CO-OP Financial Services Blog: Insight Vault

With the current economic environment, vendor due diligence requirements and evolving member needs, credit unions are faced with challenges today that were not in play just a few years ago. Current legislation has a significant potential negative impact on the non-interest income revenue stream of credit unions. Legislative requirements add complex operational challenges to their IT and operational staffs. Now more than ever it is imperative for credit unions to understand their EFT portfolio, income and expense, and maximize processor and network partners.
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We’re past Memorial Day – summer’s here and the time is right for newly-minted high school and college grads across the nation to start spreading their financial wings.
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Try this simple bit of arithmetic to see how much the Durbin interchange amendment to the financial regulatory overhaul bill will hurt your credit union:

$30 x the number of debit cards you issue

So, if there are 10,000 active debit cards out there with your credit union’s name on them, you will lose somewhere in the neighborhood of $300,000 in interchange income each year if the Durbin amendment isn’t stricken from this bill.

Mad yet?

We at CO-OP certainly are. In fact, we’ve pledged $75,000 to CUNA to help them mount one of the biggest grassroots efforts since The Credit Union Membership Access Act of 1998, or H.R. 1151.

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(Note from Bill Prichard, Public Relations Manager: On May 14, CO-OP issued the statement below regarding the Durbin Interchange Amendment. We welcome your comments on this important industry issue. Please leave a comment via the icon at the bottom of the text).

On May 13 the “Durbin Interchange Amendment” (#3989) to S. 3217 (Restoring American Financial Stability Act) was passed by the U.S. Senate. The U.S. House of Representatives had previously passed a similar bill that does not contain an interchange amendment. The bills will go to a House/Senate conference committee to resolve differences. We hope through the conference committee process the interchange amendment can be deleted. We also hope that Rep. Barney Frank makes good on his promise to us at the CUNA Government Affairs Conference that there would not be interchange legislation this year.

Sen. Durbin’s amendment requires the Federal Reserve Board to regulate signature and PIN debit interchange for issuers and payment card networks with more than $10 billion in assets. That means most credit union cards will be unregulated. Normally we would view that as positive. In this case, however, it will likely make credit union-issued cards the most expensive cards for merchants to accept. This opens the door for merchants to exercise other provisions of the amendment to provide selective discounts, set transaction minimums and maximums, and provide discounts for other payment types. At the last minute, language was added to prohibit differentiation of discounts between issuers; however, the entire provision is unclear. Bottom line, the biggest winners will be the large merchants and the biggest losers will be consumers, many of which are your members.

We are further evaluating the amendment to assess its immediate and long-term impact. We cannot fully quantify the financial effect at this point.

At CO-OP, we will continue our efforts to support CUNA, Electronic Payments Coalition, Electronic Funds Transfer Association and other organizations in the opposition to this legislation. There is something you can do also. We encourage you to visit CUNA’s Web site at www.cuna.org and the sites of your state leagues to keep up with the issue and take the grassroots actions they recommend.

Working together, it is our goal to protect your interchange revenue stream and maintain a level playing field for credit unions in the payment card market.

We are so lucky to be part of such a collaborative industry that shares ideas and successes. I truly enjoy working for an organization that is involved with and supports credit unions. I’m always looking for ways to learn of emerging trends, improve my skills and knowledge. I’ve put together a few of the tricks I’ve picked up along the way to enhance a career in the credit union industry:

• Social networking – follow what is going on in the industry through the growing number of blogs and Web sites that provide opportunities for a free flowing exchange of ideas on our industry. Of course, Insight Vault is a favorite, but I may be a little biased! Others include www.cugrow.com and www.cuchatup.net. CO-OP is also on Twitter, so is Credit Union Times and many others. There is rich information out there; it just takes some simple investigation and online navigation.
• Network within national credit union-related associations such as CUNA and NAFCU, as well as the local chapters of your state and regional associations. Get involved!
• How often do you read our trade magazines? There is timely information and thought provoking ideas in industry-related publications such as Credit Union Journal and Credit Union Times.
• Take advantage of any training and educational opportunity your organization is offering you, whether it be in-house training, webinars or something through your state league or other institutions. It is important to always continue learning and keep your knowledge and skills up to date. There are often events that are free if your credit union has budget constraints, so always be on the lookout for those (such as CO-OP’s THINK Conference, which has been free for the past two years). I have been lucky to experience and graduate from Western CUNA Management School myself and feel it is a very worthy program.

I would be remiss if I did not also mention some of the ways you can enhance your career as it relates to job searching and interviewing within the credit union industry:

• No matter what industry or job you are searching for you always want to keep your resume current and up to date. It is also very important that on whatever Web site or social networking site where you may be sharing your knowledge, education and employment history, make sure all information there matches what is on your resume.
• When an interview is scheduled, it is important that you have done research on the company you are interviewing with and come prepared with questions regarding the position you are interviewing for and questions regarding the organization.
• Use social networking sites to keep up on job opportunities. This is a good way to brand yourself and network with other industry-related professionals. You may never know what opportunities arise. Some of the sites CO-OP uses for recruiting include LinkedIn, Twitter and, occasionally, Facebook.  LinkedIn is often used to post positions on their board and various industry-related groups can also be found there, such as Credit Union Network and Credit Union Professionals Network.
• Of course, do not neglect your own professional discipline and participate in the associations, events and resources available through your professional societies.

By following these tips, you can help all of us take the credit union movement into a healthy future, and you can continue to thrive in this wonderful industry.

“Usage Analytics” is a rather technical term that simply means knowing how your members currently use their cards. For years, broad statistics like “60 percent of our checking account holders have cards and 50 percent use them” was about as far down as we were able to drill. We knew that there were lots of accounts still without cards and those that had them had a high percentage of people that were not using them. The benefits of increasing card activation and use and the associated income gains created by that usage demanded some action to motivate a change. The Usage Analytics program from CO-OP Financial Services is called CO-OP Revelation and it’s a tool the credit union can use to motivate change in cardholder behavior.

A card transaction generates a lot of information in addition to the transfer of funds messages. In the fraction of a second it takes to verify the card and transaction, we learn how much money is spent, the merchant or ATM location name, the time of purchase, the day of the purchase, whether it was a cash withdraw or a direct purchase, whether it was PIN or signature validation, and the general merchant category. On an individual transaction basis, this data helps to resolve individual card-holder issues if there is a problem with a transaction. But, taking the information and analyzing it in the scale of the entire cardbase reveals a lot more.

Employing Usage Analytics, we learn about our member’s favorite merchants which in turn helps determine what premiums are most motivating, whether we are trying to promote greater card usage or the adoption of a new non-card product or service. We now know the percentage of transactions that are happening in signature debit, PIN debit and ATMs. This enables us to easily track change as we market to our members month by month. And, we can more easily compare our card performance against our peers to determine how much potential might be out there that we are missing.

CO-OP Revelation can be upgraded to become even more powerful by linking the usage data with individual cardholder records. The system allows us to define certain behavioral characteristics. For example, we can identify the behavior “low signature card use.” We discover that 20 percent of our cardbase is only using the card five times per month for signature purchase when our stats show that the average monthly use is 13 times. We can then tie the usage data to the cardholder record generating a complete list of names and contact information for the entire 20 percent that falls into that behavior category. Now we know who we need to reach and we know the behavior. With this information, we focus the message to the behavior while narrowing the number of members we need to reach with that message; a more effective campaign at a reduced cost! This is precisely what makes CO-OP Revelation Usage Analytics Plus, the enhanced version, worth the investment. More specific knowledge means a better understanding of cardholders and more intelligent and economical marketing planning and execution.

CO-OP Revelation lends itself to more than increased marketing effectiveness. Any usage behavior can be identified and tracked. Fraud trend identification and resolution has been a discovered benefit of the program and is used actively by the CO-OP Card Member Security Group and several large clients. The greatest win from gaining familiarity with the program is the uses the credit union dreams up for itself. CO-OP Revelation is a programmable tool. We provide useful outputs immediately so that you can put it to work right away but it does not stop there. CO-OP Financial Services offers the learning tools to make CO-OP Revelation an integral part of knowing your membership more deeply. As competition increases and providing the appropriate services becomes more imperative, knowing matters.