What makes a card program an even more compelling revenue opportunity today is that credit union issuers, by and large, have not seen the high charge-off rates that big banks are experiencing. In fact, many credit unions are having success with card programs.
What does it take to make your card program successful? No matter the state of the economy, here's what we are seeing that is working to drive high-ROA programs that meet member needs.
Strategic Commitment. Credit unions that commit to a successful credit card offering at the board, executive and senior levels are much more likely to reap high revenue potential. Recognizing the consumer shift away from cash and checks to electronic payments, savvy credit unions understand that their members use cards to transact payments everyday and this trend is accelerating.
Even though the credit card product is more mature than debit cards, industry numbers point to a 33% increase in credit card purchase volume by 2012 as compared to 2007, with the number of total transactions increasing by 19% and outstandings up by almost 29%.
Added to that volume growth, credit and debit card products are your members most frequent touch point with your credit union brand. Strategic commitment to a credit card program is often the precursor to a program in a growth mode driving revenue and the potential for your credit union to be your members' primary financial services provider.
Management Commitment. Running a successful credit card program requires active, experienced day-to-day management. Credit unions that are seeing success have committed the resources necessary to understand and effectively manage credit card risk and work proactively with card processing partners to build a member-friendly program. Building and sustaining a successful program depends on many different levers around product strategy, pricing strategy, fee structure, managing credit lines and collection practices. Expertise with risk evaluation, portfolio consulting and product offerings are critical to choosing a card partner that is able to work directly with the credit card management team to put a growth plan together. Having the right tools to build a strong program and to make running it easier with more accessible data are more important in today's risk environment than ever before.
Growth Commitment. Simply having a credit card product is not enough to fuel growth. That can only be accomplished through a commitment to the right product and a solid marketing plan. Credit unions that are seeing strong growth have committed to building a product with the right rewards for the right members and marketing the card through all available channels. Some credit unions have the in-house expertise to market to members to grow the account base and to enhance usage and retention of the card, but many rely on a partner to handle the unique complexities of a sophisticated credit card marketing program.
Large bank issuers have backed off the direct mail channel, mailing 30% fewer offers in 2008 than the year before, leaving credit unions with a unique opportunity to gain market share with member-friendly cards. TNB has experienced this in its portfolio with very strong results from marketing programs mailed in 2009 including a prescreen direct mail acquisition offer that has generated almost a 1.5% response rate and a balance transfer program that doubled its planned results.
Additionally, integrating the credit card into the credit union's day-to-day interactions with members is critical with in-branch marketing being the most cost effective growth channel. A commitment to educating branch employees on the value of the card their credit union offers is essential to helping them see how promoting the card to members will provide them with real benefits.
The time is right for credit unions with their prudent lending practices to benefit from growing consumer dissatisfaction with bank issuers' credit card practices. With the balance sheet challenges facing many credit unions to generate more revenue, the time is also right to take another look at this product and commit to it with the right level of strategic support, management resources and growth plans.
Mark Fenner is senior vice president and national sales manager for TNB Card Services. He can be reached at 800-422-0733 or mark.fenner@