Why does in-house processing make sense for such a wide spectrum of credit unions-from multi-billion dollar institutions to the very smallest? The reasons may not be clear to everyone. The plain fact is that the benefits are compelling and maybe greater than many full-service users are aware of.
I think everyone has seen that in-house processing has become an option that's as capable and respected as full-service. It's efficient and cost-effective. Credit unions using in-house systems say they value the increased member service that real-time, single-system access to account information provides, as well as the ability to adjust parameters like interest rates and grace amounts on the fly as their business needs change.
The ROI Attraction
For their part, credit unions like the increased return on investment, while members like seeing transaction and payment information appear online immediately rather than a day later.
In-house may not be the ideal answer for everyone, but many credit unions don't want the operational limitations of a full-service provider. They've found that viewing the end-to-end transaction process creates opportunities for enhancing member service.
I believe there are four areas where the advantages of in-house processing really come to the fore:
1) Efficient member service. Credit unions using full-service processors may struggle with the lack of real-time data integration between the card processing platform and their core data processing system. Employees have to contend with different platforms to obtain card-related information. With in-house, front-line personnel are empowered to make decisions, such as extending a payment deadline, because the data needed is right in front of them. Tying credit card information to other account information gives a CU an up-to-the-minute, 360-degree view of member relationships.
2) Increased operational efficiency. Immediate access to transaction detail and account balances facilitates proactive management of delinquent accounts and collections. Your card processor may also offer added value in areas such as fraud detection and gateways to payment networks. Seamless integration of these capabilities increases operating efficiencies while reducing operating costs.
3) Support for innovation. Credit unions need ways to differentiate themselves and compete against larger issuers. One way to do this is to leverage their access to member information-information that they would never divulge to a third-party processor. They can use this data to create targeted marketing materials and dynamic card programs that best fit their member demographic.
4) Protection for the credit union and its members. In-house card processing gives credit unions maximum control over system security and protection of member information. If the full-service processor changes hands multiple times due to mergers and acquisitions, members become concerned about service changes and the handling of their data. If an in-house vendor changes management, your data is still in-house.
Taking Full Advantage
Once a decision is made to move card processing in-house, taking full advantage will depend on the card processing vendor. Here are some questions for getting maximum value from an in-house card processing vendor:
• Does the company offer a solid range of complementary services? If so, you can avoid negotiating with separate vendors for each member service. If your credit card processor handles not only credit, but debit and ATM processing, then all settlements, reconciliations, and adjustments are managed by the same vendor. Get even more operating efficiencies if your card processor has a good loyalty program, offers card manufacturing, chargeback services, and so on. It's hard to over-rate the benefits of keeping it simple and having a single point of contact for multiple products.
• What is the processing vendor's reputation for customer service? Get some references. Find out how easy it is to get training and support when needed. Are representatives eager and able to help? You'll find that clear and honest communications are the hallmarks of a vendor that sincerely wants a long-term mutually beneficial business partnership. This can even extend to the vendor's billing process. Will you get a long, complicated invoice or a simple, clear explanation of what you're being charged?
• Does the card processor provide 100% interchange reimbursement daily? There's no reason why you shouldn't get all of your reimbursement in a timely fashion.
• Does the processor provide in-depth profitability analysis? A credit union's portfolio success affects the processor's bottom line, so the vendor ought to show some interest. This analysis should be more than just a statistics report. It should analyze current services, look at the financial health of the geographic region, examine member demographics, and provide clear-eyed suggestions about enhancing card programs.
Do Your Research
To sum up the points above: do your research! If you decide to take this route, be sure to get both the technology you need and the service you deserve.
I started with the question, "Why in-house processing?" I've given a number of responses, and I'll boil it down here: the ability to differentiate the CU from competitors using the member service advantage of in-house processing, and the ability to increase operational efficiencies.
Bob Davis is Director of Operations with JHA Payment Processing Solutions.
