The LAB: Innovating a Credit Card with S.I.T. (June 2009)

Credit card companies must innovate to overcome the financial and public relations consequences of recent government legislation.  The Credit Card Reform Act of 2009 is a “bill to protect consumers, and especially young consumers, from skyrocketing credit card debt, unfair credit card practices, and deceptive credit offers.”   These changes go into effect in 2010, and they will undoubtedly reduce the financial performance of card issuers.

The concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward.  Bellamy used the term credit card eleven times in this novel.  The credit card has become a ubiquitous symbol of consumerism since then.  Many credit card innovations have emerged, some useful and others wacky.  Recent innovations include: paperless statement; online statements; custom logos to display your affiliations with colleges, companies, and other groups;  a magnetic strip to read information more efficiently and securely.

The key for credit card companies is to reduce their reliance on price (in the form of interest rates, penalties, and fees) and increase their pipeline of innovative services for which consumers will be willing to pay.  That is the focus of this month’s LAB.

We will use each of the five templates of the Systematic Inventive Thinking method to create new credit card concepts.  These templates regulate our thinking and channel the ideation process.  To use a template, we apply it to an existing product, service, strategy, or business model.  In effect, we morph the existing product or service into something that doesn’t seem to make any sense.  We then work backwards to find a possible PROBLEM that this hypothetical SOLUTION solves.   In other words, we go from the solution as the starting point instead of the traditional method of starting with a problem, usually gleaned from the “voice of the customer.”

We start with a component list:

1.    Credit card number
2.    Expiration date
3.    Cardholder’s name
4.    Logo
5.    Magnetic  strip
6.    Signature block
7.    Security code CCV
8.    Customer service phone number
9.    Statement
10.  Credit limit

Here are five innovations, one for each template:

1.  SUBTRACTION:  Remove the number and replace it with a TinyURL-like number that is coded and can only be decoded at time of purchase.  Authentication is a big issue, and various schemes have emerged to address it.  This idea takes advantage of existing concepts to reduce and disguise text.

2.  MULTIPLICATION:  Make copies of the credit card number. Each one is a different credit card.  Benefit: you need only one plastic card for purchasing (such as the fictitious one pictured above).  You get to specify which actual account (Amex, Visa, or Mastercard) is applied at time of purchase.  This helps consumers spread their debt to the most advantageous credit plan.  Perhaps the card does it automatically for you based on credit limits and current fee policies.

3.  TASK UNIFICATION:  The magnetic strip has the additional job of carrying owner information and shopping preferences.  Perhaps it keeps track of proper clothing sizes or discount coupons that the owner is entitled to.  It keeps track of the owner’s membership number to that store.  Its job is to carry information that makes shopping easier, fun, and more efficient (save money).  Perhaps the magnetic strip has additional duties related to legislative reform mandates (monitoring compliance).

4.  DIVISION:  Divide the logo off the card and place it somewhere else in the system.  The logo is now on all of your cards, or perhaps it shows up somewhere where other people can see it and identify you with the logo.  This heightens the esteem you get from carrying the card with that affiliation.  Perhaps your card logo is displayed on a monitor in a restaurant, for example.  Perhaps reservations at hotels or other places with your affinity logo is used someway by the merchant and the affinity group to offer you special benefits.  Example: when you walk into your hotel room, you see the TV on with the logo of your alma mater proudly displayed on the screen.

5.  ATTRIBUTE DEPENDENCY:  The credit limit changes depending on the merchant you are shopping with.  Perhaps merchants are willing to bear a certain amount of credit risk depending on their relationship with you.  Some might be willing to extend more credit, some less credit.  By “risk shifting,” we address some of the legislative concerns.

Legislators may want to consider less brute force reform and demand more “reform-through-innovation.”

*Special thanks to Dave Kastner for creating the “uni-card” image above.