4 Benchmarking Basics for Credit Union Credit Card Issuers

In self-help circles, comparison is the killer of joy. In the credit card game, however, it’s the key to survival.

After all, consumers are benchmarking you against every other card in their wallet each time they make a purchase. Of course, the amount of time they spend doing that is shrinking as more of their transactions migrate to the digital sphere. One-click purchases, mobile wallets and card-on-file environments mean cardholders often choose their favorite card just once; they set it and forget it.

That’s why becoming your member’s favorite card is all the more important today.

Comparing your card program isn’t always about lining its products and features up against those offered by the competition. The other smart way to strategically move your card into “favorite” territory is to benchmark your internal KPIs against your peers.

What follows are four benchmarking basics and some suggestions for what to do if your program is falling short.

How Many Members Have a Credit Card Account?

Capturing existing member attention and business is an important indicator of a program’s ability to grow. For that reason, penetration is one of the most critical factors to success in today’s competitive credit card market and an area many credit unions really need to dig into and focus on improving.

Experienced issuers have realized that credit cards are a conduit for member growth and have begun to implement mass market strategies to gain new cardholders, after which they introduce additional products and services.

The industry benchmark for credit card penetration is between 30% and 40% of a credit union’s membership. Take a look at your numbers. How do they compare? If one in three members has a card account, you’re in good shape. Next up for you is turning account holders into raving fans.

If, on the other hand, you’re not quite hitting the industry benchmark, consider designing a strategic employee training and incentives plan. The best programs will not center on selling. They’ll focus on how to start a dialogue with members – in the branch, over chat, on the phone – to first discover if a credit card makes sense for them. When you have a motivated and enthusiastic applicant, especially one who already has affinity for your credit union, you have a happy member. You also have a cardholder much more likely to become a card user … which brings us to the next benchmark, card activation.

How Many Cardholders Have Activated That Account?

Having been approved for a card is one thing. Activating it is another. Often, we see community financial institutions bundle a credit card into a suite of products pushed out during new member onboarding. Because these members did not actively seek out a credit card, an otherwise exciting notice that they have been approved receives a lukewarm response, if any response at all.

The industry benchmark for credit card activation is at or above 75%. The key to hitting that number is inspiring enthusiasm for the credit card product prior to approving the member. Take a look at your activation numbers. How do they compare? Could you be doing a better job of building excitement for the product? Of painting the picture or telling the story of what that credit card might do to improve the lives of your members?

Getting a communication strategy into place for new cardholders is really critical for activation success. If you are not already sending new cardholders reminders to activate at weeks one, three and five, that’s an opportunity you may be missing. Think about the different ways you can trigger activation. Simple reminders may do the trick, or you can build out an entire set of incentives to get more members using their new favorite cards faster.

How Much Are Cardholders Spending?

This number can really start to vary as you move through your TRIP segments. Transactors, Revolvers, Inactives and Paydowns all behave differently when it comes to monthly purchases. So, for the purposes of basic benchmarking, you want to look at this from a product standpoint, rather than a cardholder segment lens.

Industry benchmarks for monthly spend on rate cards is between $400 and $600. For rewards cards, it’s higher, typically well over $600.

After getting a level-set understanding of your average spend across the portfolio, you can dive into the different cardholder segments to pinpoint where the greatest and weakest performing accounts reside. Then, you can set about designing the right kinds of marketing and promotion campaigns that will help cardholders discover that your card is, indeed, their favorite.

Executing well against a marketing or promotional calendar assumes you are hitting the right members at the right time with the right offer. Consider focusing on life cycle marketing programs, which are based on the different stages of a member’s financial journey. Life cycle marketing gives you the richest possible insights into the needs and wants of your cardholders so you can trigger the behaviors your portfolio needs most to grow.

How Much of a Line Do Members Have to Work With?

Credit unions are notoriously conservative when it comes to extending credit, and this is especially true with unsecured loan products like credit cards. Today, the average credit line is $10,000. Chances are good you’re not hitting that mark if you’re a cards team operating within a financial cooperative.

But, could you hit it? What would it take? What kind of transformative, revenue-boosting impact might it have on your portfolio? Or more importantly, on your members’ financial wellness? Wouldn’t it make sense for them to spend with the credit union that’s watching their back rather than the megabank that’s mainly after the income?

On the flipside, you may find that you’ve extended too much credit. Understanding where you’ve granted too much credit can help you determine where you can extend more.

With increasingly easy-to-access data analytics and predictive modeling, much of the risk associated with modifying credit lines has evaporated. What’s more, many of these line optimization strategies can be automated so your portfolio is continuously producing great revenue and even greater cardholder experiences. It may be time to look into how your credit union can leverage those strategies to loosen the reigns for your creditworthy members or pull them in for others.

To be sure, analyzing the opportunities and threats facing your credit card program can go much deeper than the basics covered above. The key, however, is getting started, establishing a culture of regular check-ins on KPIs and benchmarking against peers. By comparing your portfolio’s performance to others in your members’ wallets, you gain much richer insight into the changes that will drive the most meaningful evolution of your credit card program.

Kelly Mendenhall is Vice President of Product Management for CO-OP Financial Services. He can be reached at kelly.mendenhall@coop.org.