This article is the second in a two-part series that focuses on the importance of member data and how credit unions can capitalize on it to improve account opening procedures and overall institution performance.
It is no secret that the value of a member increases over the lifetime of the relationship with your credit union — the longer the relationship with a consumer, the better chance that consumer will become profitable. But member profitability is heavily dependent on retention — at which credit unions excel — and the ability of the credit union to maximize the time it takes to recover acquisition costs (approximately two years, according to industry reports).
One effective way to boost member profitability is to increase the transactions on existing share draft accounts. The most obvious place to start is with the preferred transactional device for everyday purchases: the debit card.
Increasing debit card activity helps strengthen the connection between your member and your credit union and can boost growth within that critical first two years. To start, credit unions must analyze key member data points and use them as guidance in establishing procedures, especially at account opening, that will lead to increased debit card transactions.
In the first article in this series, we focused on Data Point #1: Debit Card Take Rate. Another highly valuable piece of data your credit union should monitor is your Regulation E Opt-in Percentage.
Data Point #2: Reg. E Opt-In Percentage
The importance of obtaining a Reg. E decision at account opening cannot be overstated. Without this decision, your institution cannot serve members who desire for you to authorize transactions that may result in an overdraft fee on ATM and one-time debit card transactions. Without this decision, some of your members are undoubtedly experiencing declined debit card transactions for which they probably blame your credit union, especially if they have not made a Reg. E decision or are unaware it is even an option.
If your data shows high opt-out rates or low opt-in rates, then there likely are many of your members who are unable to use their debit cards the way they prefer.
The only way to know if you have members who cannot access their debit cards the way they prefer is to continually evaluate Reg. E decision percentages on a branch-by-branch basis. Talk to high-performing branch managers to learn their Reg. E procedures and replicate those actions across other branches, with the goal of having a compliant conversation designed to serve the member best. Likewise, if opt-in rates seem high, monitor account opening discussions to ensure employees are not using coercion tactics or being incented in any way to steer an opt-in decision.
The Value of the Decision
Provide periodic Reg. E training, including educating frontline staff about the value of obtaining a Reg. E decision. The members who use and value the overdraft service not only are happy that their transactions are authorized, but they provide income that allows your credit union to offer a new member an account that is free or close to free.
In addition to the economic benefits of a Reg. E decision, you must educate your credit union employees about how declined debit card transactions affect a member’s perception of the institution. When a member’s debit card is repeatedly declined, especially at the point of sale, the chances are very good that the member will abandon using the debit card, choosing a more reliable way to transact. In fact, a declining rate of debit card transactions is one early indicator that an account is on its way to becoming inactive.
Isolating the accounts with declining debit card swipes — along with accounts that have experienced a debit card decline without an accompanying Reg. E decision — and reaching out to them in a personalized, relevant way can save the account and potentially lead to increased account profitability.
Partner with an Expert
Harnessing and applying your member data is essential to providing meaningful interactions and services, which can lead to greater retention and overall account profitability. According to McKinsey & Company, using data analytics to personalize relationships can increase a company’s operating profits by about six percent.
If your credit union is unable to extract actionable account data, consider partnering with a third-party provider that specializes in aggregating and analyzing financial institution data, developing revenue- and service-enhancing strategies that capitalize on the findings, and providing training to ensure the strategies are implemented enterprise-wide.