Discover Horizon (Newsletter)- Spring 2012


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In this issue of Horizon, we have included insightful articles that address several topics of interest to our issuers. George Fiegle, chief operating office of ICUL Service Corporation, does an in-depth interview with us concerning the challenges of card growth in the credit union marketplace. Mark Arnold, CCUE and president of On the Mark Strategies, shares his thoughts on generational marketing and how credit unions can use generational characteristics to improve results. For more info:

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Discover Horizon (Newsletter)- Spring 2012

  1. 1. Issue 7 – Spring 2012 Brought to you by Discover ® ... your partner in payment servicesWelcome to Horizon SM An Interview With ICUL Service Corp. There are many positive Several years ago, it was fashionable for credit unions to sell credit card portfolios. signs that economic Do you see credit unions getting back into the credit card business? If so, why? recovery is on the horizon Only about 2% of credit unions that had credit card portfolios sold their portfolios. and although it continues Generally, those sales agreements called for a six-year noncompete. As those to be a challenging year noncompete restrictions expired, many of the credit unions that did sell re-entered the for our financial institution market. There are numerous reasons why. One is the realization that a well-managed and credit union partners, credit card program is likely their best yielding asset, especially in the wake of a real we are committed estate market slump. Also, some credit unions were not pleased with the way their to helping you grow members were serviced post sale. Others identified a “loss of the connection” with the membership through member that they wanted to regain.innovative credit card products and services. How are credit unions positioning their card programs to be competitive in theIn this issue of Horizon, we have included industry?insightful articles that address several topicsof interest to our issuers. George Fiegle, chief Some of the most successful credit union credit card programs are “no frills” programsoperating officer of ICUL Service Corporation, relying on low interest rates and low fees as a competitive advantage. One successfuldoes an in-depth interview with us concerning credit union eliminated late fees and used it as a marketing advantage. Others providethe challenges of card growth in the credit travel awards, discounts for products, and insurance programs. Successful credit unionsunion marketplace. Mark Arnold, CCUE and periodically review their credit lines to cardholders and are flexible with the member’spresident of On the Mark Strategies, shares needs. Different concepts work within different credit unions as they have different typeshis thoughts on generational marketing of memberships. Exemplary service is a must.and how credit unions can use generational For those credit unions with credit card portfolios, the focus is on growingcharacteristics to improve results. Advantage organically. How are credit unions growing their card programs?Consulting takes a look at the development Utilizing the “3 P’s” — price, product, and promotion — has always been a winningof co-branding and its role in the growth of formula and remains one to this day. Consistent, attractive rates and credit linescredit cards. combined with low fees and no surprises are the backbones of most competitive creditThere’s a lot of buzz about our new union programs. There has been much discussion in the media regarding high fees onpartnership with INDYCAR, so be sure to banking products and services. Credit unions have a reputation for having lower fees.catch that article. It’s one more way we have Communicating competitive advantages to members is essential. Developing a salesbeen working with our issuing partners to culture among staff is critical. Components of such a culture would include effectivedrive cardmember loyalty through exclusive cross-selling and incentives for staff.program benefits. How have you seen adoption of social media by credit unions influence credit cardWe look forward to seeing you at the portfolio growth?upcoming Card Forum and Expo. Please stop There is no question that the faster communication capability of social media hasby our booth or join us at our reception on changed our society. Previously, the main media outlets — the postal system, radio,Thursday, May 10, from 7:00–9:00 p.m., at the (continued on page 2)ChampionsGate Room, lobby level.Sincerely, In This Issue Generational Marketing Improves Results................................................... 2Kevin O’Donnell Washington Viewpoint.. .......................................................................... 4Group Executive, Credit Issuance Did You Know? . . .................................................................................. 5 Co-Branding Opportunities Continue to Create Profitable Partnerships.. ............ 6 Monitoring of Accounts Can Detect Illicit Activity ......................................... 6
  2. 2. An Interview With ICUL Service Corp. (continued from page 1)print, and the telephone system — were provides credit card programs to 642 been very helpful in further expandingslower and more expensive to utilize. credit unions. Leveraging that collective the brand. Discover also offers a uniqueNow most of society is connected almost volume allows us to provide them a full- approach that credit union members findinstantaneously by smart phones/Internet. service program at far less cost than it easy and comfortable when it comesOne person’s comment can effectively would cost them on their own. That allows to managing their credit with tools forchange and start a movement within our even the smallest credit union to provide budgeting and additional discounts thatsocial media’s platform, so information a program that is very competitive with can be added to a card program.disseminates directly as soon as they even the largest providers. By providing Can you provide examples of howhear that small “ping” from their phone. at least nine program options (from credit unions have benefited fromGood information can pass from person complete full service including collections offering Discover credit cards?to person simultaneously and no longer to sponsorship/authorizations only) inbe restricted to a small geographic area. addition to multiple processing platforms, Potelco Credit Union incented their staffNegative comments/opinions can also we can meet the needs and provide value to cross sell their unique style of Discoverspread like wildfire. A good example of this for the very largest and the very smallest credit card to their membership. Discoverphenomenon, of course, resulted in “Bank of credit unions. A team of portfolio worked with ICUL to run a contest to incentTransfer Day” in which credit unions gained development analysts is provided at no the employees with a trip to the Discoversignificant market share. Credit unions charge to consult with and assist credit Orange Bowl. Significant numbers of newhave a unique benefit to leverage their unions in managing and growing their accounts were opened and balances werestructure to take advantage of information programs. transferred from other card brands and thecoming from social media platforms and credit union received very nice accolades How has Discover supported ICUL in the media and from its membership.utilize those platforms to disseminate Service Corp.’s clients to grow andinformation. expand their card portfolios?Switching gears, how does ICUL Discover offers credit unions a uniqueService Corporation help its credit card program that can differentiate thatunion clients and prospects to create credit union from the rest of the market.a successful card program? Discover’s marketing assistance hasICUL Service Corporation has strived George Fiegle is the chief operating officer of ICUL Service Corp., who’s purpose is to helpto be flexible in its product offerings credit unions compete and to provide credit unions with a favorable operating environmentand to leverage economies of scale. It and quality information, along with products and services that have value and enable credit unions to exist, compete and prosper in the financial marketplace.American Bandstand to Satellite Radio: Generational MarketingImproves Results By Mark Arnold, CCUE, On the Mark StrategiesAs the financial services marketplace reach them that complement these unique dates associated with societal changecontinues to tighten and credit unions experiences. There are four generations rather than parental birth patterns.look to find new and innovative ways to currently in play for credit union marketers Strauss and Howe break the generationsreach members and potential members, and each has its own unique set of needs, into the following groups:it’s important not to overlook a key option: wants and expectations. Generationalgenerational marketing. When used marketing is useful because it allows credit • Matures—born between 1925 and 1942properly, generational marketing offers a unions to personalize and focus marketing (between the ages 69 and 86). Maturespowerful way to reach the diverse people messages and to make better overall are also known as the Silent unions need to grow and prosper. marketing and communication decisions. There are currently 27 million Matures (9% of the population).What Is Generational Generational Overview • Baby Boomers—born between 1943Marketing? Various dates are used with each and 1960 (between the ages 51 andGenerational marketing is an approach generation. One source might indicate 68). Baby Boomers are also known asto membership retention and loyalty Boomers were born in 1960 while others the original “yuppies” (young upwardlythat focuses on age and generation. say it was 1964. For the purpose of this mobile professionals). There are currentlyGenerational marketing recognizes that article, we will use the dates from William 64 million Boomers (21.5% of thepeople are the products of the time in Strauss and Neil Howe, the leading population).which they grew up and seeks ways to demographers of our country and use (continued on page 3) 2
  3. 3. Generational Marketing Improves Results (continued from page 2) Matures • Also too busy to read lengthy marketing • Voracious readers of printed materials— materials—a quick grab for attention is your credit union newsletters are key. crucial, therefore use bullet points and make information “scannable.” • Due to possible limited mobility, technology can play a key role— One of the keys is to make your credit be careful not to label them as union indispensable to the Boomers. To “technophobes” and don’t assume they cement the relationships with the Boomers, won’t use your home banking platform. position your credit union as the “one-stop financial center.” Use a phrase like, “If you • Will always prefer face-to-face have money, we want it; if you want money, encounters—it is imperative your front- we have it.” line staff treat them with respect, saying “Yes, ma’am” and “Yes, sir.” Generation X • Prefer expert and peer testimonials and • Cynical and very marketing savvy— straightforward marketing messages— don’t blow smoke with your marketing; quote other matures in your marketing communicate what is real and authentic pieces because they listen to their friends. about your credit union.• Generation X—born between 1961 Dupaco Credit Union created a Prime Time • Grew up under the shadow of emerging and 1981 (between the ages 30 and Club for their older members. Features of technologies (computers, Internet, mobile 50). Generation X is also known as Baby this club include access to free seminars and devices)—if you don’t use technology, Busters, Slackers and Latchkey Kids. discounts for social events, entertainment, your credit union will not reach There are currently 89 million Xers (30% merchant purchases and travel. Through Generation X. of the population). the Prime Time Club, Dupaco Credit Union • Live in the now and rely heavily on• Generation Y—Born between 1982 actually coordinates trips for their club web-based communications and and 2003 (between the ages 8 and 29). members. relationships—social media is a must; Generation Y is sometimes referred to as make sure your credit union is active with Baby Boomers the Dot Com Generation, Echo Boomers Facebook, Twitter and LinkedIn. • Teetering on the brink of retirement—lead or Millenials. Depending on where you Sporting an average credit union member your product offerings to Boomers with place the demarcation line, there are age of 37 (ten years below the national investment services. 78 million in the Gen. Y group (26% of average), Linn Area Credit Union is the population). • A busy generation (kids, grandkids, obviously doing something right when it parents, jobs, personal lives, etc.)—Applying Generational comes to generational marketing. Alice convenience services are key, so show Hagerman, vice president of marketingMarketing how your products (bill payment, instant at Linn Area Credit Union, says, “ProvideHaving a better working knowledge of the loan approval, etc.) save them time; them what they want…free services, lowdifferences among generations allows credit many Boomers prefer more time to fees, the latest in technology and, mostunions to design products and services more money. importantly, treat them like they haveto meet the unique needs of each group. a brain.”By knowing and respecting generationaldifferences, and crafting a marketing plan Generation Ythat reflects this knowledge, credit unions • Fanatically loyal to brands and brandcan begin to address the different groups image—think Apple; how can you makewith a much more targeted approach. your credit union more like Apple?As a generation ages and matures, the best • Believe in corporate accountabilitymethods of communicating with it changes, and organizations that profess civicas well. What message, communicated responsibility—leverage your creditin which ways, best expresses your credit union’s volunteer roots and communityunion’s desire to resonate with a particular involvement.generation? Here are generational • Live life at light speed and expectconsiderations and practical applications for products and services to match thiseach target group. pace—how fast does it take to get a loan (continued on page 4) 3
  4. 4. Washington ViewpointBy Ray Messina, Asst. General Counsel and Vice President for Government Relations, DiscoverIs Congress At Work? on Investigations is particularly adept at shining the light on both governmentMembers of Congress lead busy lives, and private sector activities (e.g., creditbut an important activity that is often card interest rates, the crude oil marketoverlooked is the time they devote to the speculation, and the collapse of ENRON).congressional oversight process. Formal hearings are the best knownOversight refers to congressional review of oversight tool, perhaps because theythe actions, or lack thereof, of government sometimes provide a forum for attention-agencies and the Executive Branch. It is seeking legislators to generate pressone of the checks and balances that the coverage by browbeating agencyConstitution places on the power of the recess appointment of CFPB Director representatives or CEOs of publicexecutive, and allows Congress to influence Richard Cordray. They have made frequent companies. The appearance of SEC officialsdecisions made by the White House by requests for information about Bureau and investment bank executives beforeexposing them to public scrutiny and activities, funding and policies. In turn, the the House Financial Services Committeequestioning. Oversight can be particularly CFPB has committed to providing more following the financial meltdown of 2008 iseffective where there is divided government, detailed budget information and to using a memorable exists today with Republicans holding a its authority to prevent “abusive” activitymajority in the House of Representatives and Congressional committees have judiciously.Democrats controlling the White House and oversight staffs devoted to conducting investigations, preparing for hearings and Oversight sometimes takes the formthe U.S. Senate. writing reports. They also have the power of legislation, directing agencies toEach House and Senate committee study specific issues and report back to to compel the production of documentsis empowered to examine how laws Congress. The Dodd-Frank financial reform and to subpoena witnesses, althoughthat fall within its jurisdiction are being law contained dozens of study mandates. voluntary cooperation usually makes theimplemented. In addition, the House Individual members of Congress have use of these tools unnecessary.Oversight and Government Reform the ability to conduct a form of oversightCommittee has broader jurisdiction, Recently, House Republicans have used on their own, by requesting informationessentially over the operations of the the oversight process to examine the from government agencies or asking theentire federal government. It has set operations of the new Consumer Financial Government Accountability Office to studyup subcommittees to oversee specific Protection Bureau (CFPB) and influence its and report on an issue.programs (e.g., the Subcommittee on policy decisions. They have set the stage for future legislation by calling Bureau During the 2012 election campaign season,TARP; Financial Services and Bailouts of officials to testify at a series of hearings as much is said about “legislative gridlock”Public and Private Programs). The Senate’s before three committees, including the and a “do nothing Congress,” the oversightHomeland Security and Governmental Judiciary Committee which examined the process means that more is going on inAffairs Committee performs a similar constitutionality of President Obama’s Washington than meets the eye. nfunction. Its Permanent SubcommitteeGenerational Marketing Improves Results (continued from page 3) at your credit union? Time your loan Conclusion differences in mind and customize approval with your competitors. The one Generational marketing is a powerful messages that best address them. n that has the fastest time is the one that tool to help your credit union strengthen Mark Arnold, CCUE, is an acclaimed speaker, brand expert will get the Gen. Y loan. its offering in the local financial services and strategic planner. He is also president of On the Mark Strategies, a consulting firm specializing in branding andA terrific example of a credit union focusing marketplace. It can also help you promote strategic planning. Some of the services Mark provides include strategic planning, brand planning, leadership/its generational marketing efforts on Gen. and cross sell the right products and management training, marketing planning and staff training.Y is Tinker Federal Credit Union’s “Buck services. This can, in turn, lead to increased His web address is and his blog is You can also contact him atthe Norm” campaign. Using a designated membership growth, improved member 214-538-4147 or, social media channels and other retention, new loans and additional, Tinker FCU puts special effort Credit union marketing professionals wouldinto attracting, retaining and educating do well to keep these key generationalyoung members. 4
  5. 5. Did You Know?Discover Credit Issuing Programs Add Airport Lounge Access INDYCAR, Discover® and Firstfor Premium Plus Cardholders Bankcard Join Forces toThe Premium Plus credit product has Reward Fansmany elite features that appeal to INDYCAR recently announcedthe highly affluent target market for that it has entered into a five-yearwhich it has been designed. One of agreement with First Bankcard, athe features available to your Premium division of the First National Bank ofPlus cardholders is Airport Lounge Omaha, and Discover® Network, toAccess. Eligible cardholders gain annual offer a credit card program designedmembership to the Lounge Club, a ™ to provide rewards to fans of theconvenience provided to allay the rigors sport. INDYCAR Discover creditof long distance travel and tiresome, card cardmembers can redeemuncomfortable waits in airport terminals. accumulated reward points forIndividual lounge memberships can be exclusive experiences, includingcostly so this access is seen by many Lounge Club membership now provides VIP access to Victory Lane at thecardholders as a real value-added access at 25 U.S. locations and 345 Indianapolis 500 and breakfast withservice. In a recent online credit card international lounges. No reservations legends of the sport. Other rewardsreview, 24 percent of survey respondents are necessary. Upon enrollment, include race tickets, driver meet andsaid having airport lounge access made members are sent a welcome letter greets, suite passes and INDYCARair travel less stressful. accompanied by a membership card and merchandise. a lounge directory. An online directory,From New York to Vienna to Budapest, which can also be accessed via mobile “With this agreement, DiscoverBombay or Cancun, Lounge Club is apps, ensures that cardholders can is able to help the premier open-a welcome resting spot. Amenities always get up-to-date location and wheel auto racing series in Northvary from club to club but generally lounge information. America reach their fan base in a new,include such features as complimentary rewarding way,” said Kevin O’Donnell,newspapers and magazines, drinks and To learn more about Airport Lounge vice president of credit issuance atsnacks, Wi-Fi access and entertainment Access for your Premium Plus Discover. “The INDYCAR Discoveror meeting facilities. Some come with cardholders, please contact your Discover Relationship Manager. n credit card is designed to help driveshowers, beds and even spa services. cardmember loyalty by offering tailored card benefits and exclusiveDiscover® U.S. Spending MonitorSM Says Consumer Confidence in Economic access to events that cardmembersConditions Diverges Between Credit Union Members and Other Consumers care about most.”Credit union members’ attitudes about Credit union members viewing economicthe economy improved significantly conditions as improving in Januaryover the past quarter, according to jumped significantly from nearly 13quarterly data released today from percent in October 2011 to 34 percentthe credit union demographic of the in January 2012. Those members whoDiscover U.S. Spending Monitor. Credit believe the economy is worsening alsounion members rating the economy declined. With an improving outlook onas “good” or “excellent” increased the economy and their personal finances,to 10 percent in January 2012 from credit union members are likely to keep “The partnership between INDYCAR5 percent in October 2011. Those their discretionary spending intentions and First Bankcard will enhance themembers rating the economy as “poor” the same or increase them in the month fan experience, allowing them todecreased 16 percentage points to 53 ahead compared to what was reported immerse themselves in the sport,”percent from a record-high 69 percent the same time last year. Non-credit said Stephen F. Eulie, president ofreported in October. During the same union members are also planning to First Bankcard. “We are excited toperiod, non-credit union members rating increase spending, although not at the offer this exclusive rewards card—thethe economy as “poor” decreased 9 same percentage as their credit union INDYCAR Discover credit card—whichpercentage points to 60 percent in counterparts. n will debut this season.” nJanuary 2012. 5
  6. 6. Co-Branding Opportunities Continue to Create Profitable PartnershipsBy Jim Sebo, Managing Director, Advantage Consulting Group, Inc.The market for co-branded cards has seen for consumers. With roughly 50% of the core alliance premise endures: developingits ups and downs the past few years, rapidly growing U.S. purchase volume base partnerships that create a WIN for theand recently the market has experienced at stake, growth strategies are being put card issuer, a WIN for the paymenta significant increase in the level of in place by all of the payment networks to network, a WIN for the merchant, and acompetition by the payment networks gain a bigger slice of a highly attractive WIN for consumers. While a number ofand issuers, spanning a broad range of and growing U.S. cardholder co-brand the institutions participating in the marketco-brand opportunities, both new and spending pie. have come and gone...while customerestablished. Although 2008 through 2010 Many co-brand issuers are focusing engagement channels and technologiesproved to be a period of challenge for primarily on those sectors that have have become more sophisticated overmany co-brand issuers, most emerged traditionally generated the strongest time...while government regulatory rulesboth stronger and smarter, albeit a portfolio growth and returns, such as and oversight have intensified...the basiclittle leaner. airlines, lodging and other travel-related and simple premise of credit card co-Today credit card issuer interest in opportunities. Emerging co-brand branding is still alive and well. Advantageco-branding has never been more acute, issuers are building and leveraging believes that today’s market will createalthough the players have adjusted their their capabilities to design co-branding exciting co-branding opportunities forstrategies and appetites to reflect their strategies that acknowledge the changing those with the skill, flexibility and couragechanging balance sheet positions and retail appetites of their more established to play in the years to come.banking strategies. Advantage Consulting competitors. Many of these companies Some things actually get better with age,Group expects payment network activity are building their co-brand portfolios by and we believe credit card co-branding isin support of a wide range of co-brands securing relationships with established co- one of them! nto also be lively, robust and as intense branders who no longer meet the allianceas it is with the credit card issuers in the criteria of their former credit card few years. Our experience has been So, roughly thirty years after thethat merchants are increasingly open introduction of credit card co-brandingto exploring new network strategies, to the marketplace, the strength of thewhether they entail a complete changein the program network currently used As one of the most recognized and respected consulting firms in the payments industry,for a program, or the addition of new Advantage Consulting Group has been providing innovative solutions for card issuers, networks and retail organizations for nearly two partners to provide more choicesMonitoring of Accounts Can Detect Illicit ActivitySuspicious activity takes many forms. anti-terrorism laws and regulations, Discover Network’s Global ComplianceAnything that appears to be out of the which includes monitoring for suspicious department at dfsactivity@discover.comordinary and cannot be easily explained activity, Discover Network is working with for additional assistance. By workingcould mean that money laundering, our issuing partners to create awareness together, we can help protect ourterrorist financing or other illicit activity of these potential activities. customers, partners, products, andis taking place. As a wholly-owned If you detect or witness suspicious services from exposure.subsidiary of Discover Financial Services, activity on or involving Discover Network Please note, Discover Network is awarea bank holding company regulated by cards, products, and/or transactions or if that investigations of such activity arethe Federal Reserve, DFS Services, LLC you become aware of such activity and sensitive; thus, any referral or inquiry(“DFS Services”) is firmly committed have questions or would like to discuss you make will be treated as strictlyto preventing money laundering and the matter further, you can reach confidential. nterrorist financing on Discover Network.In order to comply with all applicable If you have article topics that you would like to see included in Horizon,SM pleaseanti-money laundering (“AML”) and contact Michael Brancato, Credit Issuance, at The views of ICUL Service Corp., Advantage Consulting Group, Inc., and On the Mark Strategies as expressed in this newsletter do not necessarily reflect the views of Discover. We appreciate the contributions of these authors. ©2012 DFS Services LLC 6