Insource Versus Outsource

Credit unions should consider the benefits and pitfalls of each strategy when managing their card portfolio.


No executive decision is ever taken lightly, yet few seem as mired in debate as insourcing versus outsourcing.  In this significantly altered and still recovering economic environment, executives are continually challenged to evaluate their business practices to ensure they are capitalizing on their key strengths and core competencies.  The decision to leverage someone else’s expertise versus deploying the necessary resources to create that expertise in-house is a central consideration that spans multiple business verticals.

In the credit card portfolio management vertical, there are further considerations (legal, compliance, the challenge of navigating a difficult regulatory environment, etc.) that bring additional complexity into the equation.    

In order to effectively evaluate the benefits of either strategy, credit unions must work to understand the risks and benefits associated with successfully managing a credit card portfolio. 

InSource Considerations

Control is a key benefit that is associated with insourcing.  Employing an internal system of checks and balances ensures that control stays within the framework of the institution and with the people who have a vested interest.  This control theme spans many facets of the program, from front-line management, to collections, to the overall profitability associated with the various products.  Certainly, there are variables that can easily be managed in-house. However, this option does come at a price, and with its own unique set of risks

Positioned For Growth?

As a credit card program expands and flourishes, so do the costs associated with managing it and the risks associated with events such as data breaches, regulatory lapses, or compliance shortfalls.  As the competitive landscape increases, credit unions also need to work to ensure that the product being offered is perceived as valuable in their members’ eyes. 

Servicing is arguably the biggest benefit to the in-house model, but as a program expands, every credit union should be cautious of potential impacts and ask the following questions:

  • Can it effectively manage through peaks and valleys for events like the 2009/2010 recession, which caused a massive uptick in delinquencies and losses?  
  • Does the institution have the expertise to create and manage a product suite that is competitive and sustainable?
  • Will staff become over-extended?  
  • Can the credit union continue to not only meet but exceed expectations? 
  • If the credit union is utilizing a processor, what elements does it allow them to handle and at what cost? 
  • Does the institution have the expertise to create and manage a product suite that is competitive and sustainable?   

Outsourcing Considerations

Unsecured lending represents the most volatile asset on a credit union’s balance sheet. It is the most costly to service and potentially the most regulated, also making it the most difficult to navigate. When all of the elements that go into managing a program are considered, the picture may become muddled with noise that potentially takes away from a core function of many credit unions ─ offering their members the best products and services.  Each institution must ask itself if it would be more effective and offer better products and services by outsourcing to an issuer who specializes in creating best in class programs. 

Outsourcing provides the following benefits:

1. Reduced Risk– Outsourcing removes the threat of regulatory, financial, and direct reputational risk from the equation. 

2. Economies of Scale– It alleviates functions, such as the need for continual product enhancements, lifecycle marketing, system development, and upgrades, all of which free up resources that can be allocated to other functions within the organization. 

3. Cost Savings– Outsourcing limits the need to have a fully dedicated staff and offers cost savings across various categories, such as third-party processing, marketing, external legal and compliance work, and more.

4. Revenue Generation– It creates a predictable, relatively riskless income stream.

If reducing risk, creating a stable and predictable income stream, and having the ability to offer industry leading products and services sounds like a better alternative, it’s time to speak with the right agent issuer about moving down that path.  

Elan Financial Services is one of America’s largest agent credit card providers for credit unions. For over 46 years, Elan has delivered a proven partner based solution, offering best-in-class products and unwavering commitment to service to more than 400 credit unions across the United States.

Elan's base of more than 2,000 employees are dedicated to helping credit union clients reduce costs and risks associated with managing and growing their credit card portfolio’s. For more information call all 800-223-7009, or visit




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