Credit Unions Are Gaining Stature as Card Issuers, Visa Exec Says
WAILEA, Hawaii -- Bill Sheedy, president of North America for Visa Inc, said credit unions have grown in stature with the No. 1 card brand.
Sheedy told credit union and CUSO executives attending PSCU Financial Services annual Member Forum that Visa's most recent statistics showed that credit and debit cards issued by credit unions were responsible for 10% of its sales volume and that, when aggregated, credit unions represented the fourth largest Visa issuer in the U.S.
This means CUs have an important role to play both in Visa's ongoing operations as well as in special projects, such as the brand's work to defend card interchange from legislative and regulatory attacks, he added.
Unlike some of the meeting's other presenters, Sheedy delivered a primarily optimistic message on credit cards generally and CU-issued credit cards in particular. He noted that while asset quality questions would likely linger, the overall picture on credit card debt and consumers' abilities to make their payments will likely be more clear going forward than less clear.
As part of that improving picture, Sheedy reported that Visa was working with PSCU to support the launch of the Visa Signature program for credit unions that process with PSCU. Visa Signature is the brand's card platform aimed at affluent cardholders and has never drawn a lot of credit union issuers.
Sheedy emphasized the ongoing effort to increase consumer acceptance of electronic payments over cash and checks and Visa's own efforts to support card interchange are two of the card brand's most important priorities.
On the former, Sheedy noted that the overall competition between card payments versus cash and check payments dwarfed the competition among the different major card brands, observing that over $3 billion per year still moves though the system as cash and checks.
To make inroads into this market, Visa has continued its effort to get organizations with routine monthly payments, such as utility companies, insurance companies and other sorts of monthly payments to offer consumers the chance to put those payments on a credit or debit card. This was an effort Visa began a few years ago, and Sheedy reported that it has begun to take off.
The brand has also launched its "currency of progress" ad campaign to help consumers understand the benefits that the entire country receives if more payments are made on cards than through checks. One illustrates a single mother in the state of Nebraska who receives court-mandated child support through a debit card rather than by check, saving the state tens of millions of dollars per year on hers and similar accounts.
Thirty five states, so far, have signed agreements with Visa to offer these options to their residents various support programs and have found them accepted enthusiastically, Sheedy said.
On interchange, Sheedy was also upbeat but more cautious. He noted that a third of his time in the last year had been spent in Washington trying to influence policy makers about card issues but met with "a noted lack of success" even though most of the most important legislators have signaled they are not in the mood to tackle interchange in this Congress and maybe into the next.
Sheedy, who is one of Visa's experts on card interchange, described the interchange problem as having a number of faces.
First, it tends to be fairly complicated, which makes it difficult to bring into the regulatory or legislative arena. Second, it's part of a naturally competitive vendor-customer dynamic where there will always be some degree of natural tension.
Every merchant would like to take credit or debit cards and not have to pay anything for taking them, but Visa and card issuers are vendors and need to be paid for the service that adds value to everybody, Sheedy explained.
Credit unions have a crucial role to play in the interchange conversation, Sheedy explained, by bringing their credibility to the discussion at a time when bank card issuers have little.
"Legislators know you, they listen to you and they understand many of your positions already," Sheedy said, adding that put CUs in a good position to help legislators understand how important interchange is to their bottom lines.
He also reiterated Visa's commitment to the issue, since the card brand, generally, makes little from interchange when compared to the issuers.
Unlike previous meetings where fraud and security were top level concerns, Sheedy didn't discuss them much, not mentioning the recent spate of convictions and sentences that have taken the biggest recent computer hacking thieves out of commission. He did, however, announce that PSCU was the first credit card processor to be able to start offering Visa's Transaction Alert service.
Sheedy told the meeting that Visa saw rolling the technology out to CUSOs like PSCU as instrumental to helping strengthen the brand's fraud prevention effort.
Alerts are delivered through Visa's transaction alerts platform and are usually sent within seconds of transaction authorization and can be delivered by e-mail or text. Members can elect to receive any or all of the following alerts: transaction declined; out of country or card-not-present transaction; gas station charges or transaction exceeding an amount set by the cardholder, the brand and PSCU explained.
"We are fully committed to empowering our credit unions and their members with new technologies to reduce the risk of fraud. This new transaction alert service allows Visa credit cardholders to detect potential fraudulent use, providing credit union members more control over their accounts," said David J. Serlo, president of PSCU Financial Services in a statement accompanying the announcement.
Sheedy's generally optimistic outlook on cards echoed one offered as well by Charles Fagan, PSCU's chief sales officer prior to the meeting.
Fagan reported that credit union CEOs have emphasized to PSCU their view that credit card programs are among the places where they see growth opportunity in the mid- to near-term, but there is a good deal of uncertainty about how best to manage the risks cards can pose.
He also noted that credit unions generally, including half of credit unions that currently do not issue credit cards, are going to have to start offering cards that fit into their members broader financial strategy more comprehensively. The days have passed when credit unions would conduct periodic reviews of their card portfolios with an eye toward building balances with credit line increases, Fagan commented.
"Americans are still going to have cards and use cards, but they will have them and use them differently and credit unions need to help lead the way on that," he added.