Friday, October 19, 2007

Serving the needs of the customer first

I've just been notified that I can sign up for a new kind of credit card. Oh, I know that most of you like me are probably inundated with credit card applications. I've been saving mine to help heat the house over the long, cold winter.

What made this solicitation a bit different and intriguing was the premise that the card actually sought to reduce or eliminate interest charges for the consumer, and, if the consumer paid their bills on time, would actually refund money back periodically. That's got to be a first - a financial institution that's not seeking to make money on fees and other charges and seeks to help you remember to pay on time. It will even reward you for what would seem to be activities detrimental to its bottom line. When a financial services firm goes out of its way to help you avoid interest and penalties, that's not just innovation - that borders on cannibalizism.

Well, the new Motiva card from Discover does just that. It appears that the Discover card folks are flipping the table on the traditional credit card business. The dirty secret in most financial services firms is that most make the majority of their income from fees. With the Motiva card, the Discover folks aren't only working to eliminate fees and interest, they are actually offering to rebate the amount of what your interest for one month would have been if you make six on-time payments. This amounts to paying you for what is in your best interest!

Note also the phrase on the website - "timely reminders to help you avoid fees". Again, this amounts to slashing your own wrists as a financial institution. As noted previously, the biggest money maker for most of these firms is fees. Why would a firm create methods to help you avoid doing something that made them money?

The answer is that the Discover folks are innovators, and as one of the smallest of the credit card purveyors feel the need to constantly change the game. This is a classic guerilla move, attacking an opponent's apparent strength by challenging a practice or capability that they can't or won't easily change. We'll see how Visa and MasterCard, the dominant credit card issuers with over 80% market share respond.

Innovators are people who are willing to upset the apple cart and dramatically change the way business is done. It remains to be seen if Discover can pull off a line of business that seems to intentionally limit its profits, however they are to be commended for creating a product that serves the needs of the customer.

Note: while I am interested in the offering and will watch it closely, I don't YET have a Motiva card, nor am invested in any way in the success of the offering.
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posted by Jeffrey Phillips at 5:22 AM

6 Comments:

Blogger awallace said...

This comment has been removed by a blog administrator.

5:52 AM  
Anonymous Katie's credit said...

That's interesting. I've never bothered to look into getting a Discover card before because it's hard to find anyone who accepts them, but I'll have to check that out.

Better competition is what the credit card industry really needs.

6:00 PM  
Blogger Frank said...

More places are accepting Discover Card now. In the past, Visa and Mastercard conspired to keep Discover out of business by not letting banks process Discover card.
I own a restaurant, I like Discover Card because it has the lowest fee charged to the store.

Discover Card also let me not paying late fee when I paid late few times in the past.

12:44 PM  
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2:50 PM  
Anonymous stop pre ejaculation said...

Thanks a lot for this time sharing of innovation about SERVING THE NEEDS OF THE CUSTOMER FIRST. This is really the best website about innovation i have ever read.

9:53 PM  

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