Two years ago, Amy Sink, senior vice president and CFO of Teachers Credit Union ($1.5 billion in South Bend, IN) challenged a group of credit union organizations to develop a P-card program that would be better than the one she used, which was offered by an East Coast bank.
Teachers had implemented a P-card program in 2002, and P-cards soon became the credit union’s primary payment tool, replacing paper checks. Employees use the cards for a broad range of purchased goods and services, from office supplies and overhead expenses to ATMs and computer equipment costing hundreds of thousands . In addition to the efficiencies, the interchange rebate on purchases of nearly $10 million a year soon added up to real money.
A CUSO Is Formed
The first step for the group challenged to develop a credit union-owned alternative was to clarify what distinguishes P-cards from corporate cards, which are commonplace in credit unions and used mostly for travel, and what credit unions would value in a P-card. P-cards are similar to traditional credit cards in that employees use them to make purchases from any VISA merchant. P-cards go several steps further, however, by significantly reducing manual accounts payable operations and offering an interchange rebate on all spending.
From that discussion, WesCorp, MEMBERS Development Company, PSCU Financial Services, and Callahan Credit Union Financial Services Limited Partnership joined forces to create a P-card program. They called the CUSO Procura and dubbed the card Purchase ONE.
Results Exceed Expectations
Purchase ONE hit the streets in June 2005, with a goal of 10 subscribers by the end of the first year of operations. Teachers Credit Union volunteered to be the first subscriber and by June 2006, Procura enrolled 28 subscribers, far beyond initial projections.
The only aspect of the program that has fallen short of potential has been credit unions’ usage of the Purchase ONE cards. “The rebates we paid this year were half of what we could have potentially provided had all subscribers used the cards to their full potential,” said Dennis Toda, the WesCorp vice president responsible for Procura operations. Bonus rebates on spending are one incentive, but the most important factor in maximizing spend remains putting cards into the hands of employees making any kind of purchases on the credit union’s behalf. Strong front-end management controls (for example on the amount and type of spending permitted) and liability insurance against card user abuse provide protection and peace of mind so that the cards can be distributed more widely than a traditional corporate card typically would.
Credit unions generally see results soon after implementation because P-cards do not require major changes in behavior. And that is one thing that makes them a useful tool in a tight operating environment. Says Toda, “Credit unions should be benefiting from the operating costs they are already incurring.”
To read find out more about America's CUSOs, order your copy of the 2006 Directory of Credit Union Service Organizations. Along with key contact information for all multi- and wholly- credit union owned CUSOs in over 30 service categories, it also includes updated information on every CUSO's financial, ownership and customer metrics in this year's just launched CUSO Guide Online. Online access is free with your purchase of the publication.