Card Fees From Merchants, Not Members

For retail financial institutions, non-interest income is the main route to boosting revenues without growing the depositor base. That’s what $448 million, 36,268-member UMassFive College Credit Union was seeking when it opted for a third-party debit-card loyalty rewards program.

Debit card transactions generate fee income from merchants, not credit union members—an important objective for UMassFive College CU, based in Hadley, Mass. And although the institution’s existing in-house program, Co-op Points, was reasonably successful, it wasn’t generating enough additional card swipes. “It just didn’t have the oomph we needed to move people,” says Jon Reske, the CU’s VP/marketing.

UMassFive College CU looked at several third-party offerings but found Buzz Points most intriguing and most in line with the organization’s ethos and mission of supporting local businesses. The program from Buzz Points, Austin, Texas, offered a “simpler, more straightforward approach,” says Reske.

UMassFive College CU members earn half a point per dollar spent on any debit card transaction, and a point per dollar for shopping at a local merchant. Rewards include gift cards and coupons for “preferred” local businesses or for a few selected national vendors (at a considerably lower rate); members can also elect to donate points to local charities as cash.

“We liked the idea that our members would be rewarded for shopping and doing business locally, not just with us,” Reske says. It was also a way for UMassFive College CU to support local business without instituting an elaborate additional program. “Buzz Points rolls all that into one—really a win-win-win.”

The credit union has been working with Buzz Points since September 2014 and is happy with the results. “The delivery is very consistent with our brand and they’ve done a fantastic job reaching our members,” Reske says.

Buzz Points takes care of all administration and marketing; it offers a yearly calendar of promotions that the institution can opt to run. For UMassFive College CU, Buzz Points runs a promotion each month, which can include things like points for switching to electronic statements, or semi-annual “Pot-O-Points” competitions that employ gamification techniques to spur members to make more debit card transactions. The following month it might offer discounts for using up accumulated points with participating local merchants.

Promotions like “Pot-O-Points” have encouraged those who actively participate to boost their average debit transactions by a significant margin. In March 2016, for example, members who met the threshold to “win” averaged 55 swipes, up from a previous average of 34 per month. “That’s some serious interchange income,” says Reske.

In all, UMassFive College CU’s non-interest income has increased substantially since the Buzz Points program began. In September 2014, the CU netted $79,410 in monthly interchange income; the equivalent figure for May 2016 was $98,333, an increase of almost $19,000. For 2015, annual interchange income was $1,059,019, up from $986,485 the previous year.

Buzz Points is compensated by the institution on a per-account basis for the marketing services we provide to drive program awareness and engagement, and a success-based fee per point awarded for completing a profitable behavior. 

Reske says that the program has met its expectations and passed the break-even point a few months ahead of schedule. Buzz Points enrollees average about five more debit card swipes per month than non-enrollees do.

Reske is very pleased with the Buzz Points partnership. “Many credit unions are looking for something that’s just set-and-forget, which is why many of their programs fail,” he adds. UMassFive College CU meets with a Buzz Points analyst every two weeks and monitors the program closely. “They are very open to our suggestions and really go the extra mile,” he says.

Dwayne Spradlin is CEO of Buzz Points, Austin, Texas, which provides incentive-based customer engagement and revenue solutions for community financial institutions.