We expect 2008 to be a year of robust activity in plastics that will include expanded capabilities as well as continued growth for credit unions that wisely choose to invest in their portfolios. As CEOs look for ways to build revenue and reduce expenses, we anticipate greater usage of automated risk-based pricing that takes into account each individual cardholder's actions and relative risk. Fraud management will continue to be a primary concern as credit unions strive to offer their members the best preventative and protective technologies available. And, despite congressional hearings on potential regulation of interchange fees, most industry analysts believe that no action will be taken.

For debit issuers, rewards incentives have proven to enhance portfolio performance. Many credit unions find that traditional rewards programs work very well, particularly when members are able to reach redemption levels quickly by combining points for both debit and credit activity. There is also a strong push toward loyalty-based rewards, where active debit cardholders receive preferential rates for financial products and earn rewards points for using additional financial services. These loyalty programs deliver greater differentiation against competition from de-coupled debit card issuers such Capitol One.

Regular activation and usage campaigns remain a primary requirement for any debit program's success. Cardholders are creatures of habit and studies show that once a member is comfortable with the card, he or she will continue to use it and will increase usage in response to the right reward. Half of users would spend more on debit cards if incentives were attached, says a study by Synergistics Research Corp. The result: an average 22% spending increase, according to the report.

Flexibility for the user and convenience for the giver continue to drive expanded usage of prepaid cards, with re-loadables offering long-term growth potential. Success depends upon actively promoting and marketing this product.

More credit unions are focusing on credit portfolios as a way to boost revenue and earn member loyalty. Historically, our industry has viewed credit card portfolios in relationship to their asset percentage instead of their income potential. That perspective has shifted: credit unions throughout the nation have achieved dramatic improvements in revenues with a modest investment in marketing and energizing their credit card offering. NCUA records indicate that 69% of card portfolios grew from March 2006 to March 2007. Callahan & Associates reports that credit union card balances posted a 12.2 % annual growth rate as of June 2007, while banks recorded a decline of 0.4%. This is the second year in a row that credit unions have outpaced banks in credit balances. The profitability of this asset has led credit unions that previously sold their portfolios to regain ownership.

With growing concerns about the credit crunch, risk-based pricing programs provide an effective way to offer a competitive product that protects the credit union. Automated programs monitor each cardholder's risk and offer the choice of quarterly, semi-annual or annual rate updates. This should provide a good night's sleep for credit managers while allowing the institution to maintain good yields and satisfy member needs.

As Visa joins MasterCard as a publicly held corporation, we can expect greater competition and differentiation between the two cards. This may benefit credit unions in the form of incentives as these companies launch aggressive campaigns to gain market share.

In a mature market like the credit card business, customization is a smart way to achieve differentiation and boost usage. Community-based graphics earned rave reviews from credit union members, and the future promises the ability for users to imprint their card with a personal image, such as a family vacation or wedding photo.

Advanced personalization techniques promise the ability to deliver targeted communication and marketing to important member segments. Major online retailers like Amazon.com and others leverage shopping and purchasing preferences to create personalized offers. A credit union example would be targeting members in the youth segment with an offer for portable electronics or gift cards when they visit your rewards Web site.

In 2007 early adopters of mobile banking began testing and employing this technology, but we should see greater functionality in 2008 with programs that extend basic Web-based banking services to cell phone users on the go. This enhanced access may attract new members–especially young adults–to credit unions.

The industry continues to make gains in fraud management. We are expecting the debut of a new platform that will provide enhanced security for both signature and PIN debit transactions in 2008. This platform will be the first of it kind in that it will integrate individual risk analysis for signature and PIN transactions. We also look forward to evaluating the benefits of Visa's Advance Authorization system and the continued expansion of fraud management for debit and credit transactions undertaken by the cooperatives and CUSOs that serve the industry.

All of these programs should yield greater protection for credit unions and their members with faster response times, lower false positives, and more accurate identification of emerging fraud patterns.

The credit union industry is well positioned for dramatic revenue growth in 2008. The industry has gained momentum in both debit and credit programs and is managing exposure from subprime mortgages and credit delinquencies. NCUA reports that credit unions are experiencing some increase in mortgage and loan delinquencies and foreclosures but on a relatively small scale. The industry's credit card delinquency rates actually declined from June 2003 to June 2007 to a very conservative 1.05%.

Credit unions have proved that they can compete effectively against banks in both credit and debit arenas. A modest investment of resources will deliver continued revenue growth in both platforms and will position credit unions as the primary financial institution for a growing number of members.