ST. PETERSBURG, Fla. — While the long-term payments future remains optimistic for credit unions, the 2013 annual conference of Card Services for Credit Unions revealed the immediate payment path continues murky and expensive as ever.
The organization held its conference from April 24-28 at the Renaissance Vinoy Resort.
“We are definitely at the beginning of a technology shift in payments,” Patricia Hewitt, director of debit services for the Mercator Advisory Services told a conference meeting specifically set aside for credit union CEOs. But the market has not picked a winner among the new technologies, and until it does, it will be hard for financial institutions to know how to move forward, she said. It will also be difficult to tell which nonfinancial institution innovators will succeed and which will fail, she added.
Hewitt’s message seemed to sum up much of the conference, at least when it came to discussion of the future.
When it comes to traditional payment products, for example, the usually reliable credit cards and debit cards face a shift to new smart card technology and the market changes mandated by changing regulations that still leave many unanswered questions.
A panel of executives and experts from different parts of the card industry told the conference that cards outfitted with EMV smart chips were not likely to make any of their institutions any money and should be treated as something of a necessary evil, like insurance.
Bastian Knoppers, senior vice president for card personalization at FIS, advised the executives that they soon will need to present their boards of directors with proposals for switching debit and credit card portfolios over from having cards with magnetic stripes to cards having EMV chips. Such a presentation is going to have to address questions about why, what, how, when and who, he told the group, and the challenge is that there is not a strong case for why.
“There is not a good looking business case [for EMV], I can guarantee you that,” Knoppers told the group.
The problem is that absent a mandate from a government or from the major card brands, there is no strong case for paying the additional costs for EMV cards, at least not for an entire card portfolio. The cards will significantly cut the cost of one type of fraud–counterfeit card fraud–but not necessarily others.
Cards enabled with EMV chips can cost between two and four dollars more per card than cards with magnetic stripes.
Institutions will face liability for card fraud after October 2015, and that has provided both card issuers and merchants a strong incentive to adapt to the new technology. After October 2015, it will be the party on either side of a transaction which is not yet enabled EMV technology, whether merchant or retailer, that will bear the responsibility for card losses that would have otherwise been prevented had the new technology been in place.
CSCU Robert Hackney noted the changes looming and urged the credit union card executives attending conference to pick up the pace on educating their members and themselves about the changes coming.
Speaking about the EMV shift, Hackney said that CUs have 30 months to get their EMV decisions made and cards issued before the coming liability shift urged them to appoint someone to take on the task of monitoring and organizing the shift in their institutions.
This may not be quite as big as a core processor conversion, Hackney told the meeting, but it is an extremely large and complex change and it needs to have someone in the organization own it.
He also urged credit union to stay up to date on payments changes because many decisions, particularly in EMV equipped debit card and in mobile payments, have yet to be made. There are still too many different players that have staked out positions with significantly different technologies that still need to shake out, Hackney explained, pointing out the history of great battles such as between eight track tape and cassette tape and video tape and DVDs Until that shakeout takes place credit unions need to keep informed about the topic, Hackney added.
Yet even among the challenges, CSCU still offered some of the same motivational speeches and examples of card success that usually characterize its annual conferences.
Meeting attendees heard from Ken Schmidt, communication strategist for Harley Davidson, as he outlined the way, he suggested, credit unions need to change their communication with members to motivate them into loving their credit unions.
“People almost never make decisions based on logic and facts. That’s not the way the world works,” Schmidt said. “People make decisions based on emotions. I like you or I don’t like you. I want that or I don’t want that. I trust you or I don’t trust you.”
Credit unions instead need to focus on humanizing their interactions with the public, not treating them as customers or even member, but treating them first as human beings, and that means noticing them and listening to them.
Another panel of three executives from credit unions that had strong credit card success in 2012 agreed that getting senior credit union management involved with and committed to the card program early was key.
Joe Mayhew, consumer loan manager at the 59,000-member $700,000 million CoastHills Federal Credit Union in Lompoc, Calif.; David Throne, vice president of internal operations at the 69,000-member $934 million Fox Communities Credit Union in Appleton, Wis.
in Appleton, Wis.; and Julie Brock, marketing publication specialist at the 15,000-member $94 million GEMC Federal Credit Union in Tucker, Ga., described how each of their credit unions all used slightly different strategies to see strong card performance in 2012, but all agreed that getting senior management committed to the goal early had played a key role.
Having senior management on board helped the credit unions motivate their frontline staff to back the card and enthusiastically offer it members, the executives said, while senior management commitment had played an important role in making sure the different departments of the two larger credit unions cooperated on the shared goal.
“We were really pleased to see how the different department’s worked together,” said Throne. “Frontline staff was able to engage members about the cards in part because of the materials that marketing had developed for them to use.”