Barclaycard, a credit card issuer that primarily furnishes branded credit cards, like the Best Western Credit Card and the Carnival Credit Card, is experimenting with a new business model with a brand new card called Barclaycard Ring. I have to wonder if the “Ring” in the name of the credit card refers to a circus, because this may be the atmosphere Barclaycard is trying to create.
The Barclaycard Ring card is the first “social” credit card; the terms will be shaped by the community of credit cardholders. For almost nine years I’ve been sharing my financial reports each month and accepting feedback about and suggestions for my financial decisions from a community of readers, and Barclaycard is taking the same approach. Cardholders will be able to view the card’s profit and loss statements, offer suggestions to direct the future of the business, and share in the card’s profits.
Customers will be encouraged to participate in the community, likely to take the form of a forum-based website, and with this participation, they’ll have the opportunity to take home part of the profits in the form of rewards. Through the openness of the business, customers will see the effect these decisions have on the card’s bottom line. By crowdsourcing some of the terms most relevant to generating profit, the community will decide which features the card may include. Here are a few aspects of the credit card offer customers will be able to affect:
- Interest rates (currently 8% APR)
- Balance transfer fees (currently $0)
- Annual membership fee (currently $0)
- Late fee (currently $25)
- Foreign transaction fee (currently 1%)
- Whether to outsource customer service
- Specific deals with merchants
- Marketing ideas
- Web site features
Unlike most businesses, where customers feel they are better served when a company’s profits are narrow, this clever idea changes the perspective of customers. By giving the customers a role in designing the card, the community will have a feeling of ownership and responsibility. With this feeling, in addition to the possibility of sharing in the profits, customers who normally feel they are living in opposition to their credit card issuers will feel that they and Barclaycard are on the same team.
Barclaycard will share its profits with the community through a program the company is calling GiveBack. While shareholders are always the first priority, a standard calculation will determine how community participants share in the profits. While some portions of the Giveback program seem to be exempt from shaping by the community, users will have the option o directing some of this Giveback money to charities.
By giving cardholders the ability to share in the profits — more like a credit union than a typical financial institution — it’s easy to see why the low interest rates and low fees Barclaycard Ring currently offers might not be permanent. When revenue data are kept private and profit is only reinvested withing the company and distributed to its shareholders, card users benefit the most with low rates and low fees. Once customers see how higher rates and fees might benefit each individual or a community consisting of responsible credit card users who can avoid fees and interest rates by paying on time and in full, I don’t expect it to be long before the crowd votes to increase fees and rates.
Customers who participate in the community will begin thinking more like business owners than like consumers, eager to see profits climb, with the opportunity to boost their own bank account balance through the GiveBack rewards.
Updated March 14, 2012 and originally published March 13, 2012. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.