12 minutes
The advent of Apple Pay has accelerated the pace with which credit unions are considering their mobile wallet options and the impact of current loyalty programs.
Credit unions now face such key questions as: How does our card loyalty program fit with the dramatic shifts in mobile channels? How can we leverage our card loyalty program to help make our card top of wallet, especially the coveted digital one? And, what can our credit union do right now to leverage rewards in general to align with burgeoning digital platforms?
Whether it’s a comprehensive enterprise program, traditional merchandise for specific accounts opened, cards that give cash back, or mobile retailer rebates, rewards can and should be tailored to connect with your members and cement loyalty.
“A successful rewards program is contingent upon a credit union understanding member needs and having a clear idea of what motivates behavior,” explains Megan Zuber, VP/loyalty program manager for card services provider Vantiv, Cincinnati. “The most productive programs will not only serve those needs, but encourage account acquisition, activation, motivation, and retention.”
They will also differentiate your card and brand, and entice members to use a broader range of services, continues Zuber. The right loyalty package should provide a unique competitive advantage, adding value to the member’s overall experience while building the primary financial institution relationship through all available channels.
Brian Day, manager/mobile products for CUES Supplier member The Members Group, Des Moines, Iowa, encourages clients to use their member data to ferret out member needs, especially for members the CU may not regularly see or who use digital channels. This data may include MCIF tracking, household relationship statistics, card spend ratios, and branch transaction trends.
“Serve members how they want to be served,” he stresses. “Your loyalty program must suit your member’s unique lifestyle, and it may be necessary to offer more than one program based on member preferences.” For example, some segments may prefer traditional credit-based rewards, while others seek cash rebates via their debit card. Yet others may prefer rewards via mobile payment platforms.
“Each financial institution is unique and has different objectives,” says Zuber. “Whether it’s to capture market share or develop enterprise relationships spanning a number of banking products, a credit union’s loyalty program must provide a customized solution to fit the demands of its members.
“Cost may be a challenge,” she adds. “However, if you manage your program and recognize the additional benefit and revenue opportunities it can bring, and communicate your program properly, the benefits far outweigh the costs.”
CUES Supplier member PSCU, a card services CUSO headquartered in St. Petersburg, Fla., designs its CU loyalty programs and supporting marketing efforts to keep a CU’s card top of wallet.
“Nowadays, cardholders, especially the sought-after Millennials, expect rewards,” says Director/Growth Solutions Annie Cox. “They won’t buy unless it’s the best deal around. But it’s also up to the credit union to clearly communicate the loyalty program.”
Cox says to remind members frequently of rewards and to use a consistent marketing message in all channels. “You can have the most robust program on the planet, but if members don’t know about your program, it more than likely won’t succeed.” It’s also vital to have staff on board, so they can talk up the benefits to members and be advocates on how to use the program, redeem points and take advantage of loyalty benefits.
Cox also sees comprehensive enterprise programs becoming more prevalent in CUs’ loyalty arsenals, especially as the use of mobile wallets increases.
“Today, credit unions use enterprise programs to encourage the full member relationship,” explains Cox. “Points are rewarded not only on card usage, but the member’s entire portfolio of services.” For example, a member could earn loyalty points based on a mortgage or car loan, by enrolling in e-statements, or being the source of a certain number of online banking hits or mobile payments. Some institutions even award points for new member referrals.
The key is to offer meaningful programs and to engage your members. “The more attractive your program, the more momentum you can build and the more likely your member will set your card in the default position,” says Cox.
Looking for Mobile Loyalty
Loyalty programs are likely to be “the next progression in the mobile payment space,” says Amanda Smith, strategic product architect for CO-OP Financial Services, a CUES Supplier member based in Rancho Cucamonga, Calif. “Loyalty programs can help add value and drive the adoption of mobile payments. Just as loyalty is a necessary component of a successful card program, loyalty will become a necessary component of a successful mobile wallet.”
Smith adds that Starbucks’ reward program is an excellent test case, albeit a closed-loop one—that is, the card only works for one store or store network. The card-based program offers free drink or food rewards; custom offers when cardholders opt in to receive the My Starbucks Rewards® email; early access to new products; and easy payment through the Starbucks mobile app.
Trends to Watch
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“Also look for Apple to launch a loyalty component to Apple Pay in the near future,” she says. “Similarly, the benefit of mobile rewards or loyalty incentives could present the user with location-based and contextual offers, such as discounts and coupons.”
Other programs, such as Shop Main Street from RewardsNOW, Inc., can help to keep CU cards top of wallet in Apple Pay and other third-party wallet applications, Smith adds. Member Rewards by CO-OP currently has a mobile app, but Smith has yet to see integration with a mobile wallet.
As part of its rewards offerings, PSCU offers a loyalty mobile app allowing members to view their CURewards Mall offers based on their current location. The geolocation allows members to find merchants where members can earn additional points, bonus offers and discounts “near me.” The app also includes a full merchandise catalog function for easy point redemption as well as a member wish list; travel redemptions will be added later this summer. Over 225 CUs have embraced the app since its launch last April.
Vantiv offers the capability to integrate a mobile rewards application into a CU’s existing mobile app. The application allows the member the same functionality as the Vantiv rewards website, including placing an order for point redemption, viewing applicable offers in proximity, and browsing the catalog of redemption options.
“There is plenty of opportunity for credit unions to enable rewards with mobile payments in their mobile banking applications,” Smith notes. “Rewards, offers, and loyalty will be key factors in the success of any wallet. The ideal solution is for your vendor to support your existing loyalty program and extend the mobile payment benefits by creating strong merchant alignment.”
In other words, let merchants help subsidize the cost of a CU’s loyalty program by offering discounts and benefits to the members and even helping to pay for points via the mobile payments channel.
David Eads, CEO of Mobile Strategy Partners, LLC, Atlanta, says loyalty programs should reiterate the overall member experience through every digital platform, including online and mobile banking and the digital wallet. While many CUs plan to launch a digital wallet at some point, Eads encourages CUs to leverage their loyalty programs now, in conjunction with current providers like Apple Pay and Google. CUs can promote the use of a mobile wallet while making the most of their own card-based rewards to lift card placement.
“Credit unions should do what they do best: Compete through the member experience using rewards as a differentiator. Member trust is a huge competitive advantage. Use it to boost account usage, while keeping your card top of wallet and rewards top of mind.”
If a CU aligns with current mobile wallet providers, it can prepare for the future and the possibility that some members may eventually choose the Apple or Google product over a CU-branded wallet. Eads’ advice? Let Apple educate your members on the benefits of the mobile wallet today, while keeping your card in the first position for payment.
Eads stresses that mobile will only get bigger and will grow in popularity.
“Having loyalty programs entrenched in mobile channels is non-negotiable for success,” he says. “It’s a must for credit unions to integrate rewards with mobile, whether through Apple Pay, Google or a CU-branded wallet, while using rewards to make their card the preferred choice.”
Richard Crone, CEO of Crone Consulting, LLC, San Carlos, Calif., acknowledges that Apple Pay and Google are here to stay. “But, a credit union cannot discount the value of controlling the user interface for its own digital wallet,” he notes. “It will need to offer all mobile options, including Apple Pay and Google Wallet. However, by offering another’s wallet, a credit union relinquishes about $300 of potential ad revenue annually. This figure is about twice the revenue of a traditional checking account.”
Plus, with a CU-branded wallet, Crone says, you can reiterate your brand and reinforce loyalty before, during, and after the transaction. Handling a member’s payment is the most frequent service interaction between a member and credit union —occurring about 60 times per month on average. If you lose those crucial touch points to Apple or Google, you risk losing the member entirely, he explains.
Crone also advocates building member loyalty through a variety of other value-added functions, like mobile deposits and the option to view a balance before making a payment.
“When you give members information about their account, you naturally increase loyalty and use of the account.” He adds that, ultimately, the one who enrolls is the one who controls, and there will probably be no single digital wallet that rules. It will be up to each credit union to prepare and meet the demands of members today and into the future.
Crone enumerates:
- The priority must be the CU’s branded wallet because it will yield net new revenue and increased member loyalty.
- Apple Pay or Google are additional distribution channels for mobile payments, but with no upside in revenue or loyalty to the CU.
- It’s wise to support options to provide choice, but also to create healthy channel conflict by providing incentives for use only with the CU-branded wallet.
In all, a successful loyalty program will help your CU compete with large industry suppliers and keep your card top of wallet.
Zuber reminds that loyalty isn’t all about points. “It’s about providing products that meet member needs and the ability to cross-sell the right product to the right member at the right time,” she says.
Loyal members will have more products with the CU, higher balances, and greater satisfaction. And if positioned and promoted correctly, rewards will help keep a CU’s card as the member’s first choice, no matter what banking channel or digital wallet they choose.
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Card Rewards Program Pushes Portfolio Turnaround “When I came to the credit union five years ago, members weren’t engaged and mostly used the credit union as a ‘car loan shop,’” explains Norris. “My first goal was to discover member needs.” The CU hired the Raddon Financial Group, Lombard, Ill., to perform a member analysis and determine how they were using products. “We saw a large percentage of inactive members and single-service households,” says Norris. “Our challenge was to provide greater value so members would take advantage of additional services. We believed offering more value would encourage higher balances and increase member profitability.” Based on his research, Norris instituted an internally controlled loyalty program, the Member Value Program or “MVP.” It offers three tiers of rewards based on member engagement, household relationship, and product usage; the higher the relationship balance, the higher the reward. With distinct creative tying it together, there are three levels of commitment: sweet, sweeter, and sweetest. The program hit a home run with members, turning around a lagging credit card portfolio in just three years. From 2012 to 2014, the portfolio increased from $6 million to almost $10 million. The average services per household also increased from 2.09 to 2.28 during this same period, assets increased by 26.5 percent, and loans increased by 49 percent. “We promote the program big at the front line and have regular cupcake days to tie in with our sweetest theme,” Norris says. The result? “If members do more business with us, they get more in return. The best loyalty programs turn into a game for members; they’re always looking for what’s coming next.” The CU also offers additional loyalty incentives to members. One is a Visa Rewards program, via CUES Supplier member PSCU, a card services CUSO in St. Petersburg, Fla., and CURewards, that provides points for doing transactions on its rewards card. Members can use the CURewards mobile app for browsing and redeeming rewards, and soon, the CU plans to integrate the app within the CU’s mobile app, eliminating the need for two. To increase transactions and interchange income for low-usage debit cards, the CU offers quarterly incentives through CO-OP Financial Services, a CUES Supplier member based in Rancho Cucamonga, Calif. And finally, the CU offers Purchase Rewards through Digital Insight. Once members who use the CU’s debit card click on the offer and shop at the retailer, they get a percentage of the transaction deposited into checking accounts, explains Norris. Norris adds that he doesn’t mind spending the money to encourage more usage. “Typically, I see over 300 percent return on my investment. And these incentives have resulted in an increase in debit interchange income of almost 16 percent over the past three years. “Whatever program a credit union chooses, its loyalty program should add value and create a positive change in member behavior,” he adds. “Communicate the benefits consistently, and don’t give up.” |
With 25 years of marketing and communications experience, Stephanie Schwenn Sebring established and managed the marketing departments for three credit unions. As owner of Fab Prose & Professional Writing, her focus is assisting credit unions and industry suppliers with their communications needs.
