Deepening Member Relationships with Affinity Cards
Credit unions enjoy a historical strength through their affiliation with organizations that are integral to their members' lives. The affiliation may be through the company they work for, a military branch, or an organization they are associated with. One way to reinforce this affiliation is through an "affinity" credit card that is branded with the credit union's logo, but also contains imagery related to other organizations or groups that the member is affiliated with.
One recent example of a credit union that offered affinity cards to their members is Purdue Employees Federal Credit Union. PEFCU ($539M in West Lafayette, IN) worked with the Alumni Association of Purdue University to provide cards to their members with Purdue University-related imagery.
The decision to offer this product was an easy one for PEFCU to make. "Credit cards are our most profitable product," noted Bob Falk, President of PEFCU. By pairing with the Alumni Association, PEFCU would be able to get exclusive rights to Purdue-branded cards, a benefit to both the credit union and its members.
The Benefits of a Local Financial Institution
In order to win the contract, PEFCU had to go up against other major financial institutions that were interested in the program. Many of the larger banks in the area were also hoping to win the contract. According to Falk, the key to PEFCU's ability to compete with these larger rivals was a strong focus on their relationship with both the university and the community. "What won them over was the fact that we were local. They knew that this would be a strong relationship as we are already involved with the university in so many other ways. All the places they were looking to go, we were there too," says Falk.
In addition to PEFCU's strong presence within the community, they were able to use their position as a locally based financial institution to their benefit. "Being a local institution, the Alumni Association knew that everything would be handled here," says Falk. "For many larger institutions, where the cards are all issued from a central location, you may not be able to get an answer from the front line staff. In our case, we are the ones that issue these cards. If you have a question about it, we can answer it."
PEFCU was also able to leverage their card policies as an added benefit when pitching the program to the Alumni Association. "They knew we were looking out for our members' best interests. We don't have default interest rates; there is no fee for balance transfers. We try to avoid policies that can have a negative impact on our members," said Falk.
This ability to issue cards quickly was another area where PEFCU was able to outmaneuver their competition. PEFCU can issue their cards in-house, offering members much faster turnaround than their competitors. "They were really blown away by our ability to issue the cards so quickly," says Falk, "The fact that we could walk into a branch and have a card in their hands within a few minutes was a really great selling point for us."
Another key component of the proposal was the fact that it could easily be coupled with Purdue-affiliated products PEFCU was already offering. Previously, PEFCU had been issuing non Purdue-branded cards to students during their tenure at the university. However, based on the previous contract with the Alumni Association, if that student wanted a Purdue-branded card after graduation, they would have had to switch financial institutions. Knowing that switching your primary institution is a complicated and cumbersome process, PEFCU was able to present the benefit of keeping student and alumni cards at the same institution. This was also an important benefit to PEFCU as they looked to develop more long-term relationships. In time the Alumni Association agreed, granting PEFCU exclusive rights to these affinity cards.
What Other Credit Unions Need to Know About Affinity Cards
For other credit unions looking to expand their card portfolios, affinity cards can be a great catalyst. "There is, as the name suggests, an affinity or pride associated with the cards. It gives you the ability to say something about who you are," says Falk. Many credit unions have the opportunity to offer affinity cards, especially if they have major SEG bases that encompass the military, large companies, universities, or other organizations. "It gives people the chance to say, 'Hey, I'm part of this company or organization, and I'm proud of it.'"
One of the most important things you need to have before looking into affinity cards is an understanding of the competition you are facing. When you are facing a much larger competitor you need to know their offerings backwards and forwards, giving you the opportunity to see where your credit union can provide better services. "We knew what the previous contract holder was doing with the program," says Falk. "By knowing our competition we were able to point to multiple areas regarding their service or rates and show how we could do it better. Competitive analysis was a real key for us."
Looking back on the proposal, one of the things that surprised PEFCU once they became the official issuer of the Alumni Association cards was the number and volume of cards they were processing. "Initially we expected to see a much larger volume of cards with smaller average balances," remembers Falk, "In the end our total volume ended up being close to what we expected, but it came from fewer cards that were used more frequently." PEFCU discovered that this product was clearly something that its members were excited to have as an offering. Once they were able to provide the card to their members, they saw that the cards were being used much more frequently than they expected. The cards were truly at the top of their member's wallets. "We saw less risk and loss than we expected with these cards," says Falk, "because members were really beginning to use these as their primary cards."
For other credit unions looking to get into the affinity card market, Falk recommends a careful analysis of the contract and the terms of the agreement. "There were so many things we had to think of and prepare for. What happens if the logos are changed? What if we only get rights to credit cards and not checking? Does the organization have the authority to provide all of the things that are promised?" In the end, all worked out for PEFCU because they were aware of what they were getting into and they had a plan for all options.
Since it began offering the cards, PEFCU has been even more active in managing their credit card program. "You have to be sure you are managing the cards that aren't giving you activity," says Falk. "We are much more active now about making sure we lower rates more consistently for those who deserve it and we have processes in place to increase credit limits several times each year."
Affinity Relationships that Any Credit Union Can Take Advantage Of
For those credit unions that may not think they have the opportunity to develop affinity card relationships, Falk offerings the following advice. "You don't have to be tied to a school or a corporation to offer affinity cards. Previously we had been issuing cards with images of local landmarks around our community. The affinity people feel towards their community can be just as strong and has an even broader reach than most other affinities."
Additionally, new technology is possible for credit unions to offer what Falk calls "an affinity of one." Credit unions that don't have a particular organization or group they want to focus on can offer members cards where they can provide their own image to be placed on the card. This allows them to show off an affinity that may be more exclusive to them, whether it is a picture of their car, their children, or a favorite location; the opportunities are endless.
Affinity cards present an excellent opportunity for credit unions to connect with their members. While shared companies and organizations are the most frequently used options, opportunities still exist for credit unions to build relationships based on a sense of shared community or even an individual's passions or defining characteristics.