As 2011 draws to a close, it has been another challenging year for credit unions and their members. Credit unions are focused on two goals: (1) continually seeking new ways to serve their members’ changing financial needs; and (2) growing membership specifically with Generation X and Y. One product that is often overlooked during this exercise is the credit card program.

1. Inside NAFCU Services
credit card Portfolio Growth
Strategies for 2012
By Kevin O’Donnell
A
s 2011 draws to a close, it has been another chal-
lenging year for credit unions and their members.
Credit unions are focused on two goals: (1) prepaid products, so you address every market need. Since
continually seeking new ways to serve their mem- credit unions do local better than anyone else, choose a hand-
bers’ changing financial needs; and (2) growing membership ful of local charities and allow your members to direct their
specifically with Generation X and Y. cash rewards to nonprofits. Or better yet, allow your members
One product that is often overlooked during this exercise to nominate and vote on which nonprofits should be included
is the credit card program. A May 2010 Javelin Strategy & in the program.
Research study asked credit union members which product n Stimulate interaction with better financial tools.
they valued most. Ninety-four percent said credit cards. Credit unions are leading the way by providing financial
For credit unions, the opportunity to revitalize their credit management tools that teach their members how to be finan-
products begins at the acquisition stage, but continues cially savvy, according to consumer payment research group
through activation, card usage and loyalty. When revitalizing Mercator. While it may seem counterintuitive, offering these
a credit portfolio, it is important to understand what mem- tools on your website actually increases member engagement
bers look for in a credit card product. Research has identified and helps members save. Adding incentives, such as adjusting
four key elements that members value most: interest rates for those who save regularly over time will also
provide a boost to your reputation.
1. No annual fee n Add context. Financial tools are important. Informa-
2. Fraud protection tion, particularly editorial information that properly addresses
3. Great member services member segments, adds another opportunity for engagement,
4. Flexible rewards learning and saving. By increasing your members’ financial
knowledge, you’ll help them make smarter decisions about
By including these four components into your credit card credit cards, loans, savings and investing. When this happens,
offering, members will find your credit card appealing. Once member loyalty grows.
members apply for your credit card and are approved, the n Segmentation + contextual information + tools =
task then turns to bringing the card to “top of wallet” and increased retention rates. As your membership increases
gaining loyalty from each cardmember. their engagement with your financial tools and targeted
Here are some suggestions you might consider that achieve contextual information, they become far savvier about their
cardholder loyalty: money. Savvier members translate into increased retention
n Focus on segmentation. The same Javelin Strategy rates, higher deposits and lower defaults. These members will
& Research study found that credit union members value soon become some of your most profitable, providing addi-
payment products more than anything else. Just 29 percent tional cross-selling opportunities.
of members have a credit card through their credit union. Do There is another option: Do nothing and hope for the best.
you know which are your most profitable member segments? The problem is that the risks of doing nothing are huge. Self-
Once you identify them, is there an opportunity to cross-sell educated consumers are seeking financial institutions who
other products that add to the bottom line? To start, con- offer tools and contextual educational materials. Your credit
sider breaking out offers to Gen X, Gen Y and Baby Boomers. unions want to capture those consumers, because they’ll put
Create opportunities for contextual information specifically the highest value on saving and investing.
targeted to each segment’s wants and needs. Another risk of the ‘Do Nothing’ strategy is that you won’t
n offer your members the right products and have anything that drives engagement. For your credit union,
rewards. Once you’ve identified needs and wants, you can combining innovative tools, the right offers, top-quality
target your offers more effectively. According to a Millward financial information and great rewards with a local flavor is a
Brown Brand Tracking Study conducted in late 2009/early formula for success. s
2010, there has been a shift among credit union members
from revolvers to transactors, making this an attractive, Kevin O’Donnell is vice president of credit issuance at Discover
lower-risk portfolio. Simple cards will work best for some Network, the NAFCU Services Preferred Partner for turnkey
members while others prefer rewards. Offer credit, debit and credit, debit and prepaid card programs.
44 The Federal Credit Union November/December 2011