Point West Credit Union recently unveiled a system to reward members with points that allow them to get better loan or savings rates, or waive fees for certain services.
Just a few months after the August 2003 launch, however, the CU's management is reevaluating the "PoinTracs" program due to concerns it did not properly reward the best members.
Karen Johnson, Point West's CEO, told The Credit Union Journal that members love the program, but the credit union is losing income as a result of the way it is structured.
"We are looking for ways to revise the program so it becomes a win-win," she said. "It has possibilities, but we want the program to facilitate our goal of rewarding members who make us profitable."
One problem, Johnson revealed, was Point West did not do as much research as it should have done before launching PoinTracs. She said the CU recently signed with Liberty Database Management to assist in its efforts to target certain members.
"If we were starting over, we would look much more carefully at who we want to reward and who we don't. We would like to be egalitarian and reward all members, but not all members are profitable."
The points are administered by AlphaPk, a company founded by a former Point West employee. Point West is AlphaPk's first installation at a financial institution, Johnson said.
As originally designed, PoinTracs awarded members 100 points for each year of membership. Referring a new member brought 500 points, while a switch to e-statements was worth 100 points. In addition, members got one point for each dollar they earned in interest from a deposit account, and each dollar they spent on a loan finance charge.
When members reached 2,500 points, they could "buy" a 25 basis point decrease or increase on a loan or deposit product, respectively. At 5,000 points, members could get a 50 basis point increase or decrease. The points also could be used to waive fees, such as for insufficient funds on an item.
According to Johnson, the program gave too much weight to length of membership. "It gave a lot of points to some members who, in hindsight, might not have been members who deserved to be rewarded," she observed.
Point West is analyzing where the break-even point is for savings and loans. Johnson said one way to make the program more equitable might be to raise the threshold for when a member can use his or her points to 3,500. She said 14% of the points redeemed in December were used by members who had only a checking and/or a savings account with the CU.
"That's not the kind of member we created this program for. Our philosophy is: every member needs to be responsible for the success of the credit union. For example, we can't provide certain services-such as traveller's checks-for free, because they cost us money. Sometimes we have to educate our members about that. We will be looking to reward members with large loans, large deposit accounts, and especially those with more than two services."
Point West members will receive notices in their upcoming statements informing them the program is being reevaluated. Johnson said the CU is motivated to keep the program because member reaction was so positive. She said the members who maintain high balances or multiple accounts have been "happily surprised" when they are told they can waive a fee, buy down a loan rate or get a better CD rate.
Eventually, Johnson foresees the PoinTracs program as a way for the CU and its members to give back to the community. "Members will be able to donate their points to charity. We will determine a formula to convert points to dollars, and the money will go to a good cause."
