Part
01
of one
Part
01
What is the average customer acquisition cost that a bank pays to acquire a credit card customer? I'm looking at potentially investing in a startup that will offer a new credit card product -- and trying to get a sense of the industry average cost to acquire a credit card customer
Hello,
Thank you for your question about the average customer acquisition cost that a bank pays to acquire a credit card customer. The short version is that it costs around $80 to acquire a customer who returns about $120 in profit.
Below you can find a deep dive in to my findings.
METHODOLOGY
I have searched reputed finance blogs, company reports and trusted media sites to find the cost of acquisition for a credit card customer. The information is very scarce and are mostly presented as a range of figures in a few sources. I also checked Google and online customer acquisition for credits are companies, but it was rather limited. Whatever information was obtained is mentioned in this research.
It might be of interest to you to know that Experian offers two marketing optimisation programs by the name Decision Point and Marketswitch Optimisation which helps to increase revenue for credit card companies by 70%.
OVERVIEW
Americans collectively have over $1 trillion in credit card debt as of mid-2016. Visa, American Express, Master Card and Discover issues 57 percent of all the cards issued by 5,231 banks in the US. As of fourth quarter of 2014, Citibank had the most number of credit cards under circulation ( 109 Million) with 18.1% market share, followed by JP Morgan at 93 Million and Bank of America at 79 Million.
CUSTOMER ACQUISITION COST
Customer acquisition cost of different banks varied heavily. An article from Database Marketing Institute showed that it costs about $80 to acquire a new credit card customer who returns about $120 per year in profit.
Citibank is shown to have a credit card direct cost of $25 and a customer retention cost of $140 .
JP Morgan has reportedly spent over $1350 for acquiring new customers for its Chase Sapphire reserve card, thus shelling out a total of $200-300 million for rolling it out. The cost included a sign up bonus of 100,000 points which can be redeemed for $1500 worth of travel, a travel credit of $300 and the annual fee of the credit card was $450 ($1500+$300-$450=$1350)
ONLINE CUSTOMER ACQUISITION
Google adsense cost per click for terms related to credit card comes in the range of $14-$40. (Please note that this is not cost per lead, but cost per click)
Cost per lead offered by websites and affiliate networks like Credit Card Broker, Credit Karma, Bankrate Credit Cards can only be obtained on signing up as a publisher or advertiser. An article says that $25 to $75 is the usual norm though some companies pay as much as $300 for affiliates that help in acquiring new customers through their website.
Discover Card affiliate program offers a commission of $40 per "approved Consumer Account—including the Discover More, Discover Open Road, Discover Motiva, and Miles by Discover Card."
CONCLUSION
On an average, it costs about $80 for acquiring a credit card customer returns a profit of $120 per year. The cost for generating a lead through websites and other online platforms is in the range of $25 to $75.
Thank you for using Wonder. Please let us know if we can help you with anything else.