WILMINGTON, Del. -- For the first time, an organization has formed that will bring card processor Total Systems into the at the credit union card processing and portfolio market.
PartnersFirst, a subsidiary of the rapidly expanding $5 billion Western Alliance Bancorp., will focus heavily on partnerships with credit unions, community banks, associations and other groups to either start card programs or process their existing card programs or purchase their card portfolios to issue cards through agent relationships, according to Hal Erskine, a former MBNA executive. MBNA is now part of Bank of America.
"What we bring to the picture is a card issuing relationship where the sponsoring issuer, the credit union, the community bank, the sport or bar association, comes first," Erskine said. "Whether that means we process their cards for them for a fee or own the card portfolio ourselves doesn't much matter. We think we have a superior model that resonates with what credit unions are trying to do with their cards."
Erskine conceded that, in some ways, PartnersFirst could be seen as the resurrection of at least parts of MBNA, the noted affinity card issuer which merged with Bank of America in 2005.Like Erskine, many of Partners' staff and card experts are former employees of MBNA and other large-bank card issuers that were headquartered in Wilmington and who lost their jobs in successive bank mergers. Erskine said he and the staff bring to the firm the same focus on affinity marketing and development that, he said, characterized MBNA during its heyday.
Erskine declined to name any big card issuers, including his former employer, but argued that, as a group, larger issuers have let their service of smaller to medium-sized affinity groups slide in favor of larger clients like airline mileage cards.
"Affinity card processing and service is fundamentally a patient business," Erskine said. "You need to have a business horizon longer than next quarter or next year."
Although the firm does not yet have any credit union clients, it has started up programs with 30 groups, including the Chicago Bar Association, Winston-Salem University, the Palms Casino Resort, the Westchester Bar Association and American Drag Racing, and it clearly has credit unions and other smaller financial institutions in its sights. According to the firm's data, the market for mid-sized and small affinity partners is at least $37 billion.
Erskine contended that PartnersFirst's alliance with TSYS will be a key element in the company's appeal to credit unions. The processing company previously has generally focused on larger bank and issuing clients and currently processes cards for Bank of America and the Target retail chain, among others. The partnership with PartnersFirst will be the first time the processor has sought to introduce its services to credit unions and other smaller financial
institutions along with other affinity issuers like alumni groups, bar associations and sports associations.
In addition to 24/7 call centers, transaction pricing and customized rewards and points management, among other benefits, Erskine explained that the TSYS platform will be particularly inexpensive. It's also easy for credit unions to use because PartnersFirst has spent months building an Internet-friendly marketing portal that moves the power of TSYS platform to an easily accessible and user-friendly format.
"Essentially we have made it possible for smaller issuers to have the sort of access to the TSYS platform which the biggest banks and issuers are able to get," Erskine said. "In theory, a credit union or community bank could approach TSYS and do what we have done individually, if they had the staff to dedicate to it and if they could send people to work and live in Columbus, Georgia, for months. We have just made it easier."
A sample program PF offered as an example of the TSYS platform included fixed-rate cards tailored to individual needs by the issuer's underwriting, no late fees, no over limit fees and no annual fees. Additionally the platform would not charge additional fees on international transactions, would offer 24/7 accessibility by both phone and the Web and a wide variety of rewards programs ranging from issuer specific rewards like lower interest rates on other loans to cash back to merchandise, gift cards, travel and merchant offers. All easily customizable by the issuer, Erskine said.
Erskine also explained that the firm's relationship with Western Alliance gave it a very strong foundation to use moving forward. Western Alliance is run by Robert Sarver, a long-time banker who founded his first bank in 1984 in his mid-twenties and grew it successfully before selling it to another, larger bank in 1994 and moving on to start others. The bank has most of its holdings in Nevada, Arizona and the San Diego area, all of which have been hit hard by the recent downturn in the mortgage and housing industries. But Western Alliance has benefited by limiting its exposure to the most problematic parts of the industry, according to company data, and writing down the losses it did have relatively quickly.
"Sarver is a pretty straight-up guy who believes in owing up to losses when you have them," Erskine said.
Western Alliance is the fourth largest bank in Nevada with 21 branches in the state and the 11th largest bank in Arizona and the San Diego markets.
The bank decided to back Erskine and the PartnersFirst approach when Sarver became convinced that the largest card companies in the U.S. had begun to adopt a one-size-fits-all approach to card management and to lose patience with the affinity group model. This shift has not been lost on affinity groups that, particularly the medium- and smaller-sized ones, have noticed a loss of service and revenue at the same time, Erskine said, a trend he attributed to focusing more on rapid growth than slower, more organic growth.
Erskine acknowledged that the credit union card marketing and portfolio markets are already crowded but said that he believed PartnersFirst could offer credit unions the mix of impact, rewards, ease of use and cost effectiveness that will draw credit unions. "What are credit unions about if not serving their membership with the best possible products and services," Erskine asked. "We think we have all of those when it comes to cards."