How Ascentra Saved Big Deploying EMV

The Iowa credit union used card chip deployment to realign vendor relationships across its payments processes.

 
 

Ascentra Credit Union ($387.4M, Bettendorf, IA) was protecting its members and itself when it rolled out EMV-armed plastic earlier this year, but the Quad Cities cooperative also was engaging in vendor work that can be illustrative to other credit unions.

The cost of the new chip cards promoted Ascentra to review, then revamp, its payment processes. It then used those revamped processes when it mass issued its debit cards in February and its credit cards in May.

DaleOwen_AscentraCreditUnion
Dale Owen, President/CEO, Ascentra Credit Union

President and CEO Dale Owen says Ascentra plans to save approximately $450,000 a year over the next seven years through new contracts with its core and card processors and other suppliers of technology platforms it plans to deploy this year.

“Our contract was coming due for renewal with our card processor, so we negotiated the cost into the renewal process and went out to others for bid,” says Owen, who was promoted in 2013 from executive vice president and chief lending officer to the top job at the credit union he joined in 1999.

Ascentra ended up signing with Visa. The credit union also identified back-end processing savings and increased integration potential in its Fiserv DataSafe core platform, so it converted its debit and credit card processing to Fiserv EFT and negotiated a new contract for the core itself. It also enlisted the services of SHAZAM, the Iowa-based provider of ACH and other electronic fund transfer services.

AscentraCreditAscentraDebit

Ascentra’s new credit and debit cards now boast EMV chips and a vertical orientation designed for chip use.

Whose Growth Matters?

Besides savings, Owen and his team will realize other benefits from this payment process revamp: experience they can share with their industry peers.

For example, Ascentra’s key business initiatives for 2016 — better member service, product integration, and substantial savings — did not necessarily align with their suppliers’ goals. That showed up when Ascentra found some of the vendors were tying the credit union’s incentive potentials to the suppliers’ overall performance in the credit union vertical.

“We caution other credit unions to make sure incentives in the contracts are realistic and tied to your own credit union’s performance rather than industry growth by the vendor,” Owen advises. “In the end, the high payout is irrelevant if the growth projections are unattainable.”

Ascentra Credit Union’s payments process suppliers include Fiserv, Visa, and SHAZAM. Find your next solution in the Callahan & Associates online Buyer's Guide.

Let’s Get Aligned

CU QUICK FACTS

Ascentra credit union
Data as of 06.30.16
  • HQ: Bettendorf, IA
  • ASSETS: $387.4M
  • MEMBERS: 36,423
  • BRANCHES: 10
  • 12-MO SHARE GROWTH: 9.7%
  • 12-MO LOAN GROWTH: 6.4%
  • ROA: 0.4%

Owen says another primary focus was aligning the maturity dates for all the contracts to better position the credit union when renewal time rolls around again.

“We’ve been pleased with our relationship with Fiserv, but having numerous contracts that overlap with the maturity date of your main contract adds significant penalties should you decide to change core processors down the line,” Owen says.

Ascentra executives negotiated the new contracts themselves with the help of their corporate counsel. They also drew on relationships with the providers themselves, a process that took more than a year to complete.

“We’ve been fortunate to have our senior team engaged in user groups with our technology partners for years,” says the Ascentra CEO. “We’ve always found great value in having a seat at the table when system enhancements are being developed.”

He points here to Ascentra’s executive vice president and chief technology officer, Brad Knutson.

Shift Follows Switch

Ascentra Credit Union’s impetus to switch out its entire card inventory to chips was driven by the liability shift that occurred last Oct. 1, when the big card brands began holding the weakest link in the transaction chain liable for fraudulent transactions.

A creditcards.com poll this spring found that 70% of U.S. credit card holders now have an EMV card. On the other hand, while card processors already are reporting fraud savings, Ascentra’s members, like everyone else, will still find many terminals don’t accept the chip and still run the cards off their mag stripes. Estimates earlier this year were that 22% to 37% of U.S. retailers still didn’t authenticate through the chips.

Visa, for its part, announced moves earlier this summer aimed at boosting adoption at the merchant end, following up on software enhancements that are touted to at least change the perception that the process takes a long time compared with simply swiping.

“Brad’s worked closely in this capacity for a number of years,” Owen says. “I know our vendors have found his engagement equally valuable, and I’m certain that also helped our renegotiation process.”

Don't reinvent the wheel. Get rolling on important initiatives using documents, policies, and templates borrowed from fellow credit unions. Pull them off the shelf and tailor them to your needs. Visit Callahan’s Executive Resource Center today.

Rewarding Relationships

Ascentra’s share draft penetration as of June 2016 was 55.44%, compared with 54.43% for the average credit union in its asset-based peer group of $250 million to $500 million and 55.16% for all credit unions nationally, according to data from Callahan & Associates. Furthermore, Ascentra’s credit card penetration was 15.95%, compared with 15.42% for peers and 17.24% for the nation.

And although the projected savings of more than $3 million over the life of the multiple contracts are substantial, they could have been even higher.

“We ate into some of the projected savings by implementing a new rewards program for our debit and credit cards,” Owen says.

Owen says it’s too soon to see if the EMV chips have reduced card fraud at his credit union, Ascentra’s members— now numbering 36,423 —indeed have found their relationship with their credit union rewarding. The credit union boasts a score of 92.38 out of 100 in the Return of the Member index, a comprehensive scoring system from Callahan & Associates that includes products and services offered and used and loan and deposit rates.

 

 

 

Sept. 12, 2016


Comments

 
 
 

No comments have been posted yet. Be the first one.