Capitalizing on credit card growth

The opportunities for credit union loan growth haven’t been this good for a very long time. According to the CUNA Mutual March 2017 Trends Report[1] (January 2017 data), overall, credit union loan balances rose 0.9 percent in January (better than the 0.4-percent pace reported in January 2016) and 11.5 percent during the past 12 months. Credit union seasonally-adjusted annualized loan growth reached 12.8 percent in January of 2017 – the fastest pace since January of 2000.

For many credit unions, loan growth opportunities are found in abundance among existing members and a record number of new credit union members. CUNA reported in its 2016 year-end report[2] that membership in U.S. credit unions increased by 4.1 percent in 2016 overall. When compared to previous calendar year results, this is the fastest growth seen since 1986. U.S. credit unions now report 108.2 million members – a total which is equal to slightly more than a third (33.5 percent) of the country’s population.

Growing credit union loan balances reflect an abundance of opportunity in the market today – is your team making the most of these opportunities and finding the optimum amount of success? For those of you looking to make more of these market opportunities (while they last), I offer the following thoughts.

Be prepared, and take advance of peak credit card spend time

Overall, credit card spends increases from lows during the first quarter and then peaks annually during the fourth quarter. The chart below illustrates this trend back to 2014.

Smart credit unions are preparing now to make the most of this strong opportunity in fourth-quarter 2017. Here are a few suggestions to help you capitalize on what will likely be a very strong year of credit-card activity.

First, don’t rely on best guesses, or what you believe others are doing. Use trustworthy data that is relevant to your membership and target market. Trusted sources like Experian have created powerful card spend^[1] algorithms, built from credit data, to help credit unions find the best opportunities. This data can help your team:

• Target high-spending members with your very best offer
• Assign the credit limit your members need and want
• Assign the right APR to make sure you maximize interest and interchange income
• Retain profitable cards and identify those members who provide new opportunity

My experience is that many credit unions miss the boat when it comes to capturing the larger credit-card opportunity. High-performing credit unions are using the best-trended data to have a better understanding of their members, and customizing the product features and offer. Successful card programs are built upon a lot more than a low rate and reward program. Smart credit-union marketers know which members are likely to be Rate Surfers, Balance Revolvers, Transactors, Consolidators, Non-active, or Seasonal users. Card experts know how to present the right card product to the right member at the right time.

Why it matters

Portfolio expert and Director Jason Dietrich of Experian’s Global Consulting Practice reports that year-over-year growth for national banks in credit cards is at a higher clip than credit unions: 12 percent for national banks versus 9 percent for credit unions (balance growth). National banks are credit unions’ primary card competitor in the market. This identifies an opportunity to revisit the way credit unions approach their card portfolios, and to take steps to maintain and grow their card share versus national banks.

When asked to identify one thing credit unions should be focused on when it comes to managing their card portfolio, Mr. Dietrich replied, “retention.” Good retention activity requires a view toward retaining both spend and balance, aligned toward the needs of individual members. It’s very important that on the balance retention side, credit unions stay in touch with members who are showing the need or desire to consolidate debt, or who have significant revolving balance elsewhere at rates higher than the credit union can offer. Getting an offer for a balance transfer to them in a timely manner is important for balance capture and retention. And for retaining spend, the foundation for effective retention comes from identifying which members use credit cards primarily for spend rather than to revolve. For these members, ensure that proactive steps are taken to make your card product the most attractive one for that purpose. Several tactics are proven effective in achieving these goals, but it all starts with proper and timely identification of member needs.

Who knows what tomorrow’s loan-growth opportunities will be. Let’s each win as many of these opportunities as we can TODAY. Be assured that your toughest competitors are using the best data, analytics, and marketing strategies to beat YOU in the market. You can take that to the bank.

You’re strongly encouraged to assess your credit-card portfolio strategies. Make sure you are using the very best tools to make the most of today’s opportunities while they exist.

[1] http://www.experian.com/consumer-information/consumer-spending-data.html