As a credit union, the credit card is arguably your most important product. In fact, a TRK Advisors article published by Callahan & Associates reports that even a seemingly small loan portfolio can generate 20 percent or more of a credit union’s overall bottom line and be the most accessed product among the most engaged members.
And with American consumers approaching $1 trillion in credit card debt as of mid-2016 (creditcards.com), this market is teaming with opportunity – if only your credit union had the bandwidth to capture it.
According to Tim Kolk, owner of TRK Advisors, partnering with the right outside consultant can give credit unions the added support and insight they need for success.
“Competitive terms, operational requirements and economic forces can all shift quickly and deeply in the credit card industry, which is why market intelligence is so important,” he said. “Ultimately, the right advisor should help you identify opportunities and execute strategically faster and more efficiently than you could otherwise accomplish on your own.”
Colleen Briggs, director of implementations and portfolio development for CO-OP Financial Services, adds that an outside consultant brings an element of objectivity that can help credit unions uncover valuable insights.
“A really effective consultant will bring a fresh perspective to your program – and a very dimensional view of the industry overall,” she said. “And because the sole objective of these advisors is to analyze the product and identify opportunities, they are removed from any internal conflicts within the credit union – and are able to provide your staff with unbiased opinions and recommendations as a result.”
Ask Tough Questions
When evaluating candidates, Briggs advises credit unions to look for deep credentials. “Examine the credibility of the candidates within the industry and request some case studies that illustrate their successes,” she said. “The most important attribute of a great consultant is an intricate understanding of all aspects of a credit card program that can only come from continual analysis of what is occurring and changing within the market.”
Kolk reminds credit unions that selecting the right candidate can – and should – take time. “In addition to a depth of industry knowledge, look for a shared vision for the direction of your card portfolio,” he said. “It’s also important that you communicate well together. So speak with candidates at length, and don’t be afraid to challenge them – the really good consultants love it.”
One pitfall credit unions should avoid, he says, is putting too much emphasis on and requiring an overly precise ROI for credit card initiatives.
“There are always many variables impacted by any changes, and sometimes issuers can’t advance because they get tied up in trying to get perfect information – there is no such thing,” said Kolk. “And ROI is always an interesting question in the world of consulting, especially for services that center around strategic and skill-building initiatives. While realizing value must be a top requirement, we also suggest that the credit union evaluate what even modest improvements in card program performance can mean.”
For example, Kolk adds, increasing ROA by 25 basis points can yield tens or hundreds of thousands of dollars in additional income each year for a credit union, and adding balances through proper portfolio management can do the same. “Plus, improving product sets to attract more cardholders can deepen member relationships and loyalty,” he said.
Clearly Define the Project
Once the right consultant has been identified, Kolk advises credit unions to outline the scope of the work and length of the project.
He said, “Consultancy works best from the client perspective in three situations: when there is a project that needs to be directed or requires temporary additional resources; when staff members require training to manage the program themselves; and when the expert is employed to keep a watchful eye on the market and flag both concerns and opportunities for the credit union.”
And while growing the card portfolio is typically the overarching objective, Kolk points out that this is not always the case.
“When growth is the goal, the consultant should identify opportunities, benchmark what the credit union can expect to achieve, and identify the steps to get there,” he said. “However, some credit union card programs have been put on auto pilot for so long that executives are simply looking for ways to bring them up to date.”
The most common challenge credit unions face today, he affirms, is keeping pace with the rapidly-evolving rewards market.
“Loyalty programs are very important to members, and it is essential to have the right incentives in place to keep cardholders engaged,” he said.
Briggs agrees, adding, “Every situation is unique, but the most successful credit union card programs all have one thing in common: a strong internal dedication to their success. Credit unions that unite behind their strategy, resource their card program well, and appoint an employee or two to champion the effort see better results. Without this level of commitment up and down the organization, a consultant can only do so much.”
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