Is Your Credit Union Leveraging Its Greatest Tool For Income And Profitability? - Blog

Please Wait a Moment
X

Blog

29Aug

Is Your Credit Union Leveraging Its Greatest Tool For Income And Profitability?

Is-your-credit-union-leveraging-tools-for-income-profitability.jpg

The future of your Credit Union depends upon how you adapt to the changing landscape of the financial industry. One aspect of the change is leveraging your greatest tool for fee income—debit and credit card interchange revenue. Take a look at some of the emerging strategies, then compare them to your CU's current approach.

Fierce Credit Card Programs

As reported by Credit Union Times, credit card programs work very well for CUs. However, only 1 out of 5 CU members regularly use CU credit cards. Here are a few ideas innovative credit card program managers have discovered and put to use in order to find ways to increase interchange revenue.

  • The Small Business Card: Small businesses spend over $500 billion annually in credit card purchases. Before the 2000s, CUs issued small business credit cards but most sold their portfolios to larger institutions due to costs. Current technologies are much cheaper and accessible to CUs. Additionally, most of the cost and time-related features required for these types of cards (such as inbound customer call centers, websites, and mailing services) are now handled by service providers. 
     
  • Co-Branded Credit Cards: Do you need to increase your millennial membership? Co-branded cards are an excellent tool to do so. This age demographic already has a distrust of big banks, and they enjoy a more personal interaction with businesses they interact with. In 2015, co-brands had a purchase volume of $809 billion. A notable example of co-branding is Costco's newly crafted deal with Citi and Visa announced in March of 2015. The alliance gives Costco's 85 million members the option to have their personalized membership card doubling as a credit card for purchases. For members who like the notion of simplifying and streamlining, this offers an appealing service to them. Costco, Citi and Visa stand to win big in that the convenience offered adds "stickiness" to both the card making it top of wallet and the merchant since it's paired with the routine of having to present the membership card in order to make purchases. Credit unions might look to align wiht other co-operatives and/or brands with similar community=minded missions (e.g., REI, natural food stores, local chartiable organziations).
     
  • Affluent (Elite) Cards: Your most wealthy members will mostly like have the highest credit card spending frequencies and amounts. Hence, furnishing them with a targeted card product offering exclusive perks is a sound way to improve your share of wallet, and by extension your revenues. Currently, the luxury market in the U.S. is the world’s largest. Make sure that your CU has a significant share in the luxury pool to increase interchange revenues.

Is your credit union making strides to offer members credit card incentives that they can’t refuse?

Expanding Your Members Debit Card Use

Debit card transactions are also not to be overlooked. These cards produce a steady stream of profits and are excellent cross-selling tools. For instance, some credit unions offer debit card rewards to members with checking accounts, shareholder accounts, and those who opt for electronic statements. This strategy has attracted younger members and boosted CU member retention. This is quite useful for customers who are not yet in a position to be approved for a credit card, or who simply prefer to use debit. Linking debit card rewards with products such as direct debits, or recurring utility payments may be just what your CU needs to increase interchange revenue.

Tip: Try adopting debit card self-service features. Text or email alerts about spending limits, unusual purchase amounts, and other customizable transaction data are growing trends that consumers value. There are also card control options for parents that limit spending to specific limits, categories and times.

 

About the Author

John Best

John Best

CEO

Best Innovation Group

John Best is recognized as a thought leader and visionary of technology advancements and financial application development within the credit union industry.

Related

CU-2’s Credit Union Data Analytics Provider Guide 2019

CU-2’s Credit Union Data Analytics Provider Guide 2019

Credit Unions are at a unique crossroads. We are behind on a handful of key trends. We must balance ...

Read More >
Facebook Group vs Page: For Credit Union Marketers

Facebook Group vs Page: For Credit Union Marketers

Many credit union marketers have difficulty telling the difference between a Facebook group and a Fa...

Read More >
No Time To Be A Tortoise: Credit Unions Are Running Out Of Time To Catch Up

No Time To Be A Tortoise: Credit Unions Are Running Out Of Time To Catch Up

“We are not moving fast enough. We need to move 2x or 4x faster,” says John Janclaes, CEO of the $...

Read More >
Getting Your Data In Order – A Recipe for Digital Success

Getting Your Data In Order – A Recipe for Digital Success

Data is fundamental to your digital transformation. Customers must be able to efficiently and effect...

Read More >
3 Social Media Strategy Mistakes for Credit Unions

3 Social Media Strategy Mistakes for Credit Unions

It is imperative that your Credit Union has a social media strategy in today’s digital climate. How...

Read More >
A Guide to Growth: How to Double your size every 5 or 6 years

A Guide to Growth: How to Double your size every 5 or 6 years

In my last two blogs, I described why credit unions should dominate their competition and local reta...

Read More >