Q&A with CSCU President Bob Hackney
'There’s plenty to be positive about and now’s the time to grow.'
Credit Union Magazine interviewed Bob Hackney, President of CSCU, during CSCU’s recent 2013 Solutions Conference.
CU Mag: When you look at your conference agenda, what stands out?
Hackney: The goal of this conference is to give attendees significant take-home value.
We have a very informative EMV chip-card panel discussion on the agenda, followed by a question-and-answer period. With representatives from FIS—our processing partner—which is already doing EMV in other parts of the world; Visa; and CPI, which actually makes the cards, and Stephen Fedor, from CIBC bank in Canada.
Stephen and I both serve on the Visa Risk and Operations Council. His insights will provide that real take-home value because the Canadians have been through this and Stephen has already lived through what credit unions will be doing.
We're two-and-a-half years away from EMV implementation. If you don't currently have a leader for your EMV project, you need to assign one and gather a project team to take responsibility. The team needs to start by determining the credit union’s objectives.
CU Mag: What insight do you hope conference attendees will take home with them?
Hackney: For the past couple of years, most credit unions had a hunker-down mentality due to the recession and they weren’t focused on growing, but on maintaining the status quo.
I sensed a totally different attitude at CUNA’s Governmental Affairs Conference in February. There’s plenty to be positive about and now’s the time to grow. There’s great opportunity for credit unions to grow their business, especially in the area of credit card penetration.
Credit unions have an average 15% penetration rate on credit cards. Credit unions generate about $360,000 in revenue for every 1,000 credit card accounts they have. The economy's better, so it’s time to have a more optimistic view and grow.
In addition to increasing card penetration rates, credit unions need to manage their credit lines by regularly performing credit line reviews. We’ve seen a slight decline in credit lines during the past four years. At the same time, credit card outstandings have increased a bit, which means credit card utilization is on a steady increase.
Members are starting to bump up against their credit card limits, and when members run out of available credit, they can't generate any more transactions. And those transactions drive interchange income, and finance charge revenue.
When credit unions look for growth opportunities in credit cards, they usually find them in the areas of penetration rates and regular credit line reviews to enable volume growth.
CU Mag: What do you see as the major trends in the industry right now?
Hackney: EMV is the near-term trend; mobile is the longer-term trend. Everyone will be consumed for the next few years with EMV—that’s the top priority. But it will also be important to keep your eye on mobile where events are unfolding very quickly.
What consumers want is convenience. They want to be able to pay anywhere, anytime, from any account. They'll be able to do that with mobile devices, regardless of whether they’re at a physical point of sale or buying something online.
Consumers will be able to use bill-pay services and pay bills from their checking or savings accounts using mobile devices.
CU Mag: Any suggestions for fee-income strategies?
Hackney: Of the three main components of credit card fee income, finance charges make up about 75%, interchange represents a little over 20%, and fees account for about 5%.
Late-payment fees or over-limit fees are set, so the best opportunity for growth comes with the annual fees that are often connected to rewards programs. That said, however, I wouldn't create strategies based on those particular fees.
Instead of fee income, credit unions should be looking for ways to drive transaction volume, which will drive interchange revenue, revolved balances, and finance charge revenue. And to increase card usage and volume, credit unions should look closely at making an investment in loyalty programs.
How many times a week do you see Alec Baldwin on television promoting the Capitol One card and its reward offering? The economy is recovering and Capitol One is striking while the iron’s hot.
The fact is—a card is all about what a person wants. Maybe a member wants to take a trip and wants airline tickets, hotel rooms, or rental cars; or maybe a member simply wants a Starbucks gift card or movie tickets.
I remember my mom pasting S&H Green Stamps into a book she’d get from the grocery store. The more you shopped, the more stamps you received, and the closer you were to getting a set of dishes or silverware. The concept has been around for more than 60 years, and it has proven successful.