It's Beginning To Look A Lot Like- Gift Cards Are To Take Off
It's always the right size and never the wrong color.
And this year it may turn into the perfect gift for both the giver and the giver's credit union-gift cards.
"Last year there was very little interest in this product at all, but this year the buzz is just so hot out there," said Michelle Thornton of Liberty Card Services. "We launched this product in October, and it's already surpassed our expectations."
In St. Petersburg, Fla., PSCU Financial Services, which is also offering a pre-paid Visa gift card this holiday season, is also seeing a lot of interest in the product.
"We are in beta-testing with 24 of our clients for a web-based gift card product, and then we're also beta-testing an instant issue [in-branch] program with eight clients. We had about 20 who were interested in doing it, but we just couldn't get them all set up [in time], and we've got another dozen or so that are wanting launch next year," PSCU-FS' Ron Silvia offered. "We were expecting to do maybe 36 in the first year, not 36 in the first few months. This has far exceeded our expectations."
Credit unions testing the web-based product already have working websites and will launch the program to their members in about a week, he noted, while those testing the instant issue program likely will launch in about two weeks-a little closer to Christmas than PSCU-FS would have wanted, but still in time for last-minute holiday shopping.
All that, compared to little to no interest this time last year. "Part of this is just the normal product life cycle. Last year, the product was still just too young, so there wasn't as much interest," Thornton explained. "But now you've got BofA and others really driving the category, so we anticipated this kind of excitement."
Certegy Card Services' Tim Kaliban agreed. "We've seen very strong interest in this product, much more so this year than last year. I think part of what is driving it is the success of the Simon Mall card program that has really brought the Visa gift card a lot of notice." Simon Property Group, Indianapolis, operates or is in partnerships with 299 mall properties in the U.S.
Although "closed-loop" gift cards that are issued by-and can only be used at-a specific retailer's shops have been around for quite some time, the concept of a credit union-issued card that can be used virtually anywhere is still new enough that CUs aren't having to work at distinguishing their cards from other institution's cards, Thornton noted. But that time may be coming.
"Right now, credit unions are doing well just by promoting the very fact that they have this product. For a lot of small to medium-sized credit unions, especially those that aren't in a metropolitan area, they may be the only place to get a gift card," Thornton related. "What will be interesting is next year, when everyone has them, then what do you do to distinguish your card from everyone else's."
But for the moment, it's enough just to offer them, she advised. Liberty, Certegy and PSCU-FS are all offering Visa gift card programs featuring pre-paid debit cards that are accepted anywhere Visa debit cards can be used.
"There will be a bit of learning curve. When you're at a restaurant, let's say the card has $40 on it, and the bill is $35, but then you add a 20% tip. The transaction won't go through because there's only $40 on the card," Thornton observed. "So consumers and merchants will need to realize that in some cases, you may have to do multiple transactions, put the first $30 on the card, for example, and then pay the rest in cash."
Kaliban suggested the primary reason for credit unions to latch onto prepaid cards is as a means of maintaining and enhancing the relationship with members. "This is a competitive product," he advised. "The point is to offer this product to keep your members from walking across the street to the bank."
It's also a means of getting the credit union's name out there, Silvia offered.
"In the credit union landscape, personalization is important, and all these websites and cards can be personalized, and then when your member gives the card to someone and that gets your name out there," he noted.
And then there's the other reason: revenue. "There's also a modest revenue opportunity, but that is very secondary," Thornton counseled. "When you ask institutions why they're doing it, no one says they're doing it to make money."
While Kaliban and Silvia agreed that the competitive aspect of prepaid gift cards is currently the more pressing reason to make it part of the CU's lineup, both were more optimistic about the revenue to be generated by the cards. "This can be a huge revenue opportunity," Silvia suggested, noting that the concept of a pre-paid debit card-especially reloadable cards-goes well beyond holiday gift giving.
"We already have a client that has rolled out a customized card to one of its SEGs," he said. "We've got a lot of credit unions that front for schools and churches and other groups. We're also looking at a parent-teen pre-paid, reloadable card for next year, and we're also working on a payroll card. The logistics of that are a whole lot more complicated, but it can be worthwhile."