Payments Plan

digital overlay of data and finance icons above image of man holding credit card and smartphone
Celia Shatzman Photo
Writer & Editor

11 minutes

With the plethora of payment options available today, it’s crucial for credit unions to decipher how they can thrive with smart strategies.

From swiping and tapping to using an app and even writing checks, there are plenty of ways credit union members can make payments. While the methods may evolve, no matter which option they use, payments are still a primary growth engine for credit unions—and that isn’t changing any time soon. Neither is the reliance on credit cards. The simple fact that the majority of payments continues to flow through and around credit cards is incredibly critical for credit unions. Each credit union must have a strong strategy to ensure they’re players not only in the credit and debit card world but in the payments space as a whole. Industry experts share how credit unions can achieve just that. 

Putting a Plan in Place

Taking an inquisitive approach, especially when it comes to payment trends and what technologies are needed to modernize a credit union’s current offerings, is how CUES Supplier member Envisant closely collaborates with credit unions. That’s why they see themselves as an extension of their credit unions’ teams. That’s no different when it comes to the payments space.

“We start by looking at a credit union’s geographic location, number of members and member demographics,” says Anthony Mondello, AVP/sales for Envisant, Naperville, Illinois. “These are critical in determining if a technology will be widely adopted by their member base. For example, a credit union with a younger demographic would likely see a higher adoption rate for reloadable prepaid cards and a stronger interest in promotions that emphasize virtual and tokenized cards that can be easily loaded to a mobile wallet.”

Envisant also considers a CU’s team size and their current workload to suggest solutions that are realistic for their bandwidth, weighing whether they would benefit more from in-house operations or partnerships that will ease the burden of operations that present a challenge to smaller teams. 

When digging into the payments space, Envisant first looks at a CU’s current portfolio metrics to see what is lacking. If transactions per card are low, they will work with the credit union on promotions to help drive more usage. “When our portfolio team sees a low penetration into overall membership, we will look at their card program holistically and make recommendations to improve adoption,” Mondello says. “Envisant has a growth plan that is designed to help bolster all aspects of a card program, including marketing, but sometimes it is necessary for a credit union to also employ a product suite that will have a permanent effect on its overall performance.”

For example, Envisant recently helped a client grow its credit program by working on a variety of strategies, such as adjusting the rate on its cards to be more in line with the marketplace. Promotion campaigns, complete with marketing materials, were also introduced, and a popular balance transfer promotion was made into a continuously running offer. The result was a more than 25% increase in total credit card revenue.

Envisant also works with a strong set of fintech partners to help connect credit unions with more advanced technology options. “Fintech partnerships offer incredible benefits for credit unions through self-service tools, automated processes and AI technology that help credit unions serve members more effectively while alleviating time-consuming routine tasks for staff,” Mondello says.

Their strategies begin with helping credit unions understand where they stand among their peers. “We then offer solutions that empower them to compete,” Mondello says. “Our goal is always to create a program that will be beneficial to a CU’s members as well as its bottom line.”

Another way Envisant serves credit unions is through fraud management. “This includes informing our clients about new fraud trends and products as well as reviewing authorization reports for fraudulent activity,” Mondello says. “Our fraud team also collaborates with clients to write and recommend rules and strategies customized to their needs.”

Tony DeSanctis
Senior Director/Payments
Cornerstone Advisors
When members use Apple Pay, the credit card becomes much more of the plumbing than the front facade of the house. You’re behind the walls instead of front and center with your brand and logo.

Strategy is Key

It is important to start with a comprehensive payments strategy, says Shanon McLachlan, president of Credit Union Solutions at CUES Supplier member Jack Henry, Monett, Missouri. “All CUs should have a payments strategy. We’ve talked to a lot of CUs that have strategies about what they want to deploy, in what sequence and such. But they may not have gone through all the options” and thought about all the bigger implications of their choices. In response to that challenge, “we’ve set up a team that will work with a CU, specifically on payment strategies to maximize what it is they’re trying to achieve.

“It’s not just about payments strategy itself,” McLachlan continues. “What is their open banking strategy? What is their fintech strategy? What is it that they want to deploy?”

When it comes to real-time payments strategy, McLachlan stresses the need to turn on Receive for FedNow and The Clearing House’s RTP. When he asks credit unions about top challenges, “the majority of them are going to tell you, ‘We’re trying to get some deposits.’ And then we turn around and ask, ‘Do you have Receive on for one or both networks? Why not?’ To have Receive, there’s not a risk. The risk is on the send side,” he says. “Because if you have a member … who is looking for those services and you don’t have it, they’re going to send their deposits somewhere else. … As our clients have enabled Zelle or RTP or FedNow, the money coming into the institution is greater than the money leaving the institution on those rails.” It’s coming from a lot of gig work activities. “So they want that money now, and they need to be able to do something with it.”

Meet Members Where It Matters

With the multitude of payment options available to CU members today, it’s all about meeting member demand. As a result, the focus remains on credit cards. “We’re not necessarily pushing any particular products or solutions. Rather, we look at what the member demand is,” says Tony DeSanctis, senior director/payments at CUESolutions provider Cornerstone Advisors, Scottsdale, Arizona. “We believe that consumers may not be aware of new payment options for them. It’s pretty straightforward in terms of primary focus, which is continuing to be on cards.” Credit and debit cards continue to be the primary way consumers prefer to pay, and it’s what they understand best. “Candidly, that’s where most of the revenue comes from for the credit union,” DeSanctis says.

When alternatives like ACH, FedNow, wire and real-time payments start to become options for credit unions with small and even medium-sized businesses, they’ll have those conversations, since those are starting to gain traction. “Things like ACH and real-time payments are disrupting the legacy solutions, like checks specifically, and other more manual processes,” DeSanctis says. “The reality is that real-time payments aren’t necessarily materially different than what is enabled with ACH today. The difference between getting your money in three days versus getting it today seems like a lot, but most businesses are structured around that and can support it. They don’t have the urgency of funds, especially when you start thinking about consumer payments. The gas company doesn’t need my $37 today. As long as they know it shows up in their account in two days, it’s not a big deal. Real-time payments are a very small piece of an overall massive payment ecosystem.”

The biggest change in payments has been the digital wallet space, which continues to grow rapidly. “That’s the most disruptive to our credit union clients because their cards now get buried behind an Apple Pay logo or a PayPal logo, especially online,” DeSanctis says. “When members use Apple Pay, the credit card becomes much more of the plumbing than the front facade of the house. You’re behind the walls instead of front and center with your brand and logo.”

That’s an example of how relationships with credit union members have changed—it makes driving engagement more important than ever. “There are also the generational challenges of younger members not necessarily wanting to come to a branch and being digital-first, digital native members,” DeSanctis says. “There are projects that we can do with our clients to help them map the next phase and drive those behaviors and those results to not necessarily win in the payment space but stay competitive. There’s so much headwind. I think the thing that gets missed specifically in payments is that it is at the center of the banking relationship.”

Brian Scott
EVP/Chief Growth Officer
PSCU/Co-op Solutions
Members are going to continue making payments and moving money through Zelle, Venmo and soon FedNow. ... If you can guide members to the places where it's most effective for the credit union, that’s turning a cost into a revenue channel.

Credit Cards Are King

Payments are incredibly critical to the future of CUs, which is why Brian Scott, EVP/chief growth officer at CUESolutions provider PSCU/Co-op Solutions, St. Petersburg, Florida, always emphasizes to CU clients that it’s not just how their members pay, but also what mechanisms they use to pay. “There are a lot of opportunities that come out of payments, whether it is data or a significant amount of income for the CU, among others,” Scott says. “That’s why you see a lot of companies really focused on payments right now, because if you get the payments, you get a lot of the other pieces of a relationship.”

To help credit unions make the most of that data, PSCU/Co-op Solutions takes a closer look at the different methods their members are using in the payments space. “There are a lot of moving pieces and things happening, and we want to make sure that we’ve helped credit unions optimize all of their payment strategies, both from profitability and member convenience perspectives,” Scott says. 

It’s ideal when credit unions want to focus on making payments easier for their members. “That means they recognize payments lead to everything else—those that use their credit and debit cards more with the CU also use digital banking more,” Scott says. “Payments drives usage of all the other products, not vice versa.” That is where PSCU/Co-op Solutions can help in the space: They’re guiding CUs to examine member usage and optimize each of those channels.

PSCU/Co-op Solutions taps their consulting arm, Advisors Plus, to help craft specific strategies for each of their clients because every audience and scenario is different. All memberships are unique in how they spend and pay—even where they shop has great differences regionally. “Some parts of the country don’t have Walmart, so you can’t say that all you need is a strategy for how your cards get used at Walmart. If you don’t have Walmart, that’s not effective,” Scott says. “It’s also looking at the socioeconomic status in general of a credit union’s membership. Are they more apt to be using an Amex card or a Capital One card? And how do you create products that compete effectively with each of those different competitors based on the socioeconomic status of your membership in general?”

Another factor to consider is the flow of money, including from where deposits are coming and to where they go out. By seeing what other payments companies’ members are using to make transactions, you can determine who the competitors are and create a strategy around that.

Coming up with a strategy is only part of the equation, because execution is key. “Being able to take a recommendation and drive it all the way down to implementing that strategy is critical,” Scott says. “A great example of this is a lot of credit unions do a pretty good job of marketing; they bring in applications, but then they may decline 50-60% of the applications that come in. So, how do you implement a strategy around that, which says we can still accept those applications, just under different criteria? It could be higher interest rates or introducing an annual fee. While many CUs are averse to charging annual fees, when you look across the market, a lot of consumers are OK paying annual fees if they get a good rewards program along with it. With this in mind, it is up to us to push and actually help implement that strategy to ensure a CU feels comfortable that it can compete with Capital One, Chase, Amex and others. It just takes our attention and actually doing the work ... to get them there.”

There’s lots of buzz about other payment methods growing and taking over the space. “Some of the other ways to move money, those end up being cost centers,” Scott says. “If we can help avoid the cost and turn the payment into a revenue channel, that’s where we need to focus. Members are going to continue making payments and moving money through Zelle, Venmo and soon FedNow, among other options, and you want to be in those channels. But if you can guide members to the places where it’s most effective for the CU, that’s turning a cost into a revenue channel.”

Ultimately, in the payments space, it still comes down to the popularity of credit cards for credit unions. “Credit unions can use a credit card as a budgeting tool, as a charge card and as a source of earning higher income,” Scott says.  cues icon 

Celia Shatzman has penned stories on topics ranging from beauty to fashion, finance, travel, celebrities, health and entertainment.

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