The reasons the CU card portfolios remain small range from lack of staff to lack of time, lack of leadership or a lack of priority for cards in the credit union's product mix, according to CU card industry experts, some of whom dedicate themselves specifically to helping CUs grow their portfolios above the $1 million threshold.

"Sometimes the current leadership of a credit union might not even know why their CU started offering cards in the first place," explained Ondine Irving, a noted CU card consultant. Irving observed that a small credit union card portfolio should not always be assumed to be a young portfolio. A small CU portfolio can sometimes be more than a decade old, Irving observed; it's just never really been actively managed or grown.

Even while acknowledging the long list of challenges facing small CU card issuers, Irving said she considers mindset on the parts of the issuers themselves to be the biggest challenge.

"So often I come upon a credit union with a small portfolio and find a sense of….defeatism," Irving said, her voice expressing reluctance to use the word.

"Sometimes it can seem like they are just throwing up their hands and saying we can't compete, we can't compete, when they really can. Growing a small credit union card portfolio is not really any different from growing a larger one. They are going to want to do the same sorts of things the big boys do."

"The other major thing I find that makes the difference is CEO involvement," Irving said. "If a small credit union issuer moves their program to more than $1 million, I almost always find a good deal of CEO support and involvement in the effort."

Irving and other CU card experts said that the two biggest changes most CU's need to make to grow their portfolios are pretty basic, regularly review and likely increase card holder credit lines and move other card platforms like Gold and Classic cards to Platinum.

Visa has made it much easier to make this switch than it used to be, Irving and the others pointed out. Issuers no longer have to change bin numbers when they change over to Platinum and many of the processors are offering incentives to help issuers make the switch. But a credit union that is already ignoring its program or feels overwhelmed by it is unlikely to take the step of moving up to Platinum, the experts observed.

Irving conceded as well that a CU with a smaller card portfolio can have a different set of priorities, once the big changes likes credit lines and choice of card platform are done. Because of tighter margins, CUs with smaller portfolios should be more sensitive to costs of different services processors sometimes offer. They also need to examine their program carefully to see if they really need or use some of things for which they are currently being charged.

"I have gotten into hot water with one processor because I urged some of my client CUs that they not take a certain product that the processor was offering because they really didn't need it," Irving said, "particularly if a CU has not already tackled the changes that make the most difference."

Sometimes the search to grow their portfolios can lead CUs to make some big changes to their programs, including changing card processors or moving their program in-house.

That was the decision made by Houston-based C-E Credit Union. As of the end of 2007, NCUA data showed the CU with 646 card accounts worth roughly $1.4 million. The $16 million credit union declined to identify its former processors, but confirmed that it had decided to move its credit card program in-house with the assistance of Pemco Technologies and to move its debit processing to Computer Marketing Corp.

CEO Mark Wright confirmed that his CU is making the switch, which includes consolidating its two MasterCard programs into one Platinum Visa program and that it would do so only gradually without any mass conversion from its former processor to the new processor.

Like many small CU issuers, Wright said the existence of the portfolio pre-dated his time at C-E and said that the CU had decided to look into improving the portfolio when a vice president of lending got excited about the opportunities it provided.

Wright attributed the processing shift to greater opportunities with the new processors and reduced costs. The opportunities included the greater growth opportunities of a Visa Platinum and the reduced costs come in the streamlined billing Pemco provides.

"With our previous processor it was very difficult to see what we were paying for," Wright said. "Or there were reports we might like to see that would run us $600. Well when you have a small program like we do, there is only so much of that we can take."

C-E still outsources parts of the card program, such as fraud prevention and card holder service, but even after that Wright said he is still looking at netting roughly $1,400 a month from the card programs under the new processors.

But Dusty Bowers, national sales manager with TNB Card Services, the card processing arm of CU-owned Town North Bank, urged smaller CU issuers not to lose sight of the chances to grow their portfolios even when their costs might rise.

"From our perspective, we are very pro-growth," Bowers said. "Yes, with marketing and other efforts, the program costs might rise but the increased income should more than compensate for that investment."

CSCU Stepping Up

By far the majority of CU card issuers, including most of the smaller ones, are members of Card Services for Credit Unions, the association of credit unions that process their cards with Fidelity National Information Services.

Traditionally CSCU has tended to restrict its activities to negotiating better rates for its members for services and products that FIS provides. But CSCU Executive Director Robert Hackney detailed a steadily increasing tendency on the part of the organization to take an active role in helping its member CUs, particularly the smaller issuers, to better manage their portfolios.

"You know the old saw about leading a horse to water but not being able to make him drink," Hackney asked. "Well, we have been leading our member credit unions to the spring of card portfolio growth and making it easier and easier for them to drink from it."

Hackney described a gradual approach where the association has moved from tool to tool, modifying each to help meet a greater or different perceived need.

The first step was the Virtual Card Consultant, which allowed small issuers to better understand the reports of their card metrics which FIS provided. The next step CSCU took was to start a card portfolio consultant service enabling small credit union issuers to get specific advice tailored to their situation. Next, the association updated the VCC to compare card performance among peer groups based on the numbers of card accounts and the most recent step involved the association reaching out by various means to help the CUs that have the worst scores in a given metric like activation or usage or balance transfers.

Hackney said the association's next two measures would be formally announced at its annual meeting on May 15 and 16. These will include a dramatic increase in the staff of card consultants and the implementation of a new program to help CUs manage their card portfolios called the Actively Managed Portfolio program.

Under these two efforts, CSCU will see the staff dedicated to card consulting jump from two to eight and FIS will offer a suite of card management tools and help in an attractively priced package.

"Nobody likes the fact that so many CU card portfolios remain small," Hackney said. "But tackling this and helping them to grow has been a challenge that takes a variety of approaches. I am confident we will be able to see these numbers change," he added.

–[email protected]