5 Steps To Maximize Payments Revenue

Optimize traditional payment revenues now, while preparing to embrace new strategies and technology tomorrow.




The future of the credit union industry depends upon cooperatives becoming early adopters, working on new mobile technologies and evaluating emerging solutions from leading industry players.

To ensure long-term success, credit unions must take steps today to lay the foundation for a transformation to mobile payments, while simultaneously working to maximize revenue and loyalty generated from existing credit and debit cardholders. 

Stage 1: Launch Programs To Increase Credit Card Penetration

The heart of any payments strategy is the credit card. It remains the credit union’s greatest revenue engine. Unfortunately, only 14-15%, or less than four out of five, credit union members have and use their credit union’s credit card.

Each credit union should evaluate and update their credit card offerings and then launch an ongoing promotions program designed to boost penetration levels to a level of 50%. To attract members and consumers, credit cards should offer attractive interest rates, carry no annual fees, and offer a rewards program. Promotions that include low-interest balance transfer rates, extra rewards points during specific time periods, and other incentives will keep your credit card at the top of the member’s wallet.

SPIRE Federal Credit Union ($561M, Falcon Heights, MN)recently launched targeted marketing campaigns for its credit card product. As a result, the credit union achieved an impressive 68% jump in new accounts and a 2% increase in interchange income. This credit union’s experience proves well-designed marketing programs deliver dramatic results at an affordable cost.

Stage 2: Expand Members’ Use Of Your Debit Card

Debit transactions are a vital revenue stream for credit unions. They also represent an excellent way to interest Gen Y members and cross sell other services to consumers who may not currently qualify for a credit card.

Pen Air Federal Credit Union ($1.2B, Pensacola, FL) created a premier account with a debit card that earns rewards when members have a checking account, debit card, share account, and eStatements at the credit union. This rewards-based debit card and loyalty campaign drove attrition down by 60 basis points when compared to standard checking accountholders and also attracted younger members.

Stage 3: Offer Cards With Rewards And Self-Service Options

Rewards are compelling loyalty builders for credit and debit cardholders, so it’s wise to employ both credit-union-sponsored and merchant-funded rewards. Redemption rates for rewards programs remain at around 35%, so credit unions usually book at least 10% of rewards as income. Although budgets are tight, it can make sense to offer both types of rewards to attract and hold the loyalty of your members.   

Surveys indicate that many consumers prefer self-service options, so adopt solutions that enable members to enroll to receive alerts (via text or email) and block transactions. For example, members could set a block for all international transactions and then remove it if they travel out of the country. These services empower members to play a greater role in their financial security, which is a strong incentive for adopters of mobile technologies.

Another self-service option involves providing card control for teens and college students. This is an attractive way for parents to monitor spending and teach financial responsibility. Controls should include the ability to set spending limits and time frames for transactions (i.e. payments between the hours of 11 p.m. to 7 a.m. are denied). 

Stage 4: Offer EMV Cards, Especially For Members Who Live Or Travel Outside The U.S.

EMV(Europay-MasterCard-VISA) is a global standard for integrated circuit cards and compatible POS terminals and ATMs. This robust cardholder verification and transaction validation was developed to protect against counterfeit fraud and helps reduce risk of unauthorized payments in countries or regions where telecommunications are limited or non-existent.

EMV cards are growing in usage, especially for credit unions whose members live or work overseas. An EMV pilot at an Andrews Federal Credit Union ($886M, Suitland, MD) branch in Germany resulted in more than 1,200 new accounts and $2.5 million outstanding in the first six months. Another EMV pilot is currently underway at Army Aviation Center Federal Credit Union ($1.1B,Daleville, AL). 

Stage 5: Evaluate And Upgrade Online Banking, Bill Pay, And Mobile Banking Platforms

Your credit union’s mobile payments strategy begins with promoting activation and usage of an existing online banking, bill pay, and mobile banking platform. These products put a stake in the ground and establish awareness that your credit union can deliver the next generation of mobile payment technologies.

With the future in mind, it’s time to evaluate and possibly upgrade your mobile banking and online products. Within the mobile channel, a solution that delivers comprehensive services to smart phone users is essential, as is integrating your online bill pay platform with mobile devices.

Members will first expect to view and pay bills using their mobile device. Their next request will be for fully featured mobile financial services, including payments of all types.

As you evaluate emerging online and mobile banking platforms in the coming months, look for an advanced solution that offers:

  • Multiple application options for your member base, with fully featured text banking capabilities.
  • Online banking dashboards that allow members to customize their experience to suit their needs by simply dragging and dropping data elements.
  • Feature-on-demand technology for online and mobile that supports both consumer and business users on a single platform and the ability to turn features on or off.
  • Integrated payment options, allowing members to pay bills while they are on the move using their mobile device.
  • Risk and fraud analytics tools that model user behavior and analyze transactional data to identify and suspend suspect transactions.    

The Future Goes Mobile

Credit unions that build a strong connection to their members with card and payment offerings are in an excellent position to further enhance those relationships with emerging mobile technologies.

While these are exciting times in the industry, credit unions must recognize and respond to the challenges that lay ahead. Cooperative financial institutions are facing a technology race against large banks as well as Apple, Google, and other companies in the area of emerging mobile technologies. Early adopters of fully featured mobile banking and payments applications have a lot to gain — and late adopters have a lot to lose.

The move to mobile payments has already begun: 22% of consumers currently use mobile banking. By 2020 an estimated 60% of U.S. consumers will be banking and shopping using mobile technology. This technology is especially prized by Generation Y, a segment that is vital to the long-term success of the credit union industry.

Credit unions have made great strides in the past few years to grow membership, boost revenues and expand their mobile capabilities. But make no mistake: mobile payments is a game changer. Surveys indicate members will keep — or change — financial institutions to obtain the mobile functionality they want. The quality of a mobile offering is also a major factor in the choice of a primary financial institution for adults younger than 30, small business owners, and affluent consumers. And satisfied mobile users are very loyal to their financial institutions.

To ensure a successful future, credit unions must work with innovative industry partners that can deliver a bold strategy for emerging payments technology while satisfying existing members and attracting a younger generation of users who will ultimately define the financial marketplace in the coming decades.        

Tom Gandre oversees PSCU’s credit, debit, prepaid, eCommerce, and contact center solution areas along with information technology.


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