TWO STUDIES EXAMINE CASH MANAGEMENT, CARD REBATES
BOSTON, Mass.–Two new reports from Aite Group examine cash management and the strategic implications of card networks’ rebates and incentives.
The first study examines major trends currently shaping the U.S. cash management industry, as well as the changing demands of customers, new product offerings, and online capabilities of the 50 largest U.S. banks. The study found that customers are increasingly demanding real-time data, consolidated information, greater straight-through processing and more global capabilities.
The last of a series of reports on the global cash management industry, this report is based on a survey of 15 of the 50 largest U.S. banks.
“As the role of the corporate treasurer continues to expand, and the financial supply chain becomes more tightly integrated, corporate customers are demanding more tightly integrated product offerings from their banks,” said Aite Group’s analysis. “These customers no longer want to log into different systems for different products, and they want a single view of their financial positions that can be accessed through a single login.”
The study said it found that cash management and trade finance seem to be the two product areas that banks around the globe are making the greatest effort to converge.
One-third of U.S. banks surveyed currently offer their corporate customers a web portal for integrating cash management and trade finance, while an additional 40% plan to do so over the next 24 months.
Meanwhile, in a separate report, Aite Group notes that card networks’ rebates and incentives to issuers and merchants have grown steadily over the past few years, as competition to retain and attract issuers and increase merchant acceptance has increased for the card networks. “In fact, spending on rebates and incentives from Visa USA and MasterCard Worldwide increased to $1.5 billion in 2007 from $0.7 billion in 2002, due largely to the U.S Department of Justice’s 2004 ruling in favor of network competition,” the study states. The result, it suggests, is that as competition intensifies, card networks will offer more rebates and incentives, and yield on gross dollar volume (GDV) will ultimately decline.
“As card networks increasingly rely on rebates and incentives to protect and grow GDV, the yield they receive on GDV will take a major hit,” said Gwenn Bézard, research director with Aite Group and author of this report. “To fend off that trend, Visa Inc. and MasterCard Worldwide will need to grab a greater share of intracountry processing volumes outside of the United States. The alternative - failing to grow the share of branded cards processed on their network - might otherwise have consequences as dramatic as obliterating their futures as independent corporations.”
For info: www.aitegroup.com.
TMG SAYS CUS SHOULD ENTER GIFT CARD MARKET
DES MOINES, Iowa–Credit unions that do not add a Visa or MasterCard branded gift card product are missing a growth opportunity, according to The Members Group.
The Members Group, or TMG, is a financial services organization co-owned equally by Iowa Corporate Central Credit Union and the Iowa Credit Union League.
Jeff Falk, TMG’s director of product development, recently authored a white paper noting the steady climb in gift card acceptance, and urging CUs to get into the space before existing players lay claim to the audience.
According to Falk, many credit unions are wondering if they should add prepaid gift cards to their product offerings. “Instead of being a simple decision,” he writes, “it has become a complex process that is delayed or made without the commitment to making it a core product.
“To do either is to miss an opportunity to grow your credit union in a number of ways including the creation of new source of fee income as well as increased membership opportunities,” Falk continued. “The benefits are clear, yet credit unions remain hesitant.”
Falk noted there are some sound reasons for not entering the market, including a concern about scale and doubt in the product. However, he said, gift card success is “all about marketing.”
“While there are gift card sales opportunities year round, more than 50% of the total gift card volume is currently generated in November and December. So your marketing efforts should follow the retail strategy of beginning in October. Like the major retailers, consider this a retail product and keep it in front of your members.”
TMG said it offers credit, debit, ATM and prepaid solutions, as well as online reporting, item processing, ACH, ALM and printing services to credit unions across the country.
For info: www.TheMembersGroup.com.
