Increasingly, credit unions are outsourcing their credit card portfolios. But what are the benefits of this strategy versus keeping it in-house?
This week, CreditUnions.com compares and contrasts the different strategies credit unions are using to build their card portfolios.
Credit unions have increased their credit card market share significantly since the recession. What can you learn from the industry’s notable performers? Find out in How To Grow A Card Program by Drew Grossman.
Enlisting the support of a third-party service provider can be a major boon for a credit union’s member service and bottom line. But determining whether a partner will be a good fit can be a difficult decision to make.
To help, Janet Lee has identified 6 Questions To Ask Before Outsourcing.
Plastic has long been pivotal to the payments strategy at DuPont Community Credit Union, as evidenced by the Virginia credit union’s peer-busting metrics in credit card penetration and portfolio.
Building on that momentum, DCCU is now doubling down on digital, using business intelligence to drive campaign strategies and launch a new mobile app that features dashboards designed to drive and reward spend.
To see how the credit union uses card analytics and a new app to catch members’ interest read How To Segment For Success by Callahan senior writer Marc Rapport.
Underwriting for any loan carries a significant recourse for credit unions. When it comes to credit card underwriting, criteria that is too tight and interest rates that are too high might yield a profitable card portfolio, but it’s difficult to grow such a program and members are a flight risk. On the flip side, loosening criteria and dropping rates add to the portfolio’s risk. Such a misstep can end a program and a career.
Credit card underwriting is a process that requires an understanding of the institution’s appetite for both risk and profitability. Those two factors weigh heavily into any risk-based pricing strategy.
Here, Callahan associate editor Erik Payne outlines 3 Tips To Price For Risk And Profitability In The Card Portfolio.
A credit union’s credit card program is almost always its highest Return on Assets loan program; therefore, keeping it healthy, competitive, and growing is critical to the credit union’s overall performance. Many leaders are surprised to learn a seemingly small loan portfolio can generate 20% or more of a credit union’s overall bottom line and be the payment device of choice for high-value members. Those that recognize the importance of the card product make it a critical part of overall strategy and member relationship management.
As with all profitable and important products, credit cards bring out competitors. Credit-worthy consumers who already hold a credit card if not several offer little new business. Therefore, credit unions need to play as much defense with their existing relationships as they play offense to capture new accounts.
Unfortunately, many credit unions grapple with the best way to manage their credit card business.
Broadly speaking, there are three credit card management options:
- Controlling virtually all of the work internally on the core system.
- Using third parties to process transactions and manage day-to-day tasks.
- Outsourcing all elements of program management and decision-making in exchange for a fee-based revenue stream.
Learn the advantages and considerations for each approach in What To Consider Before Outsourcing A Credit Card Program by Callahan contributor Timothy Kolk.
Happy Reading!
