Crowdsourced credit cards: a new future for finance?

Source: CNN Money| By Catherine Dunn Posted November 25, 2013

In a radical experiment, Barclays is allowing customers to have input on everything from their card’s look to its interest rate to the late-fee policy. And they get a cut of the profits, too.

FORTUNE — Until last year, Jared Young was a rather anonymous credit card executive in the Wilmington, Del., office of Britain’s Barclays (BCS) bank. But that was before he developed his alter ego. Today, the senior director for consumer markets at Barclaycard US is better known to thousands of the bank’s customers as “JaredY,” the hip face of Barclaycard in its two crowdsourced credit card communities.

If that alliterative phrase gives you pause — crowdsourced what? — you are not alone. Banks have not traditionally sought the counsel of online communities when setting the terms of their credit cards. In the past, it was more common that customers would have to scour the fine print to figure out exactly how much their interest rates had been jacked up. Input? If you can handle being on hold for 20 minutes, you can always call customer service and wait to offer your thoughts to an employee with no power to change anything.

That’s what makes JaredY such a radical guy. Because with the Ring credit card community, which launched in 2012, and more recently with Barclaycard Travel Community, which went live in November, Barclaycard is defying conventional credit card wisdom.

Log on to the Ring community, for example, and you’ll find JaredY explaining the card’s revenues and expenses, along with Barclaycard’s formula for sharing profits with cardholders: Once the bank clears a 3% annual return on the card, it shares 70% of any amount above that with Ring customers. You’ll also see Young’s smiling avatar responding to customers’ queries in the comments section and asking them to vote on terms such as Ring’s late-fee policy.

By inviting customers to discuss and influence the product, Barclaycard’s goal is nothing short of upending an industry. “We really want Ring to change the way credit card banking is done in the United States,” says Young, who crafted the idea with Paul Wilmore, managing director for consumer markets, before Wilmore pitched it to CEO Amer Sajed in 2011. “We believe that there is a better dialogue, that you can be very customer-centric, and that customers will reward you with their business. It’s a different paradigm.”

Initially, Young and Wilmore thought that designing a super-simple credit card, and explaining about how it worked, could help with banking’s tarnished-image problem, post-financial crisis. At the same time, the 2009 Credit Card Accountability Responsibility and Disclosure Act pushed financial services companies to eliminate hidden fees and make products easier for consumers to understand. “The core idea was: make the simplest credit card possible, be very transparent with customers, and give them a say,” says Young.

The best way to create that kind of dialogue, they eventually realized, was to form a community. So Barclaycard turned to Lithium Technologies, an enterprise software outfit that shares a board member, Peter Fenton of Benchmark Capital, with Twitter (TWTR) and powers what it calls “social customer experience” for more than 300 brands. Lithium’s platforms — which companies including BestBuy (BBY), AT&T (T), and Sephora embed into their own websites — draw 75 million monthly unique visitors.

Developing an online community for a bank, however, was a first. “To me this is a big, disruptive innovation for financial services,” says Lithium CEO Rob Tarkoff, who previously led Adobe Systems’ $1 billion digital enterprise solutions unit. “They’re actually enlisting the customer base in the process of building the offering,” he adds.

Take the late-fee policy, for example. After Young blogged about the different ways the bank could structure the policy, Ring customers actually voted for an option that earned the bank 15%more in fees, not less. Young views it as a sign that the profit-sharing component, called “Giveback,” is working. “The feeling was, it will create more profit for Barclaycard Ring, some of which will be shared back with them,” he says.

Barclaycard has also asked for its customers’ opinion on Ring’s foreign country fee and cash-advance fee, as well as for input on the next iteration of the card’s plastic design. Its current form, a splash of bright orange on a white background, has proven somewhat divisive. “There’s a lot of people who like the look of the card, a lot of people who think it doesn’t look austere enough,” says Young, although community members have expressed “overwhelming interest in translucent plastics.”

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