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INDIANAPOLIS – David Becker, a banker and entrepreneur with a strong reputation among credit unions as the founder of data processing firm RDS and CU online banking firm VIFI, argues strongly that credit unions and smaller banks are foolish to sell their credit card portfolios. “Credit unions’ biggest card managing problem is not knowing what it is they have,” in their card portfolios, Becker explained. Credit union portfolios are excellent paper that any bank would be glad to have, he added. Becker is CEO of First Internet Bank of Indiana, a $390 million bank which has no branches and a credit card portfolio of roughly 7,000 cards worth roughly $5 million in outstanding balances. He is also CEO and owner of OneBridge, a card processing company with about 30 credit union clients that he says specializes in helping both bank and credit union issuers understand and manage their card portfolios to greater levels of efficiency and profitability. “Most financial institutions have no way to measure the return on investment of their card programs,” Becker said, even as he acknowledged that as the CEO of a card management firm he has an interest in credit unions and banks keeping their portfolios. “I would say this whether or not I ran this business [OneBridge]” Becker said. “ The fact is that credit cards can be a strong asset for any financial institution.” Becker is so confident that credit unions and small banks sit on unrecognized wealth in their card programs that he has offered to meet or beat any offer for a credit union’s card portfolio as CEO of the First Internet Bank. So far, he reported, the $139 million Capital Credit Union, headquartered in Bismark, North Dakota, has been the only credit union to initially take him up on the offer – only to back out later when they realized what the card portfolio could do for them if they managed it differently. “When they sat down with me to evaluate the portfolio and saw it through my eyes, they decided they didn’t want to sell after all,” Becker explained, chuckling a little at the memory. In Becker’s opinion, credit unions and small banks both err by misunderstanding and failing to appreciate their card programs. But credit unions additionally suffer, in Becker’s view, from some deficiencies that are almost institutional across the industry. Becker explained most credit unions don’t have one person for whom the credit card program is a key responsibility. Not having one person whose job it is to know on any given day how many credit union members carry the credit union’s card means that the institution often doesn’t really know how well a key program has penetrated its membership. This hurts credit unions in their first card battle, which is getting their cards in the hands of more of their members, Becker explained. The second card battle credit unions face is the fight for which card is going to be at the top of the member’s wallet or pocketbook. Here, credit unions are often primarily handicapped by the board of directors, in Becker’s view. “We know that credit limits are a key part of credit card usage,” Becker said. “And too many credit unions are far too slow to adapt their credit card limits to their users because they have boards of directors that are just too cautious.” Becker attributed this cautious stance to the age of many directors, making the case that many of these members came of age financially at a different time and have not kept up with how important cards have become in the day-to-day economic lives of Americans. “My dad has a credit card,” Becker said, “at least one. But I would be surprised if he uses it very much at all. He keeps it in case of emergency. He doesn’t understand that other people coming of financial age now use their cards to buy fast food or small items at a convenience store.” People often outgrow their credit limits very quickly, Becker argued, and assuming their income and assets and other loans justify it, they should be given the room they need to use their cards as necessary. Becker added that credit union boards also have to get more familiar with the notion that while increased credit limits and increased credit card use might lead to some increased loan defaults, they will also lead to greater profitability of the overall card portfolio. Too many credit unions don’t understand that, when compared to the industry at large, their credit card portfolios have charge-off and delinquency rates that are outstanding, he said. Those rates could rise significantly and still be the envy of credit card issuers overall, he added. -

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