The Relationship Consideration in Card Portfolio Sales
A+ Federal Credit Union ($554M in Austin, TX) had been considering a card portfolio sale for several years before actually moving the process forward. "Our program was very basic. We had the classic and gold card, but no platinum or rewards program," says Kerry Parker CEO of A+ FCU. The management of A+ knew that in order to reinvigorate the program they would need to invest a significant amount of time and effort in reevaluating the program and implementing any new changes or products.
Prioritizing During Periods of GrowthTwo years before, A+ had evaluated the decision to sell their card portfolio. At that time they did not feel that the option was the right move for them. They still wanted to invest in the relationship product and keep control of their program. During this time, A+ continued to implement different initiatives in order to drive growth into the program, including increasing limits for their members. Two years later however, they found themselves at a decision point once again. "We know all of the work that it takes to make a portfolio competitive and it came down to the fact that our five-year priorities were focused on branching, business services, and real estate lending," said Parker. "Credit cards just were not there, and so again we went through the process."
Prioritization is often a key factor in credit unions considering a card portfolio sale today. Although many consider credit cards to be a valuable relationship product, depending on the needs of your membership base there may be other products or services that are more important to the overall relationship. "We felt that a credit card simply didn't dictate the relationship the way that a branch or mortgage loan did," said Parker. "When a credit union is growing, many times the resources aren't available to invest or focus on multiple products and services, and some sacrifices must be made. The decision wasn't made for any financial reasons, it was simply what we though would be best for our members and our member relationships."
As credit unions prioritize their growth initiatives they may consider which areas could be better handled via partnerships. Initially A+ was very hesitant to sell to a third party, but when bids came from organizations that were owned by credit unions, they were more receptive. â€œWe received the bid from TNB and really liked that they were a credit union-owned bank,â€ says Parker. "They were at our league events, we saw them around the community, and we thought they would be easy to work with." After discussing the decision and weighing all of their options, A+ decided to sell their card portfolio to TNB in January of 2007.
Remaining Involved After the Sale
The decision to sell their card portfolio was not an easy one, but A+ has been pleased with the results. "We know that we have a very strong partnership with TNB," says Parker. "We know we can offer feedback and we'll be heard." For A+, this strong relationship was a very important component of their decision. "You need to determine your objectives, whether you want to sell and remain involved," said Parker. If a credit union wants to retain some say in their portfolio, a relationship with the third party can be very important. "We still approve the marketings to our members and we maintain a very open dialogue," says Parker. "Knowing that we'd be working with someone that will take care of our members was a major concern for us. I am not sure that we would have had that if we weren't working with a credit union-owned organization."
The decision to keep or sell a card portfolio is a major one for any credit union. Although the decision factors for each credit union may vary, there are lessons to be learned from credit unions that have already made the decision. Placing priorities on the products and services you deem to be the most important relationship factors for your members may impact the focus of your time and energy during periods of growth. Trust is also an important component in the decision to sell a card portfolio. For A+ FCU, the trust came from working with a credit union-owned organization. Regardless of ownership, credit unions considering the sale of their portfolio need to determine the type of organization they want to work with, and the level of control or input they seek to maintain after the sale.