PETERBORO, N.H.—With credit card competition from banks heating up again, credit unions are responding to the challenge with marketing analytics, creative promotions, and simply greater attention to a lending product that’s essential to ROA.

Analysts laud the efforts of credit unions that are taking on the major card issuers, saying that large banks are now in the credit card market with both feet and are turning their attention away from just top-tier credit, and more toward middle FICO scores, typically the bread and butter of CU card portfolios.

“Banks are trying to get every account they can,” said Tim Kolk, owner of TRK Advisors. “They have been focused on the Amex-type credit the last couple years but now they are coming hard at the middle-market segments.”

What credit unions can’t do, insisted Kolk, is take for granted the credit card success they’ve enjoyed in recent years. Kolk pointed out that from 2006 to 2011 bank card portfolios grew by 3% in total, but credit unions’ expanded by 55%, and that the bulk of CU credit card growth happened from 2008 through 2010.


Easy Days Are Over

Credit unions today are still doing well with credit cards, reminded Kolk, who also noted that the days of easy card wins are over—those days when banks were largely out of the credit card market and at the same time the reputation of credit unions was beginning to climb.

“Credit unions can’t use the same marketing messages they used to use. 'Nicer, cheaper, better’ is not enough anymore. Credit unions need to be focused on how they market within their member files, carefully using analytics.”

Kolk and others agreed that more CUs are doing just that, and he stressed that the credit union has to define how each member uses their card.

“For example, if they carry a balance, it’s not smart to send this person a rate promotion because they don’t care about rate,” said Kolk. “Marketing has to mirror how the person views their card as a financial tool. If the marketing is out of sync, not using logical data, then all you are doing is sending people pretty advertising pictures.”


The Value of Analytics

In Rancho-Cucamonga, Calif., Caroline Willard, SVP-business development with CO-OP Financial Services, said credit card marketing programs that leverage analytics are five to seven times more effective than mass marketing. She echoed Kolk’s sentiment that credit unions must understand how each member uses the card.

“Some people think of the card as a lending tool while others see it as a transaction tool,” said Willard. “Those are two different behaviors. For the lending person, discuss rate and balance transfer. For those who use the card for transactions, promote rewards. That is somewhat of an oversimplification of how members use their cards and how to use analytics, but these two behaviors are the big ones.”

Willard said a good analytical solution is one that overlays transaction data with demographic data. “That gives you a multifaceted view of the member and how they are behaving, which is always best.”


Digging Into Data

Jeff Russell, senior advisor for The Members Group, Des Moines, Iowa, stressed digging into data, catching members with the right offer at the right time. Saying the credit card market is saturated with ads, and that while cross-selling a credit card when someone comes in for a checking account is fine, what’s most effective is being prepared to make the card offer to someone the CU knows is credit worthy and is at an important step in their life.

“Take a couple buying a home. They come in for a mortgage, the family has to purchase furniture, offer them a credit card and attach some sort of reward or bonus, maybe extra rewards points,” offered Russell.

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