WILMINGTON, N.C. - For some time the news in plastic cards has not been encouraging. But one consultant sees opportunity for revenue growth.
Robert Giltner, consulting partner with My Rewards here, said credit unions should look to merchants for revenue to replace a decline in credit card purchasing volume.
"There is a huge opportunity that very few are seeing, which is leveraging merchant-funded revenue," he said. "Merchants hate interchange, whether it is from credit or debit cards. With the bills before Congress, it is hard to imagine interchange will not be under a lot of pressure. But what is interesting is merchants are willing to pay for pay-for-performance advertising, even if it costs them as much as interchange."
With rewards programs, especially now that debit cards have taken over for credit cards, important member usage information resides in the credit union, Giltner explained. He suggested CUs approach merchants and ask if they wish to make an offer to people who, for example, recently bought pizza from them.
"Credit unions can leverage information without sharing proprietary information," he said. "Merchants can be very targeted-offering a reward for shopping this month to people who shopped two months ago, but not last month."
Merchants only have to pay if the member comes in to shop. "But it is valuable to them to have information that allows them to make such a targeted offer. My prediction is merchant-funded revenue will be as significant as interchange by 2015."
Giltner said merchant revenue business model than they are used to, but pointed out there is a significant portion of members who are using online banking. "People go to the credit union's website several times per week, which is when the credit union can make the offer," he said. "Also, many merchants are trying to market their own rewards cards. If a merchant can get with a credit union and tag along on the credit union's rewards card, then it is easier."
According to Giltner, there are signs in the market that tell him merchant-funded rewards and pay-for-performance advertising are, "the most important things credit unions should learn about."
As another method of building market share, Giltner recommends CUs raise their debit card adoption rates. He said only half of credit union members are using their debit cards.
"People should be encouraged to use their debit cards through rewards. Not everyone can be given a credit card, but nearly every member can be issued a debit card."(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com/ http://www.sourcemedia.com/
