A leading card-processing CUSO has released a white paper that urges credit union card issuers not to reel in debit and credit card reward programs but to target and change them instead.
The Members Group is a card-processing CUSO affiliated with the Iowa Credit Union League and processes cards on the First Data Corp. platform.
"Still in Control" pointed at data from the Federal Reserve and others that show card holders generally respond to even small rewards and incentives for card use. In one example from the Fed, the CUSO noted that even a 1% cash-back bonus brought about an average increase of $220 per month among cardholders that had previously been inactive.
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"More importantly, the researchers concluded that the small cash-back incentive encouraged cardholders to choose the rewards card over others in their wallets," wrote Ivy Sprague, a product development architect at the Des Moines CUSO.
"What this hints at is the all-important 'share of wallet' chased by card-issuing community banks and credit unions. As the Federal Reserve Bank of Chicago writes in its research summary, 'Rewards are an effective tool to steal customers from a financial institution's competitors,'" Sprague wrote.
The CUSO also recommended partnering with local retailers to offer local, retail funded rewards and to examine their cardholders' shopping behavior to discern what sorts of rewards would most appeal to which cardholders.
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