Credit unions are always looking for ways to better serve their members. Whether it comes in the form of new products and services, or tailoring existing ones to better meet member needs, credit unions are constantly striving to become more involved in their members’ financial lives. For these changes to be effective, they need to be accurately tuned to the members’ needs and not just the credit union’s. According to Barry Shaner, CEO of Directions CU ($528M in Toledo, OH), “The members decide what they want, we’re just here to help.” And one thing that all Directions members want is a debit card.
Getting Members to CARRY Your Card
Directions has been offering debit cards since the year 2000, but back then it was a product the member “earned.” Similar to a credit card, there was an application process, and it was underwritten. However, Directions completely loosened this policy after a few years. “Now, if you qualify for a checking account, you qualify for a debit card,” says Shaner. They view the offering as a crucial component of the member relationship, and since 2005, their debit card penetration has increased from 60 percent to 75 percent.
Getting Members to USE Your Card
Directions knew that getting the member to carry your card is one thing, but getting the members to actively use the card is another challenge entirely. So, again responding to member needs, in 2005 Directions added a rewards structure to their debit card that was very similar to the rewards program they already offered with their credit card. “We ran a focus group,” says Shaner, “and most people that loved their debit card, especially Gen-Y, viewed rewards as key to that relationship.”
The debit rewards program that Directions eventually rolled out helped the credit union find success on both sides of the formula. Not only were a larger number of members now carrying the credit union’s debit card, but thanks to the rewards program, they were also using it more frequently. “From 2005 to 2007 we saw our annual number of transactions grow from 79 transactions per card to 116 transactions per card,” notes Shaner. In addition, the percentage of active debit cards increased from 67 percent to 80 percent during the same time period. On top of the benefits the member received for using their debit cards, the credit union also benefited. Interchange income, which according to Callahan & Associates’ Non-Interest Income Survey is the second largest component of non-interest income at credit unions, also rose at Directions as card usage increased. “Our interchange revenue per card also grew” says Shaner, “from $34 in 2005 to $53 in 2007.”
On top of the interchange gains for Directions, the increased debit card usage had another benefit for the credit union. Shaner noted, “If a member is using your debit card, every time they use the card they are reminded of your credit union and they see your logo. It really helps when we are trying to build relationships and the credit union is constantly on the mind of our members.” Looking forward, the debit card will remain a strong component of Directions’ member relationship strategies as they look to become an even more integral part of their members’ financial lives. “It has been said that product differentiation is key to success,” recalls Shaner, “and for us, the rewards program provides us with that differentiation.
Since Directions already emphasizes debit card relationships, they are ideally positioned to take advantage of the momentum that debit cards are projected to experience in the next few years. If debit cards are just another offering at your credit union, now might be the time put them in the spotlight.