your products or where to invest to grow your customer base and income.

Will you deepen your relationship with the customer or lose the relationship?

Most agent bank programs transfer your relationship with the customer to them. You may lose that critical franchise relationship that was developed with care while serving your community. Once you lose that relationship on credit cards, the agent bank communicates with the customer regarding its policies and procedures under your brand. Some of those policies may not align with your brand and may result in damaging your brand and franchise relationships.

Will you get the maximum benefit of high-yielding credit card assets?

Among all the loan products, credit cards may provide the highest ROA (6.0%+) for a bank, if done right. When offering credit cards, it is also important to ensure that there is a full coverage among consumer, business and commercial credit cards. On average, commercial credit cards produce the highest ROA. Most agent bank programs do not offer commercial credit cards including corporate cards, purchasing cards, virtual cards and fleet cards. While the agent bank enjoys the high-yielding asset on its books from your customer, are you receiving enough benefit for giving up your customer relationship?

Will you be able to service your customers locally?

You have built a brand as a community bank by providing relationship-based local service to your customers. Your customers who carry the agent bank credit cards expect the same customer service experience. In most agent bank credit card programs, your branch employees cannot access systems to service your customers. For even a simple question — such as, “What’s my balance?” — you will need to tell your customer to call the number on the back of the card. If your customers cannot be serviced on products offered in your branch, would this lead them to buy more products from your bank?

Making an informed decision about such a critical product offering is important. An agent bank program may not be the best for all banks. Many community banks would benefit more from leaving an agent bank model and joining a program that allows for more control while increasing profits and deepening relationships. There are now options available for community banks to own high-yielding credit card assets on their books and launch a full-service credit card program through turnkey offerings.

Anil Goyal is the CEO of Corserv, a modern payment card issuer that enables banks and fintechs to offer competitive card products to their clients, branded for the financial institution, with credit decisioning and P&L ownership by the financial institution, without adding staff and infrastructure.