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Carpe Diem: Living in a Post-Durbin World (Credit Union Conference Session Presentation Slides) | Vantiv
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Carpe Diem: Living in a Post-Durbin World (Credit Union Conference Session Presentation Slides) | Vantiv


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In the last year, the world has changed for credit unions. New legislation has been enacted and consumer activism has progressed. What does the next generation of business look like as a result? In …

In the last year, the world has changed for credit unions. New legislation has been enacted and consumer activism has progressed. What does the next generation of business look like as a result? In this presentation, you will learn the answer to that question, as well as how to use your credit union's brand assets to create growth, and opportunities that exist in the payment market space. For more info:

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  • 1. Carpe DiemLiving in a Post-Durbin World Royal Cole Financial Institution Services President
  • 2. Flow of Today’s Discussion• Overview of Credit Unions in Current Financial Environment• Steps to Success• Opportunities for Growth Post-Durbin• Emerging Marketplace• Implications for Credit Unions• Conclusions 2
  • 3. Overview
  • 4. Improving Signs Will AccelerateCredit Unions’ Growth Opportunities Consumer sentiment is up Unemployment is moving downward (although slowly) Consumers report higher satisfaction level with Credit Unions Once-in-a-lifetime growth opportunity for Credit Unions 4
  • 5. Overview Consumer Confidence Index Total Unemployed & Underemployed Rate (The Conference Board) 18%10090 16%80 14%7060 12%5040 10%30 8%2010 6% 0 Jun08 Jun09 Jun10 Jun11 Feb08 Feb09 Feb10 Feb11 Feb12 Apr08 Oct08 Apr09 Oct09 Apr10 Oct10 Apr11 Oct11 Dec07 Aug08 Dec08 Aug09 Dec09 Aug10 Dec10 Aug11 Dec11 Unemployment Underemployment Total Debt vs. % Revolving Debt 2,600 39% 38% 2,550 37% Total Debt (billions) % Revolving Debt 36% 2,500 35% 2,450 34% 33% 2,400 32% 31% 2,350 30% 2,300 29% Total Debt % Revolving Debt 5
  • 6. Overview 6
  • 7. Overview According to J.D. Power and Associates, 9.6% of customers switched their primary banking relationship during the past year. The main reasons… Fees and Poor Service 7
  • 8. OverviewGen Y Satisfaction with Service: 2011 vs. 2010 Gen Y: • In their 20’s and early 30’s • Familiar with new media and technology • Hyper-networked: rely on each other’s opinions • Credit Union satisfaction index at 83% 8
  • 9. OverviewOpportunity to Grow Mind - and Market - Share Traditional Credit Union high member satisfaction level represents a leverage point in this environment Large Banks experiencing negative press and organized consumer backlash post-Durbin Momentum from Bank Transfer Day 9
  • 10. Negative Press Can Take DifferentForms 10
  • 11. Unintended ConsequencesPost- Durbin“Even though we are not at $10B in Assets (YET), theDurbin Amendment has impacted us in several ways. Weare projecting an annual reduction of more than $500,000in interchange income (mainly from card organizationinterchange modifications and merchant routing). And wewere forced to add an unaffiliated secondary network.” Bob Marquette - Members 1st FCU, Mechanicsburg, PA 11
  • 12. Durbin Amendment Major Provisions Debit ▪ Fed to set debit interchange for issuers inter- with $10B+ in assets change rate ▪ Takes effect 12 months from enactment ▪ Prepaid cards are exempt from debit interchange Prepaid regulation unless economics ▪ Issuers can charge cardholders overdraft fees or a fee for the first in-network ATM withdrawal per month Durbin Amendment ▪ Debit card issuers must issue cards that allow Network authorization via more than one network operator exclusivity ▪ Network agreements cannot restrict merchant’s routing of debit authorizations ▪ Merchants can discount based on method of payment; Merchant prohibits discrimination by network or issuer steering ▪ Merchants may set a $10 minimum for credit card purchases; prohibits discrimination by network or issuerSOURCE: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; McKinsey analysis 1 2
  • 13. Impact of Durbin Amendment• The amendment is supposed to provide consumers with greater benefits and lower costs, but we have yet to see that happen• Most banks have eliminated or reduced debit card rewards programs. • Looking at new account fees to offset lost debit card revenues.• According to a recent Ipsos Public Affairs survey, just 7% of respondents believe most retailers are passing their savings on to consumers.• Total loss of revenue is estimated at $8B; for small ticket items the merchant is actually disadvantaged due to flat rate pricing. • In the 4th quarter of 2011 interchange revenue fell by 26% to $6.2B• The amendment also requires two unaffiliated payment networks for each debit card (for pin and signature).
  • 14. OverviewPlay to Win Member Satisfaction Appealing Credit to Young People Union Low Fees Strengths Mobile Apps 14
  • 15. Overview• The landscape is shifting, particularly with younger consumers Core Consumers Emerging Consumers• Credit unions have built a solid platform of strategic assets for growth Phenomenal brand equity Real performance, not just empty words• What got you here won’t get you there 15
  • 16. Steps to Success
  • 17. Steps to Success Drive Market Share Growth Know the Competitive Environment Incent the Right Behaviors Segment Your Customers; Turning Data Into Action Understand Your Portfolio 17
  • 18. Understand Your Portfolio Develop Card Groups • Any available demographic or performance information: Last activity High/Low users Transaction type Account type - Card or Checking Branch locations VIP And many more…. • TAKE ACTION! 18
  • 19. TAKE ACTION! 19
  • 20. Segment Your Customers Benchmark Performance • Control Group • Prior to Campaign • During Campaign • Post Campaign 20
  • 21. Turning Data into Action “There has been a shift in the nature of added value - it’s now leaning toward analytics and data visualization, and the ability to turn data into action.” —From Enterprise Data Management Trade Association 21
  • 22. Turning Data into ActionAnalyze Your Portfolio (Credit, Debit and Prepaid): Have a 360º lens into your portfolio Incent desired behaviors Identify member behaviors you want to modify Incorporate external AND internal data 22
  • 23. Incenting the Right BehaviorsUnderstand Which Members / RelationshipsHave the Highest Potential: Deep Dive Into Portfolio Incent the Identify Potentially Right Profitable Behaviors Members Test and Learn 23
  • 24. Gaining Market ShareOpportunity Consumer Worst Fears: Unauthorized Charges (86%), Unexpected Fees (84%), Being Charged by Store for Payment Method (80%), Being Declined (77%) From the Vantiv/Mercator Insight Series Research, February 2012 24
  • 25. Opportunities for Growth Post-Durbin Gen Y Big Bank Fees Products and innovation 25
  • 26. Opportunities for Growth Post-Durbin• Market players are jockeying to take advantage of the new market environment Too soon to pick winners and losers• Brand assets position Credit Unions perfectly to be winners 26
  • 27. Opportunities for Growth Attract New Members • Branch Traditional • Web • Direct Marketing Channels • Call Center • Mobile Emerging • Text • Social Media Channels • Email 27
  • 28. Opportunities for Growth Attract New Members Traditional • Credit • Auto Loans Channels • Small Business Services • Prepaid Emerging • Debit Rewards • Personal Financial Mgmt Channels • Mobile Banking 28
  • 29. Opportunities for Growth “The goal is to get members in when they’re young and make sure they’re satisfied with the two most basic products—checking and savings accounts. Then, through continued education, we can be there when they’re ready for, say, a mortgage.” —Jenn Cloud, Vantage Credit Union’s Young & Free Spokesperson 29
  • 30. Opportunities for Growth –Consumers and Small Business Develop Acquisition Strategies Be local: Learn about Strengthen Leverage their Develop relationship; institutional concerns and leading edge communicate strength at become a product trust and the trusted offerings reliability grassroots advisor level 30
  • 31. Emerging Trends
  • 32. Emerging PlayersCompetition • Prepaid Cards Today’s • Web Banking Channels • Green Dot • On-line Banks • PayPal New • Facebook Entrants • Google • Apple 32
  • 33. Implications
  • 34. Implications Be Prepared for Change: • Look over the horizon Anticipate change Drive strategies to adapt and grow Use analytics to focus on the future • Evolve your member base Grow profitable members Identify and attract new profitable members • Seek new solutions for growth New opportunities require new approaches Evolve solution mix with new partners 34
  • 35. Implications Be Prepared for Change: Have you built mobile technologies and social media into your future growth strategies? How about… • Prepaid • Data Rewards • Personal Financial Management • Mobile Banking 35
  • 36. Conclusions
  • 37. ConclusionsCarpe Diem: Entice younger consumers to become members Invest in Mobile Remember the Steps to Success (Understand your Portfolio, Segment Your Customers, Know the Competitive Environment, and Gain Market Share) Don’t forget Small Businesses Don’t ignore the new product landscape and new entrants 37