A paper authored by Card Services for Credit Unions and Callahan& Associates seeks to guide more credit unions into adoptingbroader array of payment services for their members.
CSCU is the association of credit unions that process their cardaccounts with Fidelity National Information Systems. Callahan &Associates is a noted CU consultancy.
The paper, “The Payment Revolution: How Payment Strategies ImpactYour Credit Union's Future,” describes a gap in payment optionsoffering by the largest and smallest asset credit unions, notingthat the nation's 153 credit unions with more than $1 billion inassets as of March 2009, nearly all offer credit cards, checkingaccounts and bill pay. Mobile banking is offered by one-third ofthe large credit unions is growing quickly.
For credit unions below $20 million in assets, the statistics aredifferent, the report said. Just over half offer checking accounts,and less than 30% manage a credit card program. Mobile bankingamong the credit unions below $20 million is rare.
“Increasing convenience for members and building long-termrelationships are the dual goals of most payment systems.Understanding the offerings and recognizing opportunities based onyour membership will be the foundation of future growth andsuccess,” the report said.
The chief payment methods that the report recommended credit unionsadopt were credit cards and debit cards. Not only did credit cardsrepresent 33% of all noncash payments in economic crisis year of2008, they also haven an importance to CUs beyond that of theirbalances.
“Credit cards are a key driver of member relationships and one ofthe fastest growing loan products,” the paper noted. Credit cardshave provided credit unions with an ability to help their membersmeet needs that other financial institutions have retreated from,by keeping CU card programs lending as other issuers canceledcards, hiked interest rates or limited credit lines. Furthermore,the report added, the cards have allowed credit unions a means forcross selling their other loan products.
“For example, Northeast Credit Union [ a $600 million CU inPortsmouth, N.H.] offers a 50 basis point reduction on an auto loanwhen the member qualifies and takes a credit card,” the reportsaid, adding that Callahan's data showed that those credit unionsthat have a higher penetration in credit cards also have a higherusage of other credit union products.
“Credit unions with 25% or higher credit card penetration havemembers using, on average, 2.74 loan and share accounts each.Credit unions with a credit card penetration of less than 10% havemembers using just 2.08 accounts each on average,” the reportsaid.
The two organizations also sought to put CU concerns over carddelinquency into context as well, reporting that CU credit carddelinquency even in this recessionary year still dramatically lagswhere it was a decade ago as proportion of overall CUdelinquencies.
But the report also urged credit unions with existing cardportfolios to carefully and thoughtfully re-score their cardportfolios to reflect members changing risk profiles. The reportcited the experience of the SAFE credit union, headquartered inNorth Highlands, Calif.
With 35,000 accounts, SAFE adopted an approach of using the servicebureaus to help develop a targeted approach to re-scoring cardaccounts that lets it effectively deploy its resources.
“We're not Bank of America. We don't have a huge staff to do thiswork,” the report quoted SAFE CEO Henry Wirz. “By doing it everytwo months, we have a bigger list to work on, but it is moreefficient.”