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ICUL Credit, Debit and Prepaid Services
 

ICUL Credit, Debit and Prepaid Services

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ICUL's presentation by Jamie Conrad during the Volunteer Track of the 9th Annual Police Officers' Credit Union Conference.

ICUL's presentation by Jamie Conrad during the Volunteer Track of the 9th Annual Police Officers' Credit Union Conference.

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    ICUL Credit, Debit and Prepaid Services ICUL Credit, Debit and Prepaid Services Presentation Transcript

    • Helping Credit Unions Competefor credit debit and pre-paid services
    • Who is the ICUL Service Corp?• We are owned by the Illinois Credit Union League, a Credit Union Non Profit Organization• Our mission is to “Help Credit Unions Compete”• We are a ONE STOP SHOP for all credit union needs with multiple processing options and comprehensive network relationships:  VISA, MasterCard, Discover,  CO-OP, Allpoint, Money Pass, PULSE, STAR  FiServ, First Data, FIS
    • ICUL Service Corporation Background• Services Offered:  We provide services to credit unions in all 50 states.  ATM Network (12th largest ATM Network)  Credit cards (1,000+ programs)  Debit cards (3,600+ CU’s)  Prepaid Debit Gift Cards Family Card Travel Money Everyday Spend Payroll  Multiple processing options • Credit Cards – First Data and Fidelity Pass Thru and Full Service option • Debit Cards – First Data, Fiserv, Fidelity Intercept and Fidelity Pass Thru Platforms  User friendly web based work stations for all of our credit unions.  Collection Services
    • Implementation Team• Dedicated group of 12 + staff• Credit union works one on one with our implementation department throughout the process• Implementation coordinators  Program upgrades  Conversions  Program consolidations
    • Customer Service Support• Call center is served by “teams” of customer service representatives so that each team gets familiar with your credit union.• Call center performance is monitored and measured• Credit union survey is conducted to ensure standards are met
    • EMV Cards (chip cards)
    • Visa and Mastercard EMVrule changes• Visa  April 1, 2013 – Acquirer processors and subprocessors must certify support for and accept Visa EMV chip contact and contactless transactions  October 1, 2015 – Liability shift for counterfeit POS fraud will be assessed to the party that prevented the chip to chip transactions • Issuer : If the card was not EMV – chip enabled • Merchant Acquirer : If the POS terminal is not chip enabled  October, 1, 2017 – Same as above for Automated Fuel Dispenser• Mastercard  January 2012: Established a “liability hierarchy” to rate card acceptance methods based on the interplay between card and acceptance devices • Mag-stripe is least secure • Chip and signature • Chip and PIN is most secure  By 2013: 50% PCI compliance testing and fee reflief for merchants running 75% of card transactions through an EMV terminal with both contact and contactless capability  By 2015: 100% relief for merchants running 95% of transactions through an EMV terminal.
    • Liability shift implication• In U.S. Today  In most card present environments, fraud is absorbed by the issuer unless the merchant fails to meet POS acceptance requirements of fails to defend the “chargeback process”• Visa 2015 :  Liability will fall on the entity that has not upgraded to chip, whether it’s the issuer or the retailer • If both have chip, then the issuer will be responsible • If the issuer has upgraded and the retailer has not, then the retailer will bear the liability cost• Mastercard 2015 :  Liability shifts to merchants who have not upgraded their POS terminals to process emv card transactions and fraud occurs • Whichever party (issuer or merchant) offers the least secure method would be held liable for a fraudulent transaction.• Liability shift does NOT include lost/stolen card fraud, card not present transactions(ecommerce) and contactless cards without a contact chip
    • EMV Adoption Rates Issuers Terminals EMV Cards Adoption Rate EMV Terminals Adoption Rate Canada, Latin America and Carribbean 318,779,062 41.1% 4,443,000 76.7% Asia Pacific 366,229,237 28.2% 4,551,000 51.4% Africa and the Middle East 31,573,578 20.6% 462,000 75.9% Europe Zone 1 759,760,119 84.4% 11,920,000 94.4% Europe Zone 2 37,104,467 14.5% 610,500 68.1% United States not reported not reported not reported not reported Totals 1,513,446,463 44.7% 21,986,500 76.4%Figures reported in Q4 2011 and represent latest statistics from American Express,JCB, Mastercard and Visa, as reported by their member FI’s gloabally
    • Durbin Amendment
    • 2011 Durbin Key Provisions• Interchange CAP  Exempt – FI’s under $10 Billion  Non Exempt – FI’s over $10 Billion• Routing and Exclusivity  2 Unaffiliated Networks required  Eliminates Issuer Priority Routing• ATM Cards must comply with PIN/POS Rules 11
    • “Unaffiliated Networks” National Network Signature PIN POS ATM Brand VISA VISA Interlink PLUS Mastercard Mastercard Maestro CIRRUS Discover Discover PULSE PULSE Star Star Star Accel/Exchange Accel Exchange Others Others Others 12
    • ATM Network Response• Most ATM Networks have enticed financial institutions , where if credit unions only participate in one PIN POS network they earn additional income > PULSE – Pulse Pay Choice (PPC) > Star - STAR Preferred > Accel/Exchange – Member Advantage• CU does have to sign a new agreement with these networks to participate in increased interchange income.• Average PIN POS increase income is between 10-15% of current income• A lot of Credit Unions already only participate in one ATM network, however they haven’t taken advantage of the additional PIN POS interchange• For Credit Unions on multiple PIN POS networks – Is having multiple networks diluting your interchange income? 13
    • Leverage Single Branded• AVG Increase in PIN POS Interchange: $.03 - $.055• What does it really mean to our CU’s?  10,000 PIN POS Transactions Month = $6,000 a year in added Revenue  15,000 PIN POS Transactions Month = $9,000 a year in added Revenue  20,000 PIN POS Transactions Month =$12,000 a year in added Revenue
    • What has happened to SignatureIncome
    • ICUL-Service Corporation Stats• Prior to Durbin Amendment – 1.40% Average – July thru September 2011 average• October – December 2011 Average – 1.31% - Visa made modifications to some of their rates October 1st, as well as some of their merchant tiers.• April 2012 – Visa once again modified interchange rates – Average is 1.26% for our credit unions in April• 14 Basis point drop since September on average  $100,000 spent is $140 less in monthly interchange
    • Credit Union Concerns• Loss of program revenue  Since October Most credit unions have lost between 10-20 basis points.  Merchant Steering of Transactions – VISA PIN Authenticated Visa Debit (PAVD)  Market suppression of future interchange? Will PIN POS and Signature Interchange reach Parity? • PIN Average : $.31 - $.04 (network switch fee) = $.27 • Add $.03 to $.055 with exclusive deal - $.30- $.325 • Signature Average: $35 x 1.26% = $.441 - $.06 (Visa base 1 and 2 fees and quarterly assessments) = $.381 17
    • Federal Reserve Interchange Report
    • Federal Reserve Avg PINInterchange – Oct thru Dec 2011 October - December 2011 January - September 2011 Exempt Non Exempt Exempt Non ExemptPIN AVERAGES $0.31 0.72% $0.23 0.55% $0.32 0.75% $0.34 0.84%ACCEL/Exchange $0.31 0.72% $0.21 0.41% $0.30 0.70% $0.29 0.61%AFFN $0.24 0.75% $0.20 0.31% $0.25 0.66% $0.22 0.57%Alaska Option $0.15 0.28% $0.15 0.27% $0.15 0.23% $0.15 0.28%ATH11 $0.30 0.80% $0.17 0.47% $0.29 0.80% $0.29 0.80%Credit Union 24 $0.21 0.46% $0.18 0.29% $0.21 0.47% $0.25 0.45%Interlink $0.31 0.78% $0.23 0.57% $0.34 0.84% $0.35 0.87%Jeanie $0.25 0.50% $0.18 0.38% $0.26 0.60% $0.30 0.72%Maestro $0.27 0.64% $0.24 0.54% $0.31 0.78% $0.34 0.78%NetWorks $0.33 0.97% $0.24 0.71% $0.31 0.94% $0.31 0.94%NYCE $0.34 0.77% $0.23 0.49% $0.34 0.79% $0.37 0.81%PULSE $0.33 0.81% $0.24 0.56% $0.32 0.79% $0.35 0.81%SHAZAM $0.29 0.72% $0.19 0.43% $0.26 0.67% $0.24 0.60%STAR $0.32 0.72% $0.24 0.53% $0.33 0.76% $0.32 0.74%
    • Signature Interchange – Fed Report 2009 averages October 2011 - December 2011 January 2011- September 2011 exempt non-exempt exempt non-exempt All F.I.sSignature $35.58 $0.51 1.43% $38.03 $0.24 0.63% $36.33 $0.54 1.48% $38.07 $0.59 1.54% $37.15 $0.55 1.49%Discover $0.42 1.43% $0.17 0.56% $0.43 1.40% $0.25 0.89%MasterCard $0.54 1.48% $0.24 0.61% $0.55 1.50% $0.59 1.50%Visa $0.49 1.41% $0.24 0.63% $0.53 1.47% $0.58 1.55%
    • Debit Card Growth Strategies
    • Visa Peer Group Scorecard4th quarter 2011 Metric Visa System Issuers Issuers Issuers Issuers 1 - 20 21 - 50 51 - 100 101 - 250 Power Score: Transaction 7.94 10.76 8.67 8.57 8.46 Sales volume $278.20 $372.43 $306.47 $300.03 $293.06 PAU: Penetration 76.6% 79.8% 73.5% 75.2% 72.0% Activation 65.6% 74.5% 76.1% 74.0% 74.8% Usage 15.8 18.1 15.5 15.4 15.7 Portfolio Growth: Sales Volume 5.3% 7.9% 8.5% 13.0% 11.3% Transaction Volume 5.0% 7.4% 7.9% 13.0% 10.9% Average Ticket $35.04 $34.61 $35.35 $35.01 $34.66 Accounts and Cards: VCC Accounts 173,858,739 5,573,098 298,980 143,453 71,308 VCC Accounts Growth 2.2% 3.6% 4.9% 4.6% 8.5% VCC Card Growth (1.1%) 2.2% 3.2% 4.8% 7.0% Sales Volume by MCC: Retail 28.8% 28.3% 29.4% 30.5% 29.4% Restaurants 10.1% 10.4% 9.8% 9.5% 10.0% Supermarkets 8.4% 7.7% 9.8% 10.2% 9.6% Fuel 11.3% 10.0% 12.4% 13.6% 12.6% Bill Payment 15.4% 16.9% 13.5% 12.7% 13.2% Quick Service Restaurant 6.2% 6.3% 6.2% 5.8% 6.5% Mail/Telephone Order 9.5% 10.1% 8.7% 8.2% 8.5% Internet 17.7% 18.7% 16.3% 15.7% 16.3% Operation Metrics: Authorizaion Approval % 93.6% 93.4% 93.6% 94.2% 94.2% Declined % 4.4% 4.5% 4.4% 3.9% 3.8% Overall Chargeback % 0.03% 0.04% 0.02% 0.01% 0.01% Reported Fraud Losses rate (BP) 11.21 12.56 9.72 7.73 8.91
    • PenetrationDevelop a Card StrategyVisa Average is 76.6% of share draft/checking accounts• All new DDA accounts should receive a Visa check card  Best-in-class issuers are penetrating 90% of new DDAs  Ensure branch platform defaults to Visa check card  Position the card as a primary access device to checking account• Evaluate non-Visa check card customers  Upgrade ATM and/or DDA-only accounts  Use Performance Measurement Calculators to develop business case• Develop activation program for all accounts  Incorporate telemarketing within first 14 days to encourage early activation  Incent employees based on card activation
    • PenetrationEducate employees and cardholders• Provide training to branch employees  Turn employees into Visa check card ambassadors• Communicate product advantages to cardholders  Ease of use  Worldwide acceptance  Safety and security • Zero Liability policy • Provisional credit  Debt management and budgeting tool
    • Activation Strategies NEW AND EXISTING EMPLOYEES CARDHOLDERS INACTIVESReward for Use Merchant Offer Develop ongoingactivation, Program incentive offers activation programnot only for account based on activation Contact monthly oropening Contact new cardholders quarterly based early (within 15–45 daysFocus new customer of account opening) on volumeconversations on the Utilize standard and/or Use direct mail,benefits of activation/ low-cost channels initially telemarketing,usage to allow for natural branchFollow-up new activation follow-up calls,accounts with an Additional follow-up after emails, statementactivation call 45–60 days of inactivity channel7–10 days after issue
    • Activation-Specific MaterialsCard Carriers FACT: Card carriers are often the first touch point with the cardholder after initial account opening  Remind them of key reasons for using their card Some credit unions have blank card carriers. Introductory/ Reissue Use them as a marketing message. Upgrade
    • Activation-Specific MaterialsDirect Mail TIP: Direct mail for activation is recommended during the initial 45–60 day window after card issuance Activation Activation Letter with General Education Follow-up Letter Merchant Discounts • Inserts (two and four-panel) • Letters and packages • Track usage 30 days after Card is sent to your member Insert with and Without Merchant Discounts
    • Usage• Visa average active cardholder does 15.8 transactions per month at an average of $35.04.• Number 1 metric to concentrate on to drive interchange income• Core Data Processors  Can you core data processor support providing a member an additional 50 or 100 basis points on the checking account balance if a member does over a certain dollar amount of transactions in a month or a certain number of transactions?
    • Usage StrategiesTake Multi-Pronged Approach• Educate cardholders where and how to use  Medium and heavy users – new places to use  Light users – benefits (security, budgeting)• Incent card usage with value-add programs (e.g., rewards, merchant offers, sweepstakes)• Ensure optimal daily spending limits  Bill payments, other emerging merchant segments have higher average tickets
    • Usage StrategiesTake Multi-Pronged Approach• Encourage cardholders to pay bills with the Visa card  Build annuity-like usage and improve retention  Increase average ticket – $79 bill payment average• Advocate security-based product advantages to replace cash and checks
    • Credit Cards
    • Knowing Your Cardholder Habits Keeping track of your billed accounts with Finance charges assists in tracking Revolvers vs. Transactors As you can see their priorities do differ and may need to be marketed to differently.Survey performed by J.D Power and Associates.
    • Credit Card Penetration Year All in Under $20M- $50M- $100M- $250M- $500M- Over US $20M $50M $100M $250M $500M $1B $1B 3Q2011 14.74% 11.77% 10.15% 11.29% 11.77% 13.66% 14.4% 19.09% 3Q2010 14.32% 12.17% 10.37% 11.28% 11.6% 13.16% 14.35% 18.71%  Penetration continues to be an opportunity for all credit unions, regardless of their Total Asset size.  Average at 14.74% and Top 3rd up at 26.8%  Increase Penetration thru: • Rewards • Direct Mail Campaigns • Marketing Materials/Product Presence (Web, Lobby, etc.) • Balance Transfer Campaigns • Pre-approvals and cross-selling Source: Callahan and Associates 3Q3011 Credit Union Strategy and Performance
    • Average OutstandingsAverage outstandingsremained stagnant as wellas finance charges  Balance Transfers  TLR Pricing – Special APR’s based on MCC  Rewards Source: CSCU averages year end 2011
    • INCREASED ACTIVE ACCOUNTS% of Accounts Billedshowing growth. Themore Billed Accounts wehave the greater portfolioprofitability.% of Accounts with Finance Charges remainat the same level, 65-66%. Increasingrevolvers increasesOutstanding andimproves Loan to Share. Source: CSCU averages year end 2011
    • •CREDIT LINES VS. OUTSTANDINGIncreased % of CreditLine Used continues torestrict cardholders fromincreasing averagebalances.Annual Credit LineManagement:• VERIFY ACTIVE ACCOUNTS VS. CREDIT LINE USED• Look to increase revenues and reduce risk Source: CSCU averages year end 2011
    • USAGE & VOLUME CONTINUE TO GROWIncreased Usage drivesincreased Volume perAccount.Work your inactiveaccounts. Usage Promotions Rewards Source: CSCU averages year end 2011
    • REVENUE PER BILLED ACCOUNTIncreased Penetration,Activation, Usage andBalances DrivesREVENUE Growth Source: CSCU averages year end 2011
    • CREDIT CARD DELINQUENCY AND CHAREG-OFFS Reportable Annualized Charge- YEAR Delinquency Offs •3Q2011 •1.18% •2.5% •3Q2010 •1.64% •4.3%•There is a positive trend in Delinquency and Charge-Offs. Both ratios•continue to improve across all asset sizes. Source: Callahan and Associates 3Q3011 Credit Union Strategy and Performance
    • QuestionsJAMIE.CONRAD@ILCUSYS.ORG630-983-3485