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Silver Linings – A Playbook For Payments

Follow these rules to transform card-related challenges into institutional opportunities.
Kathy Herziger-Snider,Ph.D.

Numerous challenges have gathered on the horizon, creating a storm of issues driving credit unions to rethink how they grow and operate in today’s competitive environment. Yet these clouds may come with a silver lining for credit unions that have strong and diverse payments strategies. These credit unions are prepared to not only confront what the storm clouds bring but also ensure continued relevance and profitability in the years ahead.

Card portfolios are a key component of a strong payments strategy and can be a significant revenue center with tremendous potential to forge deep, profitable member relationships. But to get to that point, credit unions need to create and optimize a comprehensive strategy that equally addresses institutional needs and the evolving product and channel preferences among their memberships.

Reducing Operational Costs By Integrating Systems

Credit unions can improve bottom-line results by directly integrating the core platform with other essential financial service systems. This not only enhances members’ experiences but improves workflow efficiency as time-consuming and costly back-office functions are moved to the front line.

Having a card services system directly interact with core accounts is especially important in regard to data entry. Real-time integration ensures immediate data synchronization eliminating the need for dual entry and provides a seamless workflow that reduces the staff time required for data maintenance. It also positions staff to provide faster responses to member inquiries and reduces staff training.

Credit unions should investigate how real-time integration is supported for routine, but crucial, operational functions like instant issue, card ordering and activation, hot carding, resetting PIN tries, changing limits, and resolving member inquiries with immediate access to member account and transaction data. Comprehensive integration also updates critical fields used for transaction authorization.

Accessing accounts through a centralized application reduces the need to enter and store data in multiple redundant systems, reducing fraud risk and enhancing security.

Driving Additional Revenue Growth Through Debit Card Programs

The flip side of reducing operational costs is generating additional revenue and one of the best ways to accomplish that is to increase debit card activation and usage. Debit interchange is evolving due to the effects of the Durbin Amendment and it is more important than ever to maximize the revenue potential of card portfolios.

This begins with understanding portfolio demographics, member habits, and overall performance. Credit unions need access to their data, a clear understanding of key performance metrics, and a defined card growth strategy to maximize portfolio performance. Armed with this information, credit unions can begin to enhance loyalty, increase card usage, and attract new target members.

But that’s just the beginning. Credit unions must also evaluate their payment network affiliations and understand the total costs, member benefits of participation, and potential revenue opportunity. Credit unions may also rethink rewards, as relationship-based, blended, and merchant-funded programs can help boost performance and drive credit union cards to the top of wallet in a cost-effective way.

Enhancing Member Relationships With Credit

For a truly competitive credit card, credit unions will need much more than a simple card processing solution and a rigid, commodity-style business model. They’ll need flexible and comprehensive solutions that allow them to create unique packages tailored to their credit union and individual members’ needs.

A complete credit card processing solution should include products such as:

  • Business and commercial cards
  • Private label programs
  • Installment loans
  • HELOC account access

And credit unions shouldn’t forget that reintroducing or re-emphasizing ownership of a credit program can be a great way to target increased revenue.

Investing In Self-Service Channels

The success of credit unions is founded on providing a superior member experience. Because large numbers of consumers prefer interacting and transacting through mobile applications or online websites, credit unions must provide numerous self-service options which supplement the branch and ATM network.

Mobile is now ubiquitous for consumers and credit union members expect the ability to interact and transact on their own terms anywhere, anytime, on the device or channel of their choice. Using mobile devices to manage card access enhances the member experience and helps reduce potential fraud.

These ascendant financial management options will prove desirable among:

  • Risk-averse members who want to better manage and safeguard their money
  • Parents who want to control and monitor a child’s spending
  • Business members that want to ensure spending policy compliance.

By providing this additional level of self-service and control, credit unions can successfully address the preferences and priorities of virtually any member demographic.

Updating Risk Management Strategy And Toolsets

Cards remain the payment method of choice for most U.S. consumers. With that preference comes the need for all organizations to review, select, and implement a comprehensive strategy that proactively prevents and detects fraud and money laundering activity.

This is a delicate undertaking that requires balancing the member experience with the ability to provide the highest level of protection by issuing effective fraud alerts.

For this reason, credit unions should look for solutions that offer customization and unique parameters, and facilitate the ability to react quickly if any potential fraudulent activity surfaces.

Credit unions also need to combine these tools with ongoing rigorous review and adjustment of risk management efforts. Dedicated resources knowledgeable about data, rules, trends, and the member base served will reduce risk exposure while establishing a powerful early warning system to help minimize potential losses.

Ready To Seize Opportunity

More than ever before, credit unions need to take the time to fine-tune their specific card strategies and propel their offerings to the top of their members’ wallets. A flexible, multi-channel strategy that is responsive to member preference will help tackle the evolving payments space head on. Expense reduction, portfolio optimization, fraud management, efficiency, and a superior user experience for credit union members now that is certainly a silver lining!

About The Author
Kathy Herziger-Snider, Ph.D., vice president of channel management, Card Services, Fiserv, has responsibility for market development and sales pursuits within the credit union market. Her wide-ranging experience includes core systems, operational process and procedure, as well as the development and execution of mature and emerging payments strategies for the credit union industry.

About Fiserv
Fiserv, Inc. (NASDAQ: FISV) is a leading global technology provider serving the financial services industry, driving innovation in payments, processing services, risk and compliance, customer and channel management, and business insights and optimization. The Accel debit payments network from Fiserv processed approximately 12 billion transactions in 2013, making it one of the largest financial transaction processors in the United States. Fiserv provides comprehensive debit, credit, prepaid, and ATM processing services to more than 3,400 financial institutions across the United States. For more information, visit www.fiserv.com.

This article is sponsored by a recognized solutions provider in the credit union industry. Callahan & Associates does not endorse vendors or the solutions they offer, and the views and opinions offered here might not reflect those of Callahan. If you are interested in contributing an article on CreditUnions.com, please contact the Callahan team at ads@creditunions.com or 1-800-446-7453.
January 26, 2014

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