The Agent Credit Challenge

Posted by
October 13, 2022

Italian economist, philosopher, and sociologist Vilfredo Pareto is father to the eponymous “Pareto Principle”, a power law stating that 80% of outcomes will be determined by 20%of actors. In modern business parlance, we refer to it as the “80/20” rule. 

In the world of Banking, there is more like a “90/10” rule regarding mindshare and PR — a few huge banks get the lion’s share of coverage and airtime. This, unfortunately, quashes a powerful force in the American economy, namely regional banks.

There are approximately four thousand regional banks, with US assets ranging from $200M to $20B. These form the backbone of communities, serving vast swaths of the American population. Still, they receive short shrift in the business press.

The perception that regional banks have limited card offerings is partially to blame. Indeed, there are significant challenges in this space centered on four constraints:

1)      These banks can’t or are unwilling to undergo the arduous effort of developing their own credit card offering, requiring a large technical, support, legal, and financial effort, not to mention the years it takes to get it off the ground.

2)      These banks either suffer the embarrassment of telling their corporate customers that they’re nota “real” bank with credit cards, or they outsource this capability to a competing bank.

3)      Those that outsource it find to their aggravation that these so-called Agent Banks won’t share customer information or much of the revenue generated by the card programs.

4)      And those corporate customers unable to qualify for credit are left with either a debit card or a credit card secured by the owners’ personal property or hefty collateral deposits.

These factors conspire to create a real challenge. At Zact, we see this as a huge opportunity: We offer a turnkey, risk-free, white-labeled credit card program to these regional banks to offer to their corporate customers. We offer superior customer engagement, unmatched revenue share, and a unique securitized card product, Smart SecureTM, with low collateral requirements and no personal guarantees. This changes the game for these banks, helping them to innovate, serve customers, and bridge the gap with the “Big Boys.”