Bank of America 2000 Annual Report Download - page 17

Card and Payment Services
Bank of America is investing in its card and
payments business to build upon already-
impressive growth across all card-related
businesses and customer segments. For 2000,
consumer credit and debit card sales volumes
were up 17%, and commercial card volume
was up more than 30%.
Card’s strong growth is being fueled by
several factors. First, cards have become the
preferred way to pay. For businesses, purchas-
ing cards are a far more efficient way to pay
suppliers. For consumers, cards are the domi-
nant form of payment on the Internet, and
nothing matches the convenience and control
that cards offer both online and at physical
points of sale. By 2005, cards are projected to
overtake checks as the most used form of
payments for consumers.
Bank of America is leading this paper-
to-plastic payments revolution, primarily by
leveraging and deepening customer relation-
ships across all lines of business.
Like many card companies, the bank is
making significant investments in marketing
and new products. Direct mail solicitations have
doubled, as have new accounts from that source.
Bank of America has launched “Photo Security”
credit cards, upgraded Check Cards and intro-
duced the new Visa BuxxTM card for teenagers,
enabling parents to program value into the card
and monitor purchases. A newly integrated
national sales force is selling unique bundled
products to meet the needs of small business
and middle market customers.
Unlike many other card companies,
Bank of America can leverage its huge base
of banking relationships to produce a higher
return on its investment. For example, the
bank is soliciting twice as many relationship
customers as in the past because these cus-
tomers have almost 30% higher response
rates to card solicitations and 25% lower
overall loss rates. The bank’s mailing “uni-
verse” has been increased 50%, and the cost
of acquiring a new account is down by
more than 30%.
Customer relationship information is
also a key to improving customer satisfaction
and operational performance. For example,
lower-risk relationship customers don’t need
to be called when their payments are only a
few days overdue. Attention can be focused
on higher-risk accounts, thereby increasing
collections effectiveness and improving cus-
tomer satisfaction.
Customers are also getting an enhanced
Check Card experience as the bank’s ability
to use relationship information grows. Lower-
risk customers are now identified and their
transactions approved, allowing them to use
their cards to fund purchases directly from
their accounts, even when their balances run
low. Revenue is projected to increase
sharply as a result, and customer satisfaction
will benefit from fewer declined transactions.
Card products can also be a good way to
create new banking relationships. Thousands
of single-service credit card customers are
expanding their relationships with the bank,
and when single-service customers become
relationship customers, their relationship net
income increases more than 600 percent.
Harnessing customer information that
no other card company possesses, the bank
is leveraging the value of relationships to
improve both the customer experience and
financial performance.
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The Bank of America Check CardTM
is becoming increasingly popu-
lar with customers, and it's
easy to see why. Check Cards
offer the point-of-sale conven-
ience of a credit card, but reduce
the need to write checks or carry
cash for everyday purchases.
This popularity is reflected
in our large increase in Check
Card purchase volume, which
was up 28% in 2000. Per-card
transactions are also rising,
another sign that customers like
the convenience of the Bank of
America Check Card.
Higher transaction volumes
mean higher revenue for Bank
of America, as well as lower
processing and servicing costs
than we incur when customers
write checks or withdraw cash
from ATMs. From 1998 through
2000, debit card revenue has
more than doubled, from $225
million to $520 million.
As more of our products
migrate from paper to electronic
channels, we will continue to
grow revenues and reduce costs,
while providing better service
and convenience for customers.