Are You Ready for 2012?

Keep four themes in mind as the New Year approaches.

December 6, 2011

As 2012 approaches, the mood among consumers—many of whom are migrating toward smaller, locally owned financial institutions—has created an opportunity for credit unions.

According to CUNA, 650,000 consumers joined credit unions between Sept. 29 and the first week of November.

How will credit unions respond to this renewed consumer interest so they can grow and retain their member bases, comply with regulation, manage risk, and deliver the services their members want?

Here are four themes credit unions should keep in mind as they ring in the New Year.

1. The Durbin Amendment

One of the biggest changes for 2012 is the Durbin amendment of the Wall Street Reform and Consumer Protection Act. The Federal Reserve Board regulations implementing that provision of law required that all financial institutions participate in at least two unaffiliated debit networks.

With January just around the corner, credit unions need to remember the considerable timeframe required to ensure compliance by April 1, 2012. If they’re not already participating in at least two unaffiliated debit networks, they should act quickly to meet the deadline and avoid potential negative consequences.

Bryan Kratz
Bryan Kratz is First Data's senior vice president, financial institutions.

Selecting a personal identification network debit network is an important decision that should take into account strategic considerations beyond interchange revenue.

Credit unions should choose their network partners based on long-term value, positioning for future innovation, and the opportunity to form strategic business relationships.

2. Mobile

After several years of anticipation, a convergence of factors—including consumers’ connected lives, available technology, and consumers’ expectation that they’ll be at the center of their service relationships—means we’re likely near a tipping point for mobile banking and payments.

The value of mobile goes beyond its use as simply another banking channel. As the contents of our wallets migrate to our mobile devices, we expect those devices to transform how we access our money, pay for purchases, and save.

Offers and loyalty programs have the potential to increase the value proposition for consumers, merchants, and financial institutions alike, accelerating the growth of mobile use.

Consumers increasingly maintain their relationships using their mobile phones—with friends and family by e-mail or phone or with companies through apps and text messaging.

Consumers will expect their financial institutions to be able to build and maintain relationships through mobile means as well.

3. Fraud threats

Phishing, ATM skimming, counterfeiting and malware attacks are just a few of the major threats credit unions must prepare to combat during 2012.

Credit unions must adjust fraud detection and prevention strategies to keep up with evolving trends. In some cases this means investing in new technologies; in others it means bridging organizational silos.

In all cases, it means improving your odds of detecting fraud threats before they reach the customer.

Key elements of a fraud prevention strategy include:

  • Innovative ways to detect transaction fraud;
  • State-of-the-art tools to verify customer identity;
  • Data sources and predictive modeling to help mitigate risk; and
  • A comprehensive set of options to maximize collections.

Ultimately, data security comes down to protecting the lifeblood of your business—your member relationships and the trust your members place in you.

4. Consumer insight

It will be critical for credit unions to meet their customers’ needs and expectations to be successful in 2012. But before they can do this, credit unions must truly understand the consumers that comprise their member base.

A study by First Data and Market Strategies International, The New Consumer and Financial Behavior, categorized the banked consumer population into six segments.

The study found “Simplifiers” and “Conventional Stalwarts” made up a large percentage of credit union members. These segments typically are traditional consumers who prefer to pay by cash or check, visit their financial institution often, and eschew technology.

Credit unions whose markets include these consumer segments should make sure those traditional payment products and services are still available, while making them as efficient as possible.

Credit unions that want to appeal to younger technology enthusiasts, referred to as “Fast Trackers” in the study, should consider boosting their investments in the latest technologies.

With careful planning, credit unions can position themselves to take advantage of the evolution taking place in the financial services industry. According to “The New Consumer and Financial Behavior,” 92% of credit union members are highly satisfied.

To maintain this high satisfaction rate, credit unions should consider these four themes as they kick off 2012.

BRYAN KRATZ is senior vice president, Financial Institutions, for First Data.