Credit cards and payments

Credit card lending remains one of the central financial products in the lives of most consumers.  Credit cards, a key vehicle for consumer spending, have experienced steady growth in purchase volume and outstanding balances since 2010 and the end of the Great Recession. And during this time consumers have benefited through lower costs, higher approval rates, and increasing credit lines.  And while this has translated into improved financial performance and profits for most lenders, now is not the time for the industry to rest on its laurels.  In several regards, credit card companies are facing some of their toughest challenges yet contending with increased regulation, growing competition, non-traditional players disrupting established order, and demanding and savvy customers.

PwC’s Consumer Finance Group can help companies drive long-term value amid this landscape. From strategy and designing the customer experience to operational processes, technology, risk management and regulatory compliance, our team of practitioners is ready to help.

Today’s consumer lending environment is highly complex, driven by ever increasing customer expectations, evolving regulatory requirements, and a digital revolution that is transforming the lending business. To successfully navigate these challenges, lenders need to have the right strategy in place for the consumer lending and credit card business.

Ways in which PwC can assist clients with their consumer lending strategy include:

  • Strategic planning and design: Assisting with the development and implementation of a forward looking strategic vision linked to growth goals, customer service objectives, and financial performance measures
  • Customer experience strategy: Assisting with the design of customer experience strategies that help achieve higher customer satisfaction, reduce turnover and increase revenue
  • Product strategies: Developing and reviewing product strategies that launch efficiently and yield effective results, product launch implementation and management
  • Profitability analytics: End-to-end loan profitability analytics
  • Target operating model: Development of target operating models aligned with the strategic vision and business objectives

In a world of greater complexity, uncertainty, and accelerating change, monitoring and managing risk is a strategic imperative. How an organization monitors, manages, and mitigates risk can have direct impacts to the bottom line. We assist our clients with identifying, evaluating, monitoring, and responding to the full spectrum of risks in the lending environment including credit risk, market risk, compliance risk, operational risk, and reputational risk.

The following examples demonstrate how PwC assists our clients:

  • Risk governance frameworks: Design, establish, and review risk governance structures and organizations
  • Risk reporting: Review board and management risk reporting for appropriate level of oversight
  • Risk assessments: Risk analyses on specific functional areas or processes such as originations, underwriting, servicing, and default management
  • Control assessments: Designing and implementing internal control frameworks, performing process reviews, and measuring control effectiveness
  • Third-party risk management: Program diagnostics to identify gaps against leading practices, transformational roadmaps, TPRM office design and execution, technology enablement, and third-party assessments
  • Policies and Procedures: Assisting clients with establishing and enhancing policies and procedures across the consumer lending business

According to PwC’s 2015 CEO survey, regulatory compliance is the top concern amongst CEOs, with 57% of CEOs concerned about over-regulation. The evolving regulatory environment is placing more demands on lenders which increasing the cost of doing business. In today’s environment, lenders must bolster their compliance capabilities and continue to move to a more customer focused business model. PwC has assisted organizations in comprehensively evaluating their regulatory compliance requirements and developing new approaches that deliver more value, enhance operational performance and limit costs.

Ways in which PwC can assist clients with regulatory compliance include:

  • Regulatory examination preparedness: Conduct pre-regulatory examination readiness assessments
  • Regulatory examination remediation: Assist clients with designing and implementing corrective action resulting from a regulatory examination
  • Regulatory compliance self-assessments: Analyzing processes and controls for compliance with key regulatory requirements such as:
    • Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act)
    • Fair Credit Reporting Act (FCRA)
    • Equal Credit Opportunity Act (ECOA)
    • Regulation Z - Truth in Lending Act (TILA)
    • Unfair, Deceptive and Abusive Acts and Practices (UDAAP)
    • Service members Civil Relief Act (SCRA)
    • Telephone Consumer Protection Act (TCPA)
    • Regulation P - Privacy of Consumer Financial Information
  • Cost reduction: Identify opportunities within the compliance management program to rationalize costs.
  • Technology infrastructure: Perform gap analysis to identify potential technology enhancements, including CMS evaluations, to meet regulatory requirements.
  • Reporting: Develop robust reporting suite to provide board and leadership with seamless oversight over regulatory compliance.

Finance organizations are asked to respond to ever more complex regulatory, reporting and disclosure requirements, placing Finance leaders under pressure to quickly operationalize complex standards and develop robust reporting that enables enhanced analysis and decision making.

The following examples demonstrate how PwC assists our clients:

  • Auditing and attest: Financial statement and compliance auditing using auditing best practices and in consideration of the latest developments
  • Accounting advisory: Technical accounting advice on US GAAP and IFRS, technical and practical implementation analyses
  • Membership rewards reserves: Review the reasonableness of assumptions within the membership rewards liability provision
  • Reserve calculations and TDR methodology: Recalculate credit reserves utilizing internally-developed benchmark models and reviewing the reasonableness of assumptions in troubled debt restructuring (TDR) methodology
  • Credit reserving assumptions and estimates: Review the reasonableness of assumptions and estimates within the credit reserving methodology, in light of applicable accounting and regulatory guidance, current industry practice and the latest developments in credit reserves methodology
  • Internal audit: Support through outsourcing or co-sourcing

Consumer finance organizations are facing unprecedented demands and challenges as they strive to meet heightened expectations from customers, investors and regulators while managing costs to generate profitable growth. A successful transformation journey requires a trusted partner who has deep industry knowledge, proven track records in servicing operations, and innovative approaches.

The following examples demonstrate how PwC assists our clients:

  • Process improvement and design: Identifying opportunities to improve processes, from origination and underwriting through servicing and default management, based on leading practices.
  • Operational and cost benchmarking: Cost studies and benchmarking performed on KPIs and costs for both originations and servicing.
  • Servicing operational efficiency and quality improvement: Analysis of procedures and operations, identification of cost savings, servicing profitability analysis
  • Call center management: Assessing call center operations to identify cost reduction opportunities and optimize staff utilization
  • Operational capacity assessment - Assessing resource capacity management and assisting with development of dynamic capacity planning initiatives and tools
  • Default management process improvement: Review of default management strategy and operational procedures, including:
    • Using non-linear strategies and business rules to drive collections activity
    • Enabling relationship-based collections processes
    • Using risk-based analytics to drive collections strategy improvement
  • Outsourcing and offshoring analysis: Assessment of current operations and strategic alternatives for in-house operations in both fulfillment and servicing
  • Policies and procedures: Development and review of operational process documentation
  • Rewards programs – Analyzing rewards programs, including how offer differentiated rewards while also managing costs

As the software industry pushes towards concepts such as cloud-based services, big data, private-label branding, and rule-based automation, CIOs and CTOs face decisions as to the strategic direction they will take their company's technology.

The following examples demonstrate how PwC assists our clients:

  • Software/Vendor selection assessment: Reviewing project requirements, budget, software capabilities/vendor skillsets, resource availability and timeline constraints to assist with the selection process
  • Technology roadmaps: Developing strategic roadmaps for software retirement/development, identifying gaps, and providing insight into industry practices.
  • Requirements: Development of business, data, and reporting requirements for card-related implementations
  • Implementation support: Project management, data mapping, system conversion, testing, and other forms of implementation support
  • Reporting & business intelligence: Designing, documenting, and implementing data warehouses and/or big data concepts, business intelligence frameworks, data analytics, reporting, scorecards, and management dashboards

Most consumer leaders realize the importance of a customer-centric business model and positive customer experience, but few have successfully achieved their vision this. Understanding customers’ wants and needs is critical to providing a differentiated experience to customers who are more financially and technologically sophisticated and have more choices in the marketplace. As service delivery has expanded across multiple channels —including branches, call centers, the Internet, and mobile channels —the business of serving customers, not to mention delighting them, is particularly complex. Lenders must reassess their customer relationship model and refine their value proposition. PwC can assist in discovering customer insights and turning those insights into actionable intelligence to help clients comply with regulatory requirements as they strive to exceed their customers’ expectations.

The following examples demonstrate how PwC assists our clients:

  • Understanding your customers: Customer journey mapping, Voice of the Customer strategy development, Customer experience strategic assessments, Persona development
  • Customer analytics: Lifetime value analysis, Lost customer root cause analysis, customer segmentation
  • Customer-centric program evaluation: Program metrics, performance scorecards and management dashboard development
  • Complaints: Assessing complaint management maturity and strategic assessments

As advisors across the industry, we have developed benchmarking and perspectives on leading practices which we leverage when assisting our clients evaluate acquisitions, divestitures, and strategic alliances. Our services span the deal lifecycle from strategy development and target evaluation, through due diligence and execution, to post-acquisition integration. We have assisted in many clients with converting their vision and strategy into detailed integration plans and developed a range of proprietary tools including value driver analysis processes, and enterprise wide blueprint development approaches to support our analysis.

The following examples demonstrate how PwC assists our clients:

  • Strategy: Extracting maximum value from merger, acquisition, and divestiture activities. Objective advice on value propositions and synergies
  • Due diligence: Financial and operational due diligence of consumer finance companies and divisions
  • Benchmarking and cost analysis: Benchmarking the cost base and operating models of newly created entities versus industry competitors
  • Pre-acquisition logistics and planning: Integration program setup and support, including roadmaps, gap analyses, and contingency planning
  • Post-acquisition integration: Leveraging operational and technology expertise to effectively evaluate and integrate technologies and operations

As changes in the market environment impact consumer lending businesses, leadership teams are refocusing attention on the key strategic questions about improving business performance and overall profitability without taking on unacceptable levels of risk. Fundamental to this objective is the capability to assess end-to-end profitability of products, channels and operating units as well as analytics that can support strategic decisions that direct investment and better manage the economics and risks of the portfolio.

Ways in which PwC can assist clients with their analytics and reporting:

  • Business financial performance and strategic initiative analysis and design: Financial analytical capabilities to provide better visibility into the profitability and business performance of products, channels and/or operating segments through dashboards, metrics and performance indicators
  • Business profitability forecasting and analytical tools: Review of current business profitability forecasting and analytical tools, and recommendations to improve transparency and align profitability metrics with your organization’s strategic vision and bottom-line.  Development of risk and profitability based analytical frameworks, including improvements to financial reporting, risk modelling and forecasting plans
  • Development of cash forecasting models and reporting: Develop an enhanced view of future expected cash flow for efficient deployment of capital and ultimately reduce the cost of capital.  Operational assessment to improve accuracy and consistency in data – End-to-end review of operational and financial systems/processes and their associated data feeds to the general ledger and other financial reporting tools.  Identify processes and systems that inhibit accurate and consistent financial reporting and analytics, and provide recommendations, such as operational improvements or data processing software to streamline your organization’s data movement
  • General ledger structure and alignment: Evaluating the general ledger structure and other financial reporting systems to better align with operational and strategic vision, including analyzing the structure of accounts, evaluating of general ledger size (slim vs. robust), evaluating the effectiveness of system feeds and the financial reporting close process
  • Market Analytics & Portfolio Surveillance (MAPS): Utilize PwC's MAPS platform, a subscription benchmarking service utilizing industry leading data visualization tools, to benchmark key performance metrics against peers and perform analysis of lending operations data in a flexible environment to identify portfolio trends and outliers