Customized rewards programs
Experts project more rigorous competition in rewards offerings this year, so credit unions would be well-served to evaluate their programs and make changes that increase brand identity in physical and e-commerce transactions.
Although an easy change would be raising the payback ratio—which averages 0.82 points for each dollar spent on a credit card, according to CUNA’s card survey—a smarter strategy might be to make rewards programs more relevant by offering members greater choice.
That could involve partnering with merchants in your area to offer rewards for card use, says Samantha Paxson, CO-OP Financial Services chief marketing officer.
“Say that your member is really a running enthusiast: She can earn points at the local running store that would go to her credit union card,” Paxson says. “That strategy aligns with credit union values about being local, community-driven, and focused on making connections with the members.”
Elevations surveyed its members through focus groups, Net Promoter® Score feedback, social media polling, and face-to-face conversations.
One takeaway, according to Kindle: Members overwhelmingly desired a cash-back benefit as part of the rewards program. The credit union management team listened and responded with a rewards program tailored to the area’s pride in its natural resources, natural beauty, and philanthropic spirit.
Elevations commissioned a graphic designer to create a handful of concepts apiece for its branded University of Colorado “Buff” credit card—a tribute to the school’s buffalo mascot—and “Colorado Metals” reward card, then allowed members to determine the winner in each category.
“It really is their card,” Kindle says.
Elevations offered members the option of pocketing their cash-back rewards or donating that sum to the credit union’s foundation. Recent foundation contributions included $300,000 in 2012 to victims of severe wildfires in Fort Collins, Colo., and $400,000 to relief efforts in 2013, after floods devastated much of the state, and particularly Boulder County.
Marketing innovator Catherine Palmieri says in an article for strategy+business that rewards programs should be subject to a litmus test: Do they actually drive the intended repeat purchase behavior and brand loyalty?
She suggests eliminating rewards for every purchase—instead providing perks such as occasionally issuing an extra $20 bill during an ATM transaction—and simplifying the redemption process so members can focus on attaining rewards that appeal to them.
Mobile wallets catch on
About 15% of credit unions with credit card programs currently offer a mobile wallet to their members, according to the CUNA survey. Expect those numbers to increase. For example, already more than 800 credit unions have either rolled out Apple Pay or are in the implementation queue.
About 56% of larger credit unions now offer mobile wallets, with almost all of them focusing on two options: Apple Pay (54%) and Google Wallet (20%).
Credit unions that adopted mobile wallets cite as their main reasons staying “top of wallet” for members’ point-of-sale transactions (79%) and meeting member demand for this payment channel (63%). Only about one-third view mobile wallets as a vehicle to enhance payments security or become an industry leader.
Among credit unions that have yet to act, 58% are still assessing their options. Some of the reasons for the delay include a lack of demand from membership (40%), a lack of time or resources to implement a mobile wallet (32%), or insufficient merchant outlets where members could use mobile wallets (29%).
But consider this strategy for your credit card programs: Just as many members use a wide range of credit cards, they might choose to use multiple digital wallets to access certain rewards or guarantee access at all merchants, CSCU President/CEO Bob Hackney observes.
“We’re trying to help our member credit unions grow their electronic payment transactions and related revenue by getting their cards into as many wallets as possible,” Hackney says.