RANCHO CUCAMONGA, Calif.-CO-OP Financial Services has updated and upgraded CO-OP Total Revelation, its portfolio management solution designed to maximize revenue from debit cards.
Total Revelation initially was introduced in November 2008. It is a Web-based application available to CO-OP Debit Signature and PIN clients.
Caroline Lane, the CUSO's SVP, business development and marketing, told Credit Union Journal Total Revelation can be described as data mining-it takes transaction data and marries it up with demographic data and allows a credit union to see how the different segments are behaving.
According to Lane, CUs have shown "heightened interest" in "really getting good at finding those hidden pockets of profitability in the debit card portfolio."
"It is difficult to do this on the macro level; it really comes down to segmentation," she said. "Credit unions look at their credit card portfolio as a profit center-as they should, because it is a lending product. But now they are realizing they are going to have to be a little more surgical to make money on the debit side. There is not much margin for error, or for allowing cards to sit and not be activated. Credit unions need to be sure to get activation and usage, which is one thing data mining does really well."
Several 'Twists' Added
CO-OP has added several "twists" in its 2011 upgrade to Total Revelation it would not have thought about before passage of the Durbin Amendment, Lane reported. She noted there remains different schools of thought as to which type of card to promote: PIN debit or signature debit. As the financial services industry struggles to gauge the impact of Durbin on income going forward, CO-OP foresees the possibility of "interchange rate convergence," meaning despite promises to the contrary, 18 months from now credit unions will be getting the same levels of interchange income as banks. There is a potential issue, because signature costs a credit union more due to fees.
"There are good reasons for allowing members to do both types of transactions, but signature can turn out to be upside down on profitability if interchange rate convergence happens," she warned.
Total Revelation has three progressive tiers. Similar to buying a car, CUs have the option to utilize only the basic functions of tier one, upgrade to the more advanced analysis of tier two, or go for the top-end model, which includes third-party consulting. Pricing depends on the size of credit union and the size of the card base.
Tier one is Revelation Reports, which consists of 13 pre-built, one-click reports Lane said CO-OP has found to be typically what CUs are looking for in analyzing their debit card data. To tier one CO-OP recently added acquirer data, which examines and reports on ATM usage in addition to point of sale usage.
Tier two is Revelation Analytics, which has cardholder, transaction, fraud and marketing campaign analysis. It also includes benchmarking, which gives a CU the ability to compare usage and trends with other CO-OP clients.
Tier three is Revelation Consultation, which adds a human element.
"It is a very robust reporting tool," Lane declared. "The three tiers build upon each other. Revelation Consultation is used for a Durbin impact analysis, which projects out what the hit will be for non-interest income. Also at the highest level there is outsourced data mining consulting, where an outside party analyzes the data and gives recommendations to the credit union. This usually goes to frequency of usage, PIN versus signature, and thoroughness of activation. A typical credit union will have only half of debit cards being activated, which means a missed revenue opportunity."
One unintended, but very welcome, development: Total Revelation is "a great way to identify a source of compromise in the case of fraud," she said. It sorts through transaction data and can spot a trend quickly. A CU can see 500 members used their debit cards at a specific retailer, and have a report within minutes instead of days.
"When we did our overhaul and relaunch in May we wanted to add ATM data, which is a big upgrade because CO-OP had to have all that transactional data available," Lane said. "We are inching up to 400 CUs and 1,000 users."
Case Studies
CO-OP has performed case studies to confirm the data CUs are seeking is quantifiable, Lane continued. She said one credit union client wanted to know which of its debit card users only had one to five transactions per month. The CU had a loyalty program, so after the low users were identified, they were offered rewards for an increase in usage. In a sample size of 11,000, the CU saw a 66.5% increase in usage. Members used the cards more, and they spent more, 44% more.
"Targeting can increase profitability," she assessed. "You don't want to give away rewards to those members who are already behaving the way you want them to, you want to save the carrot. In that particular case study, debit interchange income for the group grew 47%."
Even more significant: the behavior change stuck. Lane said the group of former low debit users continued to use their cards near the increased level even after the marketing messages ended.
