Stronger in the End

8/8/2019 Stronger in the End

1/8C a r d P r o c e s s i n g . P a y m e n t S o l u t i o n s . P r e p a i d C a r d s . C u s t o m i z e d S o l u t i o n s . C o n s u l t i n g S e r v i c e s

Stronger in the EndLittle known benefts o consolidating card services during a merger

By Aris Jerahian, TMG Vice President of Client Relations

and Brian Scott, TMG Vice President of Sales

The fnancial service industry has seen its share

o upheaval and credit unions are no strangers

to the changes our economic climate, regulatory

environment and compliance agencies have

imparted on the day-to-day business o serving

members. But, what smart credit unions have

discovered is that along with change comes an

opportunity to rebrand, reposition and generally

enhance services in a way that makes their

institution stand out rom the rest.


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P A G E 2

The Members Group . 1500 NW 118th Street . Des Moines, Iowa 50325 . 800.268.1884 . www.TheMembersGroup.com

Among the many catalysts or change arising rom turbulent times

has been the merger. Increasing in pace and notoriety, credit union

mergers are predicted to continue at unprecedented rates as the

economy struggles to fnd a new normal.1 More interesting than

pace, however, is the trend away rom asset-based mergers toward

those involving more strategic reasons or the union.2

As credit union executives shit their ocus away rom bigger is

better, they are also reconsidering many o the mainstay rules

o mergers. For instance, its no longer the assumption that the

products, services and culture o the larger o the two merging

institutions will automatically be retained. Leaders are taking a

more tactical approach to individual programs to see what program

will support the new culture, regardless o the credit union rom

which they originate.

Strategic leaders

looking to kick start

their newly minted

credit union with a

boost o positivity are

smart to devote energy

to retaining and/or

creating outstanding

card programs.

Card programs one o the leading eeders o a credit unions non-interest income stream are perectly suited to this type o vision. This is due in large part to mountains o data

generated by these payment vehicles. Armed with this inormation, credit union executives

can see a clear picture o past perormance, as well as the potential or growth.3

Strategic leaders looking to kick start their newly minted credit union with a boost o

positivity are smart to devote energy to retaining and/or creating outstanding card programs.

Ater all, what other service is more heavily entrenched in the day-to-day lives o members?

Introducing an exciting card program unmatched by anything in the community has

tremendous potential to deliver on promises made to members during a merger.

WEll-PositionEd for AnAlysis

What deems a healthy card program one worthy o retaining inside a newly created credit

union? Taking a look at each individual portolios recent history and perormance, as well

as ease o management and efciencies with uture processes, will provide a strong basis or

deciding i a card program should remain or should be dissolved.

In deciding between similar programs one or more rom each o the merging credit unions

executives should begin by pinpointing the portolio that has the highest return and then

ascertain the dierences between the programs. Is it pricing? Product eatures? Member

behavior? Perhaps its the member service experience a quality oten overlooked by

executives evaluating card programs.

1 A Spike in Credit Union Mergers Is Expected in 2009 and 2010, Credit Union Times, June 10, 2009

2 Changing Face o Mergers, Credit Union Journal, October 19, 2009

3 Show Me the Data: Boost Card Success With Inormation, Credit Union Magazine, September 2009
http://www.cutimes.com/Issues/2009/June%2010%202009/Pages/A-Spike-in-Credit-Union-Mergers-Is-Expected-in-2009-and-2010.aspx?k=spike+in+credit+union+mergershttp://www.cujournal.com/issues/13_43/-118222-1.htmlhttp://www.creditunionmagazine.com/Show_Me_the_Data_Boost_Card_Success_With_Information_1592.html?page=1http://www.creditunionmagazine.com/Show_Me_the_Data_Boost_Card_Success_With_Information_1592.html?page=1http://www.cujournal.com/issues/13_43/-118222-1.htmlhttp://www.cutimes.com/Issues/2009/June%2010%202009/Pages/A-Spike-in-Credit-Union-Mergers-Is-Expected-in-2009-and-2010.aspx?k=spike+in+credit+union+mergers


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P A G E 3

Metrics most commonly used to determine the health o a card portolio include year-over-

year growth fgures in sales, balances and the number o cards related to portolio losses.4

While growth is good, it requires analysis. For instance, did credit and/or raud losses

accompany the portolios growth? I so, this could signal that growth is coming rom

poor-credit members, eectively creating a weaker program.

The overall credit quality o the portolio is a key assessment, particularly in todays

economic environment. A poor or declining credit quality level may oretell current or

uture income issues, as may the portolios year-over-year change in average balance.

A decreasing average may indicate the potential to draw additional balances rom

competing cards.

Its important to keep in mind that retaining the best o the existing card programs

undergoing analysis may not be the ultimate answer. The newly created credit union

may have completely redefned itsel, and in turn, needs the support o a completely new

card program.

BEyond thE numBErs

Data alone, while important, is not generally capable o painting the entire picture o a card

programs success or potential. Also worthy o attention is the behind-the-scenes power

driving a card program namely, the card processor. A crucial element o a card programs

potential or success, the card processor can make the dierence between a run-o-the-mill

card program and a successul one.

A seasoned card processor, particularly one amiliar with the credit union philosophy,

understands the particular challenges o a merger and knows what it takes to keep membershappy throughout the process. Being able to lean on this kind o expertise during what can

be a stressul time is a bonus or busy executives managing their credit unions internal and

external reputation.


Helping to make the decision on how the newly created program

should operate is something a card processor with credit union

experience and card market savvy will be able to oer credit

unions preparing to merge. Even i that card processor hasnt been

involved in the portolios to-date, it can provide an invaluable

outside perspective, one ree o bias or back-patting motivations.

The card processor can

make the dierence

between a run-o-the-mill

card program and a

successul one.

4 CFO Focus: A Fork in the Road, Credit Union Management, October 8, 2009
http://www.cues.org/pls/cuesp/!cues1.main?complex_id_in=3069489.3071923.3123024.12158000.pagehttp://www.cues.org/pls/cuesp/!cues1.main?complex_id_in=3069489.3071923.3123024.12158000.page


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P A G E 4

mAkinG thE dEcision

Once credit union leaders have ully analyzed existing programs and current card processor

capabilities, many scenarios are possible. First, executives may deem one or more o the

merging credit unions existing programs to be the best or the newly created credit union.

Alternatively, the leaders may see more potential in one or more o the acquiring credit

unions programs. Perhaps a combination or example, the debit card program o the

merging credit union and the credit card program o the acquiring credit union presents

the best option or the new institution. Even more complex, leaders may decide that none

o the existing programs matches the culture or strategic vision o the new entity.

Choosing which program(s) will remain is only the frst step. Step two is deciding which

card processor will not only stay on as the new credit union is ormed but will guide the

institution through the card program conversion process.

While credit unions may be wary o removing a processor rom an existing program,

particularly ater the program has been eective, it can be just the decision that turns amediocre program into a revenue-producing, growth-driving orce.

undEr onE roof

By pairing with one card processor, credit unions instantly improve back-ofce efciency,

which greatly enhances member service a service o the credit union that oten takes

on the burden o extra scrutiny during a merger. Credit unions also see tremendous

enhancement in reporting and analysis, raud prevention, compliance and marketing ater

bringing multiple card programs under the umbrella o one card processor.

Without the need to

track down data rom

multiple sources,

member service

proessionals can

devote more time to

personal service.


Member Service

By reducing back-ofce headaches the kind associated with

managing several external and internal Web portals provided by a

multitude o card processors credit unions make it easier or ront-

line sta to perorm well in high-pressure situations. The ability

to address a members questions with regard to both their credit

and debit accounts makes the entire process easier, not only or

sta, but or the member, as well. And without the need to track

down data rom multiple sources, member service proessionals can

devote more time to personal service.


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P A G E 5

The credit unions relationship with the cardholding member is not the only one enhanced

by consolidation across card products. The relationship the institution has with its card

processor will also improve as both organizations work more closely together and with the

bigger picture in mind. By giving a card processor responsibility or the growth o each card

product, a credit union greatly increases the processors ability to make recommendations

or growth.

Reporting & Analysis

When all credit, debit, ATM and prepaid reporting services are provided by one partner,

the chances or spotting trends the onus o reporting are much improved. While wading

through pages o green bar reports generated at dierent intervals by dierent card processors

can give credit unions important insight into their portolios, it would take days.

Reporting is o particular value as credit unions ace critical decisions related to the Credit

CARD Act o 2009. When taken to the next level, reporting can be used or modeling the

potential outcomes o proposed changes to a card portolio. Using todays data, modelingpredicts the impact o possible activities, such as marketing promotions, rate increases, limit

decreases or changes to payment due dates. When reporting is provided by one partner that

has access to a credit unions entire mix o plastic products, the chances or more accurate

modeling exists.

Access to more data across products also improves a credit unions marketing eorts. Its well

known that a cardholders debit usage has direct impact on his credit usage. Armed with

good inormation, card services managers can crat promotions that have a net positive eect

on both programs.

Fraud Prevention & Resolution

With identity thet on the rise and the sophistication o these crimes soaring to new levels

each day, credit unions are on high alert, as are their cardholding members. Consolidating

raud management responsibilities with one card processor reduces the chances o raud

prevention strategies inringing on member experience.

Take or example, a credit union with a requently traveling membership. When managing

each o the credit unions portolios, a card processor can easily set custom raud parameters

or each o a traveling members cards credit, debit, even a reloadable travel card in one

pass. Should the member encounter problems while on the road, he or she need only call

one phone number, and the member service person on the other line will be able to oerinormation and solutions relevant to each o the members card accounts.



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P A G E 6

Oten a members credit and debit accounts are accessed with one

piece o plastic, leading the member to believe that both accounts

are managed the same way and by the same people. By turning that

perception into reality, a credit union avoids the conusion and

unease that can arise when cardholders receive multiple calls rom

multiple entities or when they call in with a problem specifc toeither credit or debit.

Compliance and Regulation

One thing we have learned through the implementation o the

Credit CARD Act o 2009 is that compliance issues are oten

complex and open to interpretation.5 Relying on guidance rom

two or more card processors can create challenges or any card-

issuing institution. Taking direction rom multiple sources creates

the opportunity or misunderstandings, missed timelines and

general conusion over which direction to take with card terms inorder to remain compliant.


A savvy card

processor, particularly

one amiliar with

a credit unions

entire mix o plastic

products, can be an

invaluable partner in

the analysis o past

perormance and

in the modeling o

proposed marketing

promotions.

By consolidating all programs with one partner, credit unions ease their own compliance

burden by relying on one expert source or guidance and implementation o changes. Not

only does this make day-to-day management simpler, it increases the odds that the credit

union will remain on top o the required changes and recommended improvements that stem

rom changes to laws governing card products.

Marketing

Introducing a new or reinvented card program to members is the ideal time to kickmarketing up a notch. A credit union has its members complete attention when discussing

changes to something as important as their credit and debit cards. Not to mention that

inside o a merger, members are already mentally braced or change. What better opportunity

to share a newly created credit unions vision and culture than with the introduction o a

new and improved card program?

In addition to introducing new and improved card products, credit unions can take the

merger opportunity to rebrand existing card programs, giving them a consolidated look and

eel across the portolio. For instance, a credit union may oer a credit card program with a

robust rewards program, but a debit card without one. They may oer rewards programs on

both products, but the perks could vary rom card to card. Bringing both programs under themanagement o one card processor helps unite the products, increasing their potential to

grab cardholders attention and inspire loyal use o the cards.

5 On Compliance: CARD Act Deadlines, Credit Union Management, August 27, 2009
http://www.cues.org/pls/cuesp/!cues1.main?complex_id_in=3069489.3071923.3123024.12105477.pagehttp://www.cues.org/pls/cuesp/!cues1.main?complex_id_in=3069489.3071923.3123024.12105477.page


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P A G E 7

Members will be understandably uncomortable; as a species,

humans are uneasy with change. But this uneasiness can be

neutralized with the introduction o new perks, such as an

unmatched rewards program, cash-back bonuses or competitive

rates. A savvy card processor, particularly one amiliar with

a credit unions entire mix o plastic products, can be aninvaluable partner in the analysis o past perormance and in

the modeling o proposed marketing promotions.

Never beore have

efciency and

partnerships with

trusted advisers been

more important than

they are today.

WhAt it tAkEs

Converting card services rom one card processor to another generally involves minimal cost.

Production and mailing o new plastic, requires the majority o the necessary investment.

In terms o time and expertise, a savvy card services vendor with conversion experience will

take on the bulk o the workload. Credit union sta training will likely be necessary, but with

the efciencies employees will discover inside this training, learning a new system will likelybe a welcome change.

Communication with members will involve the most planning and participation on the part

o the credit union. Card processors who have years o successul conversion experience will

also be in a position to help guide the messaging strategy, lead the communications timeline

and recommend any necessary ollow-up. However, this unction o the conversion will

involve credit union sta input and contribution.

The volatility o the credit union and fnancial services sector as a whole is not likely to

ease soon. Never beore have efciency and partnerships with trusted advisers been more

important than they are today. Whether a credit union is preparing or a merger or simplylooking to weather the economic storm, consolidating portolios with one dependable card

processor is a smart move. Not only does it save costs, it exemplifes dedication to the kind

o sound business practices that excite employees, endear members and encourage growth.



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P A G E 8

ABout thE Authors

A Jeaa is vice president o client relations or TMG (The Members Group), working to establish

long-term, successul partnership with credit unions. With more than 12 years o account management,

consulting and operational experience, Aris is capable o delivering the tactics and practical advice credit

unions need to grow their card portolios. He is the author o Courage to Change, which aims to helpreaders improve both their proessional and personal lives, and serves as a council member on the Council

o Advisors or Gerson Lehrman Group, a global network o executives who provide consultation to leaders

in the investment community.

Ba s is vice president o sales or TMG (The Members Group). As such, Brian leads a nationwide

sales team working with credit unions to create competitive card programs. Since starting with the

company in 1994, he has created proftability- and portolio-growth modeling tools to help credit unions

determine the impact o marketing campaigns and promotions. Brian routinely visits over 75 credit unions

each year, sharing insights on the competitive card marketplace.

The Members Group . 1500 NW 118th Street . Des Moines Iowa 50325 . 800 268 1884 . www TheMembersGroup com

Stronger in the End

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