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.
To increase interchange revenue successfully, you'll need to investigate emerging strategies from industry leaders. Without taking a copycat approach, learn from others what is working and compare that information to your CU's demographics and growth strategy. If you find that your plan is antiquated, speak with technology vendors about possible updates. Remember, to survive future industry disruptions, your CU must embrace technological advancements in ways that provide long-lasting value for your members.