Two years ago Financial One Credit Union ($57.9M, Columbia Height, MN) had below average credit card penetration at 12.9%. After scrutinizing its data and comparing it to its peers, it achieved a 20.4% penetration rate with its credit cards, which is 6% or 600 basis points above the national average, according to Callahan & Associates’ Peer-to-Peer data.
“It was eye-opening,” says Ross Bloomquist, executive vice president at Financial One, says of the credit union’s initial data analysis. “We were well below the marketplace.”
Credit unions credit card penetration rates have been steadily increasing since 2010, rising from 14.3% to 14.7% in 2012. Penetration has risen as credit union members are using more of their available credit, 32.1%, up 4.4% from 2007.
Without the comparative analysis, the credit union was looking at average performance metrics which may disguise weak performance. Once the credit union compared its credit card portfolio to its peers, it realized the portfolio was performing well below the marketplace.
Financial One’s peer group is $50-$100 million, according to Peer-to-Peer categories. This peer group’s average penetration was 11% in 2010. Financial One’s credit card penetration was 12.9% at that time told executives it was performing well: 190 basis points better than its peers. But when the cooperative a comparison of the group’s top performers told another story. Credit unions in the top quartile — the best 25% — reported at least a 17% penetration rate, which makes Financial One’s 12.9% rate seem less impressive. Financial One uses CU Analyzer as a starting point for analyzing its performance.
“What the peer comparisons allow me to do is set realistic expectations and help me develop a strategic plan,” says Previn Solberg, president and CEO of Financial One. “Once I have those components in place, I can then implement those strategies to position the credit union to successfully execute our strategic plan.”
Financial One uses CU Analyzer as a starting point for analyzing its performance. Credit unions can measure performance with peers with both the ranking report, which allows credit unions to insert any metric and see where it ranks within its peer group, and the percentile ranking report, which shows credit unions what level of performance it needs to achieve a top performer ranking.
Financial One’s credit card penetration rate is 20%, as of the first quarter 2012. The credit union’s credit card portfolio went from ranking in the 22nd percentile to the 85th percentile. And it’s reported a 20.35% growth in credit cards and 15.48% growth in credit card balances.
“CU Analyzer clearly showed us that there was significant room for improvement in our credit card portfolio, so we decided to make it a priority to grow and strengthen the performance of the portfolio,” Solberg says. The credit union received an honorable mention CAMEO Award from its card provider, CSCU, earlier this year.
And it secure this substantial growth with a budget of only $500. Instead of investing in outside advertising, it asked employees to get involved to promote the credit card and its low rates through cross selling, Bloomquist says.
“Everyone has a credit card, whether they use it or not,” Bloomquist says. “A lot of members didn’t know how good our rates were. It’s embarrassing to admit, but some of our members didn’t know we even had credit cards.”
Cross selling was tough for member service representatives at first. Financial One didn’t have a sales culture — the credit card campaign was its first. But Financial One put an incentive program in place that awarded one employee each week with a $25 gift card. Plus, the credit union broadcast individual, branch, and credit union progress weekly. It highlighted how many cards each employee referred or opened and the dollar amount of balance transfers. “This kept everyone engaged in the campaign for an extended period of time,” Bloomquist says.
In this way, the cooperative financial institution created a healthy internal competition. Once the employees started cross selling, the product wasn’t tough to promote. The expanding portfolio has led the credit union to more than double its fee income and interchange income.
“For a credit union our size to see a six-figure increase in income just from our Visa portfolio is very meaningful,” says Bloomquist.