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Direct Mail Is Far from Dead for Most Credit Card Issuers

Stephen GauschMarch 01, 2019

Among Mark Twain’s many famous quotes, the one that always comes to mind for me is, “The reports of my death have been greatly exaggerated.”  Looking at a variety of industry statistics and observing trends among many of our clients, the same could be said about direct mail as a new account acquisition channel for credit card issuers and personal lenders. Clearly, over the past decade, issuers and lenders have dramatically increased their investment in digital channels to generate new card and loan accounts. This is because of digital channels’ lower cost and consumers’ increasing acceptance to respond to digital offers and apply on line.  Yet, for many lenders, direct mail continues to be the primary engine to drive new account generation and for good reason – it works.

Historically, Direct Mail Has Been the Dominant New Account Acquisition Channel

As far back as the 1980s issuers and lenders have used direct mail to send consumers credit offers.  Although direct mail for this purpose was somewhat novel at the time, consumers responded enthusiastically and, into the ’90s, banks and particularly monoline credit card issuers built nationwide portfolios of millions of customers with tens of billions of dollars in receivables.  While traditional banks had other marketing channels available, most notably their branch network and call centers, monoline issuers were restricted to direct mail and, to a lesser degree, telemarketing to build their portfolios.  It was these monoline issuers that refined the art and science of direct mail in financial service marketing.  During this period, direct mail volumes of new credit card offers many years exceeded 5 to 6 billion pieces.

New credit card account direct mail volumes peaked in the 2005-2006 time period with annualized volumes of around 7.5 billion pieces, or roughly 30 offers for every adult in the country.  As the economy and credit cycle turned immediately prior to the great recession of 2008, lenders pulled back and significantly reduced acquisition marketing levels.  Mail volumes bottomed out in mid-2009, with just over 100 million pieces mailed in July that year.  As the economy recovered, mail volumes increased to an annualized rate of between 3.5 and 4.5 billion pieces for the next five years or so.  More recently, just under 300 million pieces per month (3.6 billion annualized) were mailed in 2017, and 2018 saw about a 5% monthly increase in volume, especially in the second half of the year.  This trend is expected to continue into 2019, barring any significant economic disruption.*

Why Direct Mail is Effective as a New Account Marketing Channel

Credit card issuers and other lenders continue to use direct mail because it has proven to be a cost-effective means of acquiring new accounts and customers.  More specifically, this is due to a number of factors, including: the inherent addressability of the channel, its tight integration with the prescreen credit process, the scale and reach it affords, the high degree of precision it offers in targeting and segmentation, and deep institutional knowledge regarding its historic performance.

Due to its very nature, direct mail is a PII-based, addressable channel; credit granters are selecting the specific individuals they seek to do business with, not devices or IP addresses.  Selection of their prospect mailing list is analytically driven based on a multitude of data and criteria, but nevertheless involves selecting specific individuals to receive specific offers.

Development and growth of the direct mail channel is also linked to the prescreen process credit bureaus offer under the Fair Credit Reporting Act (FCRA).  Prescreening enables issuers and lenders to access (anonymously) a consumer’s credit bureau record to determine if the consumer meets their creditworthiness criteria.  If so, those consumers can be selected to receive a pre-approved or firm offer of credit.  Prescreening has enabled issuers to, in a highly selective and targeted manner, select only those prospective customers they want to do business with and to match the offer they extend to the consumer’s behaviors and credit usage patterns.  Today, direct mail remains, for all intents and purposes, the only channel through which prescreening at scale is possible and permissible.

The scale and reach direct mail affords still exceeds that offered by other channels, including most digital channels.  While lead generation platforms have made significant gains in the size of their registered user bases, and issuers themselves have signed up millions of consumers for “free credit score services” through which they can extend offers, none provides access to the tens of millions of prospects a prescreened mail campaign typically includes.

Finally, because of their long history with and the proven track record of direct mail, card issuers and lenders have developed a deep institutional knowledge regarding managing, measuring and forecasting campaign performance, providing confidence in their ability to generate the number and quality of  accounts they expect.

Fusion of Direct Mail with Digital Channels

As credit granters’ use of digital channels has exploded over the past decade, many have determined through test-and-learn strategies the strengths and weaknesses of each, such as display, search, lead aggregators, social, and their own website.  There’s no doubt that industry data confirms that these channels have generated their fair share of new credit card accounts, and investment in these channels has reduced investment in direct mail.  However, many issuers have concluded that a multi- or omni-channel acquisition strategy that includes direct mail offers the greatest return on their marketing investment.  Specifically, issuers are using direct mail as the first in a series of marketing impressions, then augmenting or amplifying the offer with further digital exposures including display and email to re-enforce the offer and message.  This enables the use of prescreening to select the desired marketing universe and the cost advantages offered by the digital and email follow-ups.

Direct Mail Going Forward

Today, for most issuers, direct mail is responsible for between one-third and three-quarters of all new accounts generated.  Several top 10 card issuers have plans to increase their mail volumes in 2019 over the prior year, and one is returning to the channel this year after exiting it several years ago.

An evaluation of industry data, as well as anecdotal evidence from discussions with card marketers in the industry, shows direct mail for new account acquisition will remain a prominent channel for the foreseeable future.

*Compiled from Mintel Comperemedia reports