I am a fan of credit union products; my family does not belong to a credit union, but we do our home banking with a community bank even though I spent 25 years at top credit card issuers. We like the community bank for emotional reasons rather than financial reasons. We know the manager well, I can get the head officer on the phone anytime I need to, and when we opened the account in the 1990s, the manager found that my daughter liked green lollipops. She still does. 20 years later, we still have the banking relationship and, yes, my 24-year-old daughter still loves green lollipops.
Today’s read is from Credit Union Times, and it made me think about how significant personal relationships are in managing the household budget, and in this case, their credit card needs. The article talks about benchmarking methods for credit union credit card issuers.
When thinking about credit cards in the context of credit unions, it is important to remember that credit cards are a commoditized product. Large issuer cards do not authorize or settle quicker than smaller issuers, as network requirements specify. A difference is that in contrast to the bank, where the responsibility is to stockholders, a credit union is responsible to its members.
Here are the recommendations in the article:
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How Many Members Have a Credit Card Account?
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How Many Cardholders Have Activated That Account?
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How Much Are Cardholders Spending?
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How Much of a Line Do Members Have to Work With?
The penetration level, captured under the “how many member” category is critical. Mercator Advisory Group has observed this metric range from low single digits to the mid-fifty percent range. Activation is essential because an issued, but the unused card will not generate revenue. CUs should have customer incentives to ignite spending. Moreover, an aggressive open line is critical.
We covered the topic of credit unions in a Mercator Viewpoint several years ago and believe that platform service providers such as First Data, FIS, Fiserv, and TSYS have leveled the playing field, enabling small issuers to have card offerings on par with large lenders. Moreover, with the support of credit union service organizations (CUSO) such as Co-Op Financial and PSCU, they can have the depth to run a well-rounded card program.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group