Although card programs are already a well-established revenue source, these trends are driving growth, which presents significant opportunities for card issuers to increase market share and grow revenue.

Benefits of Credit Card Programs

Issuing institutions stand to benefit from credit card programs in several ways, primarily from fee-based and interchange income opportunities, which are unimpeded by the Durbin Amendment. Of course, credit unions must be mindful of the restrictions on how interest rates and fees can be assessed and how credit limits can be changed.

Many financial institutions now view debit and credit rewards programs as essential to retaining members, rewarding loyal users and adding value as they differentiate. Issuing credit cards with integrated value propositions enable credit unions to meet consumer needs while growing their portfolios.

By putting significant buying power directly in a cardholder's hand, credit card programs also engender loyalty for credit unions. Customizing offerings to the unique needs of cardholders through loyalty and rewards programs build revenue and help shape future business growth. Credit unions should take full advantage of program design flexibility to distinguish their organizations, foster a more member-centric brand image and retain valuable members.

However, what seems like an easy decision – to issue credit cards to willing members – becomes a significantly more complicated proposition when current market dynamics are considered. In a continually evolving payments landscape, financial institutions must compete with larger card issuers as cardholders – both individual consumers and businesses – now have more choices than ever to pay for goods and services. Add in the need to identify appropriate risk solutions, rewards programs and cardholder services, and credit unions find themselves with more difficult questions than easy answers.

Start or Optimize Now

What's the good news? The credit card marketplace is still filled with opportunity for issuers of every asset size. When credit unions offer a compelling and properly positioned product, they can compete and win against even the largest issuers.

If your organization is starting a new credit card program or you want to optimize your existing credit card portfolio, you must first understand your credit union's strategic focus, goals and business challenges. Specifically:

• Analyze your market and cardholder data;

• Establish a hands-on portfolio management strategy with distinct lines of responsibility;

• Implement industry best practices and major issuer-proven methods;

• Tailor your program strategies for your card base;

• Price your credit card program competitively.

As ongoing regulations continue to impact traditional noninterest income streams, credit cards provide a more stable source of income. Just as promising is the opportunity to expand and deepen relationships, as cardholders typically bring more deposit and loan services to their card-issuing institutions than non-cardholders do. Considering the recent growth in credit card transactions and balances, now is the time for credit unions to secure market share through a carefully designed product and implementation strategy.

Vikas Bansal is vice president and credit product leader, card services for Fiserv. He can be reached at 973-682-5993 or [email protected].