ARLINGTON, Va. – When some credit union industry executives question the idea of selling a credit union's card portfolio to a bank, they often do so in terms of relationships. They wonder why a credit union would want to sell a portfolio of such key member loans to a bank. Don't the sellers realize that the relationship is more important than the bottom line? Keith Floen, Managing Director for the InifiCorp Corporation, a significant purchaser of credit union card portfolios, understands the question and sympathizes with it. A credit union should not consider selling its relationships when it sells its card portfolio, he says, and argues that protecting and strengthening credit unions' relationships with its members, even after a portfolio sale, is a mark of InifiCorp's success. "If two years after we buy a credit union's portfolio," Floen said, "the credit union doesn't have better and deeper relationships with its card holding members, then we have failed," Floen said. From InifiCorp's perspective, Floen explained, the firm wants stronger relationships between the credit union and its members, if for no other reason the firm expects to make money from the cardholders' revolving balances and a happier cardholder is one who expects to use their card more often. Floen also pointed out that, unlike some of the other for profit firms in the market for credit union card portfolios, InifiCorp has no other products or services to sell to credit union members, even indirectly. "It's not just a question of our pledging not to cross sell auto loans or CDs or anything else to a credit union's cardholders, we don't have any of those things," Floen said. "We have cards. We make our money on the card trade and if we don't help a credit union do that better, we don't make it." Floen knows about both credit unions and credit cards. From 1984 until 1996, he worked for Credit Union Card Services, then a wholly-owned CUNA subsidiary, moving from vice president to executive vice president, then general manager and finally president from 1992 through 1996. At that time, CUCS serviced 2,500 credit unions and roughly seven million cardholders. It's his experience, according to credit unions that have worked with InifiCorp that has brought the firm a real awareness for what credit unions want and need in a relationship with their cardholding members. But while industry observers and credit unions credit Floen's background, combined with the experience and leadership of InifiCorp's CEO, Jerry Kraft, for much of the firm's success buying and managing card portfolios from credit unions and community banks, some also note that success might be more difficult if not for the management attitude of InifiCorp's owner, the Omaha, Nebraska based First National Bank of Nebraska, Inc. "For the most part, First National keeps a very low profile when it comes to day-to-day operations," Floen said. "Many of our customers wouldn't associate us with First National or even maybe recognize First National right away if they heard the name," he added. Kraft and his management team founded InfiCorp as a holding company for their card portfolio management businesses, like InifiCorp, in 1997. Initially the company worked primarily in card management. But after the leadership made the decision to go into portfolio purchases, it needed an influx of new capital to move into card portfolio purchases. That was when First National Bank entered the picture, Floen explained, and InfiCorp and First National made a decision that even though the bank would own InfiCorp as a wholly-owned subsidiary it would not be involved in InfiCorp's immediate operations. But Floen admits that it might even be good for InfiCorp's association with First National to become a little better known, since the bank's history and current awards make it stand out among American financial institutions. For example, it might be good if more people knew that Fortune Magazine named the bank associated with InfiCorp to its list of America's Most Admired Companies in March. The list, which covers 66 industries, is derived from surveys of executives, analysts and directors from those industries and covers criteria like social responsibility, innovation, employee talent and financial soundness, the magazine said. Then there is the bank's age and who owns it. First National Bank began in trade of gold dust and buffalo hides in Nebraska in 1857 and remains privately held still, a fact which one card executive says gives it a certain degree of freedom that other publicly traded banks might not have. "I wouldn't say that First National's being privately held can explain everything about the firm's approach," said Robert Hammer, CEO of RK Hammer, a card portfolio consultant and analysis firm based in Thousand Oaks, California. "But it definitely means that it, and the enterprises it owns, stays free from the quarter by quarter performance pressures demanded by the stock market." InfiCorp can take a longer term strategy because First National does as well, Hammer said. That long term approach has meant that InifiCorp has focused on buying portfolios that are in the four to eight million dollar range, an area often deemed small in the overall card portfolio market, and then focus on customer service with those portfolios. That approach tries to make sure that neither the credit union that sells its portfolio, nor its members, walk away feeling that they have become little more than a number in a broader company. Examples of this approach include assigning a relationship manager to each of its credit union clients. The relationship manager is charged and empowered to address whatever problems crop up with either the credit union's management or its members. It also includes developing branded Web sites for each credit union client, so that a credit union member or credit union executive can come to a Web site with his or her institution's name on it and find out information about their card accounts or further card products without ever seeing InfiCorp, not even a link to an InfiCorp Web site. "We don't have a link to any of our Web sites because there would be no point," Floen said. "We aren't interested in selling our brand at all to the credit union cardholder. We are just as happy if the credit union member never sees our branded site," he added. All this could amount to a load of hype if it were not borne out in the real world, among credit unions that have sold their portfolios to InifiCorp and have experienced the service. The $269 million Norlarco Credit Union sold its card portfolio to InfiCorp in spring 2001 and Karen Morgan, Vice President with the credit union, said the Fort Collins, Colorado, based institution found InfiCorp to be "extremely sensitive" to the credit union's need to further and manage their member relationships. "I sign off on every bit of correspondence with our cardholders or with our members or with the public at large if it has our brand on it," said Morgan. Morgan explained that there have been times when InfiCorp has come to the credit union with an idea for a promotion or approach to its cardholders and the credit union has pointed out where that approach should be modified, and InifiCorp has taken the suggestion. And the input has not just included marketing, but also management. When Norlarco sold its portfolio to InfiCorp it had a cash back program that was very expensive, Morgan explained, but very popular with the credit union's members. "When InfiCorp proposed scrapping the program, we countered that we thought that would not go over well with our cardholders," Morgan said. "So InfiCorp let us phase out the program and replace it with one that had a lower expense profile but which would still give cash back to our cardholders." The credit union was able to tell its cardholders that a new program was coming even as the old one was phased out. But perhaps the most telling perspective comes from Arthur Ashmole, Vice President of the Colorado Springs Credit Union, a $98 million institution which sold its card portfolio to InfiCorp last year. Before joining the credit union, Ashmole worked as an executive for Fleet Bank, in credit card services. "From what I have come to learn about credit unions and what I knew about cards I strongly advocated selling the portfolio provided we could find the right partner," Ashmole said. "InfiCorp was the right partner." Ashmole explained that he was most impressed with the "honorability" InfiCorp showed in all its work with the credit union, as well as its strong focus on making sure neither the credit union nor the cardholders felt like merely a number. "I am used to working for larger credit card firms," he said. "I know how easy it can be to start thinking of the cardholder as little more than that number. InfiCorp doesn't do that." Significantly, both Morgan and Ashmole said that InfiCorp's bid for their portfolios was not the highest on the table, but that their credit unions had chosen InfiCorp because of the firm's approach. Both executives said that it they would do it again if they were put in a position to do so. [email protected]