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: www.nafcu.org/discover

1. Issue 7 – Spring 2012
Brought to you by Discover ® ... your partner in payment services
Welcome 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 the
In this issue of Horizon, we have included
industry?
insightful articles that address several topics
of interest to our issuers. George Fiegle, chief Some of the most successful credit union credit card programs are “no frills” programs
operating officer of ICUL Service Corporation, relying on low interest rates and low fees as a competitive advantage. One successful
does an in-depth interview with us concerning credit union eliminated late fees and used it as a marketing advantage. Others provide
the challenges of card growth in the credit travel awards, discounts for products, and insurance programs. Successful credit unions
union marketplace. Mark Arnold, CCUE and periodically review their credit lines to cardholders and are flexible with the member’s
president of On the Mark Strategies, shares needs. Different concepts work within different credit unions as they have different types
his 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 growing
characteristics 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 winning
of co-branding and its role in the growth of
formula and remains one to this day. Consistent, attractive rates and credit lines
credit cards.
combined with low fees and no surprises are the backbones of most competitive credit
There’s a lot of buzz about our new union programs. There has been much discussion in the media regarding high fees on
partnership 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 sales
been working with our issuing partners to culture among staff is critical. Components of such a culture would include effective
drive 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 card
We 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 has
by 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................................................... 2
Kevin O’Donnell Washington Viewpoint.. .......................................................................... 4
Group 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. 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 expanding
slower and more expensive to utilize. credit unions. Leveraging that collective the brand. Discover also offers a unique
Now most of society is connected almost volume allows us to provide them a full- approach that credit union members find
instantaneously by smart phones/Internet. service program at far less cost than it easy and comfortable when it comes
One person’s comment can effectively would cost them on their own. That allows to managing their credit with tools for
change and start a movement within our even the smallest credit union to provide budgeting and additional discounts that
social 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 how
hear that small “ping” from their phone. at least nine program options (from credit unions have benefited from
Good information can pass from person complete full service including collections offering Discover credit cards?
to person simultaneously and no longer to sponsorship/authorizations only) in
be restricted to a small geographic area. addition to multiple processing platforms, Potelco Credit Union incented their staff
Negative comments/opinions can also we can meet the needs and provide value to cross sell their unique style of Discover
spread like wildfire. A good example of this for the very largest and the very smallest credit card to their membership. Discover
phenomenon, of course, resulted in “Bank of credit unions. A team of portfolio worked with ICUL to run a contest to incent
Transfer Day” in which credit unions gained development analysts is provided at no the employees with a trip to the Discover
significant market share. Credit unions charge to consult with and assist credit Orange Bowl. Significant numbers of new
have a unique benefit to leverage their unions in managing and growing their accounts were opened and balances were
structure to take advantage of information programs. transferred from other card brands and the
coming 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 and
information. expand their card portfolios?
Switching gears, how does ICUL Discover offers credit unions a unique
Service Corporation help its credit card program that can differentiate that
union clients and prospects to create credit union from the rest of the market.
a successful card program? Discover’s marketing assistance has
ICUL Service Corporation has strived
George Fiegle is the chief operating officer of ICUL Service Corp., who’s purpose is to help
to be flexible in its product offerings credit unions compete and to provide credit unions with a favorable operating environment
and 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 Marketing
Improves Results By Mark Arnold, CCUE, On the Mark Strategies
As the financial services marketplace reach them that complement these unique dates associated with societal change
continues 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 generations
reach 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. Generational
generational marketing. When used marketing is useful because it allows credit • Matures—born between 1925 and 1942
properly, generational marketing offers a unions to personalize and focus marketing (between the ages 69 and 86). Matures
powerful way to reach the diverse people messages and to make better overall are also known as the Silent Generation.
credit 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 1943
Marketing? Various dates are used with each
and 1960 (between the ages 51 and
Generational marketing is an approach generation. One source might indicate
68). Baby Boomers are also known as
to membership retention and loyalty Boomers were born in 1960 while others
the original “yuppies” (young upwardly
that focuses on age and generation. say it was 1964. For the purpose of this
mobile professionals). There are currently
Generational marketing recognizes that article, we will use the dates from William
64 million Boomers (21.5% of the
people 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)
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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 marketing
Marketing how your products (bill payment, instant
at Linn Area Credit Union, says, “Provide
Having a better working knowledge of the loan approval, etc.) save them time;
them what they want…free services, low
differences among generations allows credit many Boomers prefer more time to
fees, the latest in technology and, most
unions to design products and services more money.
importantly, treat them like they have
to meet the unique needs of each group.
a brain.”
By knowing and respecting generational
differences, and crafting a marketing plan Generation Y
that reflects this knowledge, credit unions • Fanatically loyal to brands and brand
can begin to address the different groups image—think Apple; how can you make
with a much more targeted approach. your credit union more like Apple?
As a generation ages and matures, the best • Believe in corporate accountability
methods of communicating with it changes, and organizations that profess civic
as well. What message, communicated responsibility—leverage your credit
in which ways, best expresses your credit union’s volunteer roots and community
union’s desire to resonate with a particular involvement.
generation? Here are generational • Live life at light speed and expect
considerations and practical applications for products and services to match this
each target group. pace—how fast does it take to get a loan
(continued on page 4)
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4. Washington Viewpoint
By Ray Messina, Asst. General Counsel and Vice President for Government Relations, Discover
Is Congress At Work? on Investigations is particularly adept at
shining the light on both government
Members of Congress lead busy lives,
and private sector activities (e.g., credit
but an important activity that is often
card interest rates, the crude oil market
overlooked is the time they devote to the
speculation, and the collapse of ENRON).
congressional oversight process.
Formal hearings are the best known
Oversight refers to congressional review of
oversight tool, perhaps because they
the actions, or lack thereof, of government
sometimes provide a forum for attention-
agencies and the Executive Branch. It is
seeking legislators to generate press
one of the checks and balances that the
coverage by browbeating agency
Constitution places on the power of the recess appointment of CFPB Director
representatives or CEOs of public
executive, and allows Congress to influence Richard Cordray. They have made frequent
companies. The appearance of SEC officials
decisions made by the White House by requests for information about Bureau
and investment bank executives before
exposing them to public scrutiny and activities, funding and policies. In turn, the
the House Financial Services Committee
questioning. Oversight can be particularly CFPB has committed to providing more
following the financial meltdown of 2008 is
effective where there is divided government, detailed budget information and to using
a memorable example.
as exists today with Republicans holding a its authority to prevent “abusive” activity
majority 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 form
the U.S. Senate.
writing reports. They also have the power of legislation, directing agencies to
Each House and Senate committee study specific issues and report back to
to compel the production of documents
is empowered to examine how laws Congress. The Dodd-Frank financial reform
and to subpoena witnesses, although
that fall within its jurisdiction are being law contained dozens of study mandates.
voluntary cooperation usually makes the
implemented. 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 oversight
Committee has broader jurisdiction, Recently, House Republicans have used
on their own, by requesting information
essentially over the operations of the the oversight process to examine the
from government agencies or asking the
entire federal government. It has set operations of the new Consumer Financial
Government Accountability Office to study
up 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 oversight
Homeland Security and Governmental
Judiciary Committee which examined the process means that more is going on in
Affairs Committee performs a similar
constitutionality of President Obama’s Washington than meets the eye. n
function. Its Permanent Subcommittee
Generational 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 and
A 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 www.markarnold.com and his blog is
blog.markarnold.com. You can also contact him at
the Norm” campaign. Using a designated membership growth, improved member 214-538-4147 or mark@markarnold.com.
website, social media channels and other retention, new loans and additional assets.
marketing, Tinker FCU puts special effort Credit union marketing professionals would
into attracting, retaining and educating do well to keep these key generational
young members.
4

5. Did You Know?
Discover Credit Issuing Programs Add Airport Lounge Access INDYCAR, Discover® and First
for Premium Plus Cardholders Bankcard Join Forces to
The Premium Plus credit product has Reward Fans
many elite features that appeal to INDYCAR recently announced
the highly affluent target market for that it has entered into a five-year
which it has been designed. One of agreement with First Bankcard, a
the features available to your Premium division of the First National Bank of
Plus cardholders is Airport Lounge Omaha, and Discover® Network, to
Access. Eligible cardholders gain annual offer a credit card program designed
membership to the Lounge Club, a ™ to provide rewards to fans of the
convenience provided to allay the rigors sport. INDYCAR Discover credit
of long distance travel and tiresome, card cardmembers can redeem
uncomfortable waits in airport terminals. accumulated reward points for
Individual lounge memberships can be exclusive experiences, including
costly so this access is seen by many Lounge Club membership now provides
VIP access to Victory Lane at the
cardholders as a real value-added access at 25 U.S. locations and 345
Indianapolis 500 and breakfast with
service. In a recent online credit card international lounges. No reservations
legends of the sport. Other rewards
review, 24 percent of survey respondents are necessary. Upon enrollment,
include race tickets, driver meet and
said having airport lounge access made members are sent a welcome letter
greets, suite passes and INDYCAR
air 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, Discover
Bombay 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 North
vary 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 at
snacks, Wi-Fi access and entertainment Access for your Premium Plus
Discover. “The INDYCAR Discover
or meeting facilities. Some come with cardholders, please contact your
Discover Relationship Manager. n credit card is designed to help drive
showers, beds and even spa services.
cardmember loyalty by offering
tailored card benefits and exclusive
Discover® U.S. Spending MonitorSM Says Consumer Confidence in Economic access to events that cardmembers
Conditions Diverges Between Credit Union Members and Other Consumers care about most.”
Credit union members’ attitudes about Credit union members viewing economic
the economy improved significantly conditions as improving in January
over the past quarter, according to jumped significantly from nearly 13
quarterly data released today from percent in October 2011 to 34 percent
the credit union demographic of the in January 2012. Those members who
Discover U.S. Spending Monitor. Credit believe the economy is worsening also
union members rating the economy declined. With an improving outlook on
as “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 INDYCAR
5 percent in October 2011. Those their discretionary spending intentions and First Bankcard will enhance the
members rating the economy as “poor” the same or increase them in the month fan experience, allowing them to
decreased 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 of
reported in October. During the same union members are also planning to First Bankcard. “We are excited to
period, non-credit union members rating increase spending, although not at the offer this exclusive rewards card—the
the economy as “poor” decreased 9 same percentage as their credit union INDYCAR Discover credit card—which
percentage points to 60 percent in counterparts. n will debut this season.” n
January 2012.
5

6. Co-Branding Opportunities Continue to Create Profitable Partnerships
By 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: developing
its ups and downs the past few years, rapidly growing U.S. purchase volume base partnerships that create a WIN for the
and recently the market has experienced at stake, growth strategies are being put card issuer, a WIN for the payment
a significant increase in the level of in place by all of the payment networks to network, a WIN for the merchant, and a
competition by the payment networks gain a bigger slice of a highly attractive WIN for consumers. While a number of
and issuers, spanning a broad range of and growing U.S. cardholder co-brand the institutions participating in the market
co-brand opportunities, both new and spending pie. have come and gone...while customer
established. Although 2008 through 2010 Many co-brand issuers are focusing engagement channels and technologies
proved to be a period of challenge for primarily on those sectors that have have become more sophisticated over
many co-brand issuers, most emerged traditionally generated the strongest time...while government regulatory rules
both stronger and smarter, albeit a portfolio growth and returns, such as and oversight have intensified...the basic
little 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. Advantage
co-branding has never been more acute, issuers are building and leveraging believes that today’s market will create
although the players have adjusted their their capabilities to design co-branding exciting co-branding opportunities for
strategies and appetites to reflect their strategies that acknowledge the changing those with the skill, flexibility and courage
changing 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 is
in support of a wide range of co-brands securing relationships with established co- one of them! n
to also be lively, robust and as intense branders who no longer meet the alliance
as it is with the credit card issuers in the criteria of their former credit card partner.
next few years. Our experience has been So, roughly thirty years after the
that merchants are increasingly open introduction of credit card co-branding
to exploring new network strategies, to the marketplace, the strength of the
whether they entail a complete change
in 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 decades.
network partners to provide more choices
Monitoring of Accounts Can Detect Illicit Activity
Suspicious activity takes many forms. anti-terrorism laws and regulations, Discover Network’s Global Compliance
Anything that appears to be out of the which includes monitoring for suspicious department at dfsactivity@discover.com
ordinary and cannot be easily explained activity, Discover Network is working with for additional assistance. By working
could mean that money laundering, our issuing partners to create awareness together, we can help protect our
terrorist financing or other illicit activity of these potential activities. customers, partners, products, and
is 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 aware
a bank holding company regulated by cards, products, and/or transactions or if that investigations of such activity are
the 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 strictly
to preventing money laundering and the matter further, you can reach confidential. n
terrorist 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 please
anti-money laundering (“AML”) and contact Michael Brancato, Credit Issuance, at michaelbrancato@discover.com.
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
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