Ongoing changes in the regulatory, competitive, and economic landscape are driving many credit unions to review their credit card program strategy and evaluate whether to invest in growing an internal program or explore an outsourced solution.
When considering whether to build internally or outsource a credit card program, there are three particularly important questions to ask.
1. What is the true cost of a credit card program?
In addition to processing costs, rewards program management, and network dues — consider costs related to changes in regulations (CECL), variable interest rates, and capital reserves. Administrative costs necessary to support the program include managing risk, fraud, collections, disputes, third-party provider relationships, employee hours, and more. Don’t forget the cost of product and technology maintenance and upgrades.
2. What do my members need?
It shouldn’t be a surprise that a digital-forward experience is highly ranked, but strong products and reward programs and fraud protection are closely ranked by cardholders. Many smaller financial institutions have more than doubled their investment in digital transformation in the past few years. Can your credit union make that investment to meet member needs?
3. When should I consider outsourcing?
Whether staffing, liquidity, or resources are prompting an evaluation, the time is now. As you consider your options, review the following questions:
- Can our credit union maintain a competitive credit card program long term?
- Do we have the capital to invest in digital capabilities to meet member expectations?
- Can we allocate the resources needed to manage the program’s profitability and risk in a changing economy?
Many credit unions are hesitant to explore outsourcing because they fear losing control over the member experience. The key to mitigating this concern is to choose the right partner. A quality partner should understand the credit union’s culture and provide program visibility and ownership.
