Top of wallet is old hat. The new goal is top of app. The challenge for credit unions is incentivizing members to log their branded CU credit cards for reoccurring app payments.
“Applications such as Netflix, Amazon, Google Play, Xbox Live and PlayStation network have become part of our new normal,” said John Best CEO of the Tampa, Fla.-based Best Innovation Group (BIG), a technology innovation and development company focused on the financial services industry. “CUs must provide an easy way for its members to use their tender in these everyday applications.”
In early February, BIG hosted a webinar that discussed how credit unions can meet credit card portfolio goals. Among interested parties was the Endwell, N.Y. –based Visions Federal Credit Union. The $3.7 billion CU, supporting 182,000 members at 45 branches, is close to partnering with Setit Credit, a subsidiary of BIG.
“The objective of the product is to move the payment source to a credit union payment source on monthly transactions already occurring on our members’ accounts,” said Visions Federal CU’s Vice President Chief Information/Innovation Officer Cynthia Schroeder. “Someone is already receiving the interchange if a card is being used. Setit Credit just helps the interchange move to the credit union.”
Setit Credit Account Executive Desi Desiderio said the product can reduce interchange erosion threats, increases interchange revenue, reduces fraud, tracks vendor penetration and provide members with an “easy streamlined” way to update expired cards.
“The biggest add is giving the credit union membership the power to control which cards are in which sites,” said Best. “I originally came up with this idea after receiving a new credit card from my financial institution and spending two days logging in and replacing my old card info with my new info in each of my sites.”
Interchange Dilemma
While a small piece of a CU’s pie, interchange revenue is also a bellwether determining how members are using their cards. Best said that many companies are moving away from one-time purchases of services and opting for subscription-based models—a building trend.
“Focusing on these subscription models is important because we know that brings regular interchange that can be monitored and relied upon,” said Best. “Using data analytics to determine where their members are using other credit cards is also important.”
Along with offering webinar attendees information on how to be “top of app,” Setit Credit is offering a free one-time report that details a CU’s penetration into sites such as Amazon, iTunes and Google play.
“Given that the adult population of the U.S. is somewhere around 136 million people, the percentage of members that have an iTunes account is likely above 50%,” said Best. “If a CU could get more iTunes accounts set up, then it would result in higher interchange, but more importantly it would increase engagement by bringing more direct deposit and ultimately more loans.”
Schroeder explained that Visions Federal CU is currently vetting Setit Credit and analyzing data analytics reports provided by Savvy Intel, a financial consulting firm that specializes in credit unions. She added that the CU has an internal department dedicated to managing its card base, which includes monitoring all card activity.
“We need to have our cards be top of wallet. Our members need to know that there is value to pulling out a Visions card over a Chase or American Express,” said Schroeder. “We have used points as a way to motivate members to move their payment source to our cards.”
In today’s market, Best said that most digital services and products come at a cost. As such, he believes it’s time for credit unions to implement a platform that impacts the balance sheet in a positive manner.
“Credit cards aren’t going away and interchange erosion will continue,” said Best. “Sometimes the best defense is a good offense. It’s time to get on the offensive side of the ball by providing a good reason for CU members to use CU cards in these digital platforms.”
