Recalibrate products, self-service tools and messaging to grow your portfolio.
As the momentous events of 2020 continue to play out, credit unions and other card issuers are taking stock of their offerings in the context of ever-changing consumer expectations, economic uncertainties and the full-steam-ahead charge of competitors to embrace digital advances.
Card managers must decide how to allocate resources to recalibrate and retool payment technology and self-service card management, how to craft marketing and educational messages around those services, and how to monitor and respond to changing credit risk patterns. And they must look ahead to how members’ payment preferences will likely continue to evolve.
Support Contactless Capabilities
Especially for credit unions that have issued contactless cards or are planning to launch, it’s imperative to accompany those new cards with information about how to conduct tap-to-pay transactions and how to spot NFC-enabled terminals.
CUESolutions provider PSCU, St. Petersburg, Florida, produced more than 6 million contactless cards on behalf of its owner credit unions in 2020 and projects an even bigger 2021, with the anticipated production of 10 million cards, says Jeremiah Lotz, PSCU’s managing vice president, digital experience and payment products.
Contactless payments were definitely on the rise over the past year, driven in part by consumers’ resolve to keep hands off as much as possible during the pandemic. According to PSCU’s data, the prevalence of tap-to-pay debit transactions increased from 8% to 15.5% of total payments from January to October, and credit card contactless transactions rose from 6% to 10% over the same period. Those statistics are for point-of-sale purchases and do not include the big shift to card-not-present transactions as consumers moved to shopping for groceries and other purchases online, Lotz notes.
“We’ve seen a significant shift [toward contactless payments], but it’s all relative to the percentages,” pointing to the need for continued education on the part of card issuers on how to tap to pay and for more merchant validation that they accept this form of payment, he suggests.
The pandemic has accelerated the demand for and acceptance of contactless payments at the point of sale, agrees Tim Kolk, owner of TRK Advisors, Peterborough, New Hampshire. Credit unions currently in a processor’s queue or in the planning phase to introduce contactless cards “are losing an inch a day” as members move toward other cards in their wallets.
Once credit unions begin issuing contactless cards, “this is a nice moment to include messaging [about tap-to-pay capabilities] because people will open and read it because their card’s in there,” he adds. “These are not opportunities to be lost.”
PSCU data also shows a 70% year-over-year increase in the use of debit cards in mobile wallets and a 50% increase in credit cards registered in these apps, though the rate of transactions using this form of payment remains relatively low.
Even as many credit unions queue up to issue contactless cards, 2021 will also be a boom year for facilitating digital issuance—the automated transfer of card data into mobile payment apps, predicts John Patton, senior payments advisor with CUES Supplier member CO-OP Financial Services , Rancho Cucamonga, California.
That process, also called “push provisioning,” automates through mobile apps the complexities of registering members’ card accounts to incorporate tokenization and to be accepted into Apple Pay, Google Pay and Samsung Pay. This capability replaces the need for card issuers to contract separately with each token requester, such as a mobile wallet or merchant, by providing a single integration interface that enables cardholders to “push” a token to the destination of their choice without entering their card information manually. In other words, cardholders authorize this push simply by touching a button in their mobile app authorizing the transfer of their card data. (Read more about how this works.) Credit unions introducing this digital service should be promoting it across their marketing and information channels.
Build a Better Experience
Improving the member payment experience extends beyond the card itself to a full ecosystem of services that includes account management through self-service channels, Patton says. “If you give consumers a digital payment device, but then they have to call in to ask for account updates, that just doesn’t go together.”
An example of an experience to “surprise and delight members” is proactively increasing credit card limits through automated tools that qualify members for this benefit, he suggests.
Jackson Area Federal Credit Union rolled out a mobile card management app in April with the dual goal of improving member service and setting itself apart in a market area where this technology is still not widely available, says Lindley McKellar, VP/e-services with the $90 million Jackson, Mississippi, credit union that serves 14,000 members.
The new self-service app is offered by Ondot Systems, Santa Clara, California, through a partnership with credit card processor FIS, a CUES Supplier member based in Jacksonville, Florida, which is phasing out its previous credit card management app. Jackson Area FCU members can now manage both their credit and debit cards by setting alerts, turning cards on and off, and tracking the location of transactions with clear identification of retailers, restaurants and other recipients in transaction alerts, complete with logos (when available), contact information and hours of operation, McKellar notes.
Early feedback from members has been positive, and McKellar and other credit union employees using the app are enthusiastic about the new functionality at their fingertips and ready to guide members to optimize its use. Wider marketing of this service should expand the benefits to members and the credit union, he says. The app has been especially popular with millennial members, but older cardholders are also migrating to its always-on convenient access.
“The more the members can do for themselves, the less they’re going to call into us,” freeing up staff to respond to other service requests, he says. In addition, the app can help prevent and quickly shut down fraud as members set limits by location and dollar amounts on purchase approvals and more closely monitor transactions.
Jackson Area FCU is “on the forefront with this type of product” in its market area, McKellar says. “It’s better to get in early than trail behind. This is definitely something that’s here to stay.”
Digital accessibility is increasingly paramount. “The moment when members realize their credit union is delivering convenience and security and is helping to keep them safe through contactless payments, that’s when they understand the value their credit union provides,” Lotz says. “It’s not one of those things, but all of them in combination.”
Card managers should continue to monitor members’ payment behaviors with the understanding that their preferences are driven not just by the pandemic, but by “their knowledge of what is possible,” he adds. “The more they see of the digital experiences that are possible, the more they expect from their credit union. The shift to digital is underway, and credit unions need to be investing in that experience. They will continue to see growth there, even from members they didn’t expect to move in that direction. The pandemic pushed them in that direction, but they have embraced it—across generations.”
Do Well by Going Good
$4.3 billion, 207,000-member Summit Credit Union, Madison, Wisconsin, provides its diverse membership with a variety of credit card options:
- Ultimate CashPerks offers 3% cash back on airfare, 2% on hotels and dining, and 1.5% on all other purchases.
- Visa Platinum Rewards features rewards with every purchase and double points on gas and wholesale club purchases.
- Visa Platinum is its low-rate offering.
- Summit Student Rewards pays bonuses for good grades and double points on Amazon and restaurant purchases.
In addition, its Summit Global Good Card® combines cardholder rewards with support for World Council of Credit Unions initiatives, such as helping Kenyan teens learn farming skills to provide income for their families, opening a business development center in the Philippines to assist female entrepreneurs and advancing women’s leadership development through donations to the Global Women’s Leadership Network, says President/CEO Kim Sponem, a CUES member and past chair and secretary of the CUES Board of Directors.
Each month, Summit CU donates a percentage of its interchange income along with $10 per new account to WOCCU. Since the card’s launch in 2017, the credit union has opened more than 3,300 Global Good accounts and donated more than $100,000, Sponem reports. Global Good cardholders also earn reward points on all card purchases.
Summit CU has developed marketing materials that other credit unions interested in offering a Global Good Card to benefit WOCCU can use for free, she adds.
Major card issuers quickly tailored their rewards to match pandemic-related shifts in spending habits, offering points for streaming service subscriptions, grocery deliveries and other purchases in demand during the pandemic, Kolk notes. Many credit unions did not respond as promptly, perhaps because of cultural issues that slow down decision-making, technical roadblocks and/or the need to coordinate with third-party processors—barriers that card managers need to recognize and address.
“It’s imperative to ensure that their products have the value proposition that matches the market and to recalibrate their rewards program to the marketing message that’s working in the moment—and that evolves all the time,” Kolk advises.
Grab Opportunities to Build Revenue
Summit CU is in the process of issuing contactless credit cards to 74,000 members on a natural reissue cycle, providing tap-to-pay cards to new cardholders and replacing cards as they expire. It will begin issuing 140,000 contactless debit cards this year.
As a special offer to new cardholders, all Summit CU credit card accounts are opened with a 0% balance transfer rate for 12 months; a similar offer is planned for current accountholders early this year.
Balance transfer offers are popular in the current rate environment as members look for opportunities to save money by moving to their credit union’s lower-rate credit cards, Patton suggests.
To hold on to debit interchange revenue, Patton recommends messaging to encourage members to enter their credit union cards for such card-on-file transactions as online shopping, click-and-deliver grocery shops and restaurant orders, subscriptions for streaming services, and branded apps for gas station, big box and other retail purchases.
For example, Summit CU’s recent promotion entered members in a drawing for a $500 Visa gift card for using their CU debit or credit cards to set automatic payments on recurring bills such as Netflix, Spotify and Verizon.
“We’re also launching an always-on email marketing campaign to automate the process of connecting with members shortly after they’ve received their card,” Sponem notes. The campaign promotes card activation and features a step-by-step guide on adding their card to their mobile wallet.
Consider Card Design
A small but growing contingent of credit unions is interested in such distinctive designs as colored-core, all-metal or recycled plastic cards to set their products apart in members’ wallets, Lotz says. Metal is four to five times more expensive, so the tendency is to reserve those cards for an elite member segment as a more prestigious offering, while recycled plastic cards can be aligned with credit unions promoting their environmental commitment. PSCU is partnering with the CPI Card Group, Littleton, Colorado, to issue cards through its Second Wave line, which uses plastic diverted from sources that might otherwise end up in oceans and other waterways.
Consideration of specialized card materials can exacerbate an already complex decision process as credit unions look to overhaul their card offerings, Patton cautions. In the balance, most members are more concerned with card capabilities and digital management tools than the materials that make up their cards.
On the other hand, offering affinity card lines that build on support for schools or favorite sports teams can win members’ loyalty, he suggests. For example, credit cards issued by university credit unions are popular among both alumni and current students, who use their cards to pay for food service meals and other purchases.
Plan for Cardless Accounts
Even as cardless digital payments gain favor, most consumers are not ready to bid farewell to their physical cards, Patton says, though preferences vary by age and technological affinity. With the current average age of members in the 50s, credit unions need to be able to meet the preferences of cardholders across the age continuum, from young members who prefer mobile payments and card management to older members who may need more support as they adjust to and ultimately embrace self-service options.
Though some members may be tempted by competitors’ cardless promotions—think Apple Card—and are embracing options like push provisioning, few are ready to opt out of physical cards entirely, Lotz says.
“Consumers want to be able to use their cards in the most efficient and effective way, depending on their specific circumstances. Sometimes it’s still going to require a physical card,” he notes. “Our hypothesis is that consumers will want to opt out of a physical card at some point, but that point isn’t now—or likely in the next year or so.”
In a webinar last fall, industry experts from Ondot and Aite Group, Boston, cautioned that “digital-forward” megabanks and online institutions are increasing their share of new card accounts as credit unions and community banks fall behind. They advocated a “digital-first” commitment to improve self-service and digital card issuance, which allows card issuers to engage consumers via their channel of choice, even while continuing to offer physical cards.
The demand for all-digital accounts will grow, Kolk notes, and it’s undeniably critical going forward for individual programs to address that expectation, especially among younger members. The Apple Card is already setting the standard for consumers to apply on their phones by supplying three to five bits of information and to receive a new account loaded directly into their mobile wallet within five minutes.
“Twelve months ago, we could say, ‘That’s cool, and we’ll get there someday,’” he notes. But with the pandemic redirecting consumers toward mobile channels, “this is how Chase and others like them are going to gain transactional market share until credit unions catch up.”
Manage Credit Risk
Recent reports that credit scores on average increased during the pandemic were a bit surprising, Patton says. With so many consumers applying their stimulus checks to pay down credit card balances and other debt, “we anticipated scores would stay level. We didn’t think they’d go up.”
Without another round of government support, collective credit standing could begin to erode in 2021, and credit unions should start planning how to monitor and respond to that eventuality, he advises.
Credit unions could coordinate responses across more finely tuned credit tiers than the standard four A-D levels, he suggests. A 30-point shift in credit scores among prime borrowers, typically those with a 770 or higher FICO score, might not raise concerns, but the same downward trend for members in other tiers could trigger proactive phone calls to check in with members.
An automated credit monitoring system can also be programmed to manage the reissue cycle for “sleeping accounts,” which haven’t been used for a specified period, Patton adds. Members with qualifying credit scores might be sent special offers as an incentive to jump-start their card usage.
Persistent trends favoring debit over credit card usage persisted into the fall, and PSCU expects members to continue “to be more careful about managing their revolving credit,” Lotz says. “I think we’ll continue to see that until consumer confidence rebounds. And increased delinquencies are possible, so credit unions need to remain vigilant. There are so many variables to track.” cues icon
Karen Bankston is a long-time contributor to Credit Union Management and writes about lending, operations, technology and membership growth. She is the proprietor of Precision Prose, Eugene, Oregon.