ARLINGTON, Va. - Credit unions can successfully manage and maintain their credit card portfolios if they work smarter and remain aware of different elements of the operation. That was a significant part of the message executives and consultants from Card Services for Credit Unions and Certegy delivered to executives from 19 credit unions and credit union leagues from Maryland, Virginia and the District of Columbia at a card growth workshop over October 18-19 in Arlington. CSCU is the association of credit unions that process their card transactions with Certegy. Certegy processes the card transactions for roughly 2,000 credit unions. Jim Blouin, senior business consultant with Certegy, began by challenging the credit union executives to think about their card programs as both an ongoing part of their entire product line but also in terms of benchmarking off what other issuers are doing. If there are two most consistent themes about running a card program they are to cheat shamelessly and to remember the money, Blouin explained. Cheating shamelessly means looking around you at how other card issuers are managing their card portfolios. Remembering the money means keeping in mind that there are only three ways to make money from a credit card program - finance charges, interchange and fees, Blouin said. "Everything you do as a card issuer and manager is going to touch on one of those three areas," he added. The card executives ranged from a CEO who had come to better understand his institution's card portfolio to league officials representing credit unions in Virginia and Washington D.C. to card managers who were both looking for some help in better card management or who had just been put in charge of their institution's portfolio. None of the card executives would speak for the record about their institutions' card efforts, but there appeared to be a common desire in the room to both demystify the cards products and bring some intelligence and creativity to marketing and growing the card portfolio. Sue Chrzan, a communications executive with the association said that the issue of card management had only gained importance with the perception that "many" credit unions have sold their card portfolios to banks. In reality, as of January 2004, depending on whose numbers you use, between 100 and 140 credit unions had sold their card portfolios and entered into agent relationships with the portfolio buyers. Out of something like 4,000 credit unions that issue cards, Chrzan pointed out, the number of credit unions that have sold is still relatively small. But CSCU, Certegy and the card executives who attended the workshop acknowledged that the day when a credit union could simply offer its members one Visa or MasterCard and count on the program to more or less run itself has past. "Our job is just waking up more credit unions to face that reality," Blouin said. Blouin related one consulting trip he made to a credit union that he declined to name in which he discovered that the disclosure statements that the credit union offered its members dated from 1984. "They just weren't in touch with the program at all," Blouin said. Blouin and Chrzan explained that an early step credit unions need to take is to understand better what they have, both in terms of their credit union as well as in terms of the credit union industry and card industry overall. "There are reasons that credit union card portfolios are as valuable as they've become," Chrzan explained. "It's because the major card issuers have saturated the market several times over and a credit union's members provide a source of potentially loyal new customers in a market when most consumers have two or three credit cards," she added. Part of that picture involved looking at credit union industry statistics and using them as benchmarks, but Blouin strongly cautioned credit unions from treating the industry numbers as roadblocks and not as goals. Numbers that say that the average CSCU account has a balance of $3,100 is not meant to discourage credit unions and make them throw in the towel, Blouin explained. The goal is to give credit unions an idea of what other credit unions are doing and give them a goal for which to work. Chrzan showed a slide to the group of an average portfolio that MBNA had purchased. Since the purchase, the portfolio's outstanding assets had grown 52%, according to CSCU, and 70% of the new growth came from new accounts to the existing membership. "We aren't showing you this slide to convince you to sell the portfolio," she said. "We want you to see what you could do too and to let you know what your portfolio is really worth. Blouin said that managing a credit card portfolio boils down to one single word - work. Unlike previous credit card models, he explained, credit card issuing now involves consistent and smart effort. "It never really stops," he said, "it's like a cycle. A member comes in and applies for a card, you underwrite it, price it and put it in their hand. Now they have to activate it. Then they have to start using it and have a program in place to help them use it; and then another member comes in and wants a card," Blouin illustrated. In a wide ranging discussion, all the executives and consultants stressed the very important role that tellers and other credit union "front line staff" played in card marketing and servicing. "How many people in the room give your tellers and front line staff your credit card," Blouin asked, noting that only a minority of hands went up. "Let me assure you that your tellers' loyalties rest not with you as the management but with your credit union members," Blouin said. "If you have a teller that doesn't have your credit card and doesn't know and believe in the product first hand," Blouin said, "they are not going to enthusiastically market that card to your members." "Further," he added, "if you have a relatively high interest rate on a card and one of your members asked about it, that teller is going to tell the member it's a bad card." Credit cards not only have to become a core product on paper for the credit union, but also a core product in terms of the training and day to day business of the credit union, he added. -

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