Playing the Now Card

“Welcome to our credit union. Here are your new credit and debit cards.” More new members—or old members whose cards were lost or stolen—are hearing that welcome message as CUs introduce cards that can be produced on the spot.

Fully equipped shops have been issuing instantly for years. Now all but the front-end information collection and the back-end printing can be outsourced, with the software and its maintenance delivered through the cloud. In all, it’s easier and quicker than ever to offer the service.

$100 million Members First Credit Union, Brigham City, Utah, took the plunge into cloud-based instant issue about 10 months ago, and so far, so good, reports CUES member Darryn Hodgson, EVP/chief financial officer. Being able to locate part of the system in the cloud made it easier for Members First CU to take that step, though it didn’t drive the decision.

What did drive the decision was the ability to put a debit or credit card in the hands of members right away, he explains, including after a big security breach.

“Because of the many security breaches with large retailers, we knew we could end up blocking a large number of compromised cards and have to issue new ones. For some members, it’s important not to be without a card for even a few days.”

Instant issue also helps with the more routine instances of members whose cards have been lost or stolen, he adds. Members First CU has equipped two of its five branches with printers and card stock for instant issue.

The other driving factor was a substantial drop in cost. “If you screen the vendors carefully, you can get a great deal on the equipment,” Hodgson notes. “We looked at three different vendors. While two of them were expensive, one product—Card@Once (EFT Source)—was much less costly.”

The main expense comes from purchasing or leasing the card printer. There’s also the cost of buying a stock of unissued cards. Members First CU buys blank cards and prints not only the card number, but its design graphics as well. This requires a color ribbon for the printer. The upside to blank card stock is that the CU does not need to change the hopper based on the type of card being issued and its colors. But color printing costs 40 cents more per card, he estimates.

Because Members First CU prints mostly debit cards, Hodgson predicts the CU will buy its future cards with preprinted graphics and change the hopper for the occasional credit card. Using a black printer ribbon, it can drop the per-card cost those 40 cents, to $2.30.

Members First CU encountered one operational challenge during the setup. “Card@Once uses DHCP to issue an IP address to the printer. Our credit union uses static IP issuance. Because of this we had to do a workaround to issue the IP address to the printer in order to make it work,” Hodgson says.

There also are security issues to address. “We need to have the printers locked to the countertop and have a security camera with a clear view of the printer,” he explains. And the printers have to be maintained. “We bought extended warranties on our two printers after we heard about another credit union that had a printer die and they had to replace it quickly,” he notes.

Enter Outsourcing

Instant issue has been around since 1997, reports Brian Calabro, director of strategic initiatives at Shoreline Business Solutions, a card services vendor based in North Kingston, R.I. Then it was all done in-house by financial institutions that bought printers, servers and software and that had to key information into the instant-issue application and re-key it into core systems. Then integration finally evolved into cloud-based instant issuance.

Until about three years ago, instant issue was an on-site operation, explains Bill Dinker, president of EFT Source, Nashville, Tenn., which in late August signed a definitive agreement to be acquired by long-time partner, CPI Card Group, Columbus, Miss. Financial institutions would buy the hardware and software and try to integrate it into their networks. Now the virtual “cloud” option lets CUs outsource the software and operations around the software, relieving staff of work and responsibility, he explains. Initially, EFT Source targeted smaller banks and CUs for its Card@Once, but now larger CUs are starting to convert from on-site to cloud-based, he reports.

CUs have to buy printers, which cost about $7,000 from EFT Source if you buy just one, less per printer if you buy several. Leasing is a seldom-used option. Clients also pay EFT Source a per-card-issued fee. The printers have to come from EFT Source because they are built for end-to-end encryption so the machine and EFT Source can pass card information back and forth securely. If you already have printers for an onsite program, you’ll have to replace them if you move to Card@Once, Dinker explains.

“We have closed-loop encryption and decryption, which makes us and our clients PCI compliant,” he says. Printers are designed to produce up to 300,000 cards over the lifespan of the machine. A replacement warranty is available at a price for CUs that want to guard against premature equipment failure, he points out.

Most CUs signing up for cloud-based instant issue are putting printers in just one or two branches as they move cautiously through what amounts to a testing stage, Dinker reports. He expects the tests to succeed and CUs to expand their instant issue sites. “As our integration with core processors moves forward, the value proposition will get better and better,” he claims.

Shoreline delivers both in-house and cloud-based card production and personalization solutions. “Our program can use the cloud and eliminate the need for an institution to have a server located with each printer. We are the data center; we manage the secure information and push it to the printers, which are located at the financial institutions’ branch sites,” he explains. “Or the credit union can control the whole process without the cloud, which is what some prefer.”

Staying in House

$2 billion SAFE Credit Union in N. Highlands, Calif., does prefer keeping it all on site. It has been doing instant issue since before the cloud became an option, and Sally M. Alexander, cards program manager, doesn’t see any reason to change.

“Whether or not you use the cloud, it’s still equipment intensive,” she points out. “You still need the machine that produces the loaded card in every location, as well as a stock of cards.”

For debit cards, instant issue involves some data processing and a printing application. For credit cards, a credit decision also has to take place in a narrow window, but that’s no problem, Alexander says.

“We pull credit data from the agencies and do a full-blown credit analysis, whether it’s instant issue or delayed issue. There’s no difference except that it can all happen during the account-opening process, and new members can walk out of the branch with their cards. They’re usually pleasantly surprised that they don’t have to wait.” Instant issue has no impact on fraud or identity theft, she adds.

The difference between on-site and cloud-based instant issue is not huge. The cards are loaded in the branch with the relevant information stored in the mag stripe and printed on the face within minutes in either case.

And advantage to onsite, Hodgson notes, is if the Internet goes down, access to the cloud is uncertain. In contrast, a CU with everything on site should still be able to generate cards. However, Members First CU went with a cloud-based solution and its lower upfront cost.

“The savings were substantial,” Hodgson notes. But relying on a vendor’s system still worries him. “If their system goes down, we cannot issue cards,” he points out. “With a large security breach and thousands of cards needing to be reissued, will their system be taxed enough to prevent us from being able to issue cards?”

The capacity of instant-issue providers was tested after Target and other high-profile organizations experienced security breaches, Dinker reports.

“We hadn’t planned for our program to support massive reissues,” he says. “However, our customers found it to be a viable solution for emergency card replacement after a large breach,” even though for several weeks the average number of cards issued with Card@Once doubled.

“When the Target breach was first announced,” he says, “we saw a huge spike in reissue demand and experienced longer than normal print times, but we responded and the issue was quickly resolved.”

Starting Concerns

There can be some uncertainty when first launching instant issue. For Members First CU, how much card stock to order was pretty much a guess, Hodgson admits.

“We started with 250 for each office and then took it from there. The volume has been a little higher than we expected—around four to five cards a day,” he reports, mostly debit cards.

So far, instant-issue is reserved for new members and urgent situations; routine renewals are still mailed by the CU’s long-time card supplier, Oberthur. But new members get their cards handed to them in the branch when they open their accounts and are not charged. Existing members pay $5 to get a replacement card on the spot—and are happy to pay it, he says.

“Member response has been very positive. When a member has a card issue and needs a replacement, they often want it quickly. We used to pay close to $50 to FedEx a card to them. Now we can do it in a branch for less than the $5 we charge, and that makes them happy. Our members are very pleased to be able to walk out of our office with their cards already in their wallets.”

While the card stock now is traditional, mag-striped cards, the printers are EMV (chip card) enabled. When the time comes to move to smart cards, any CU doing instant issue will have to buy card stock with embedded computer chips.

Hodgson speculates that the transition to EMV instant issue at Members First CU should be fairly inexpensive and simple. “We’d have to go through a set-up and start using new stock, but the equipment is ready, so the change-over should be somewhat painless.”

Security and operations are affected, but marketing drives instant-issue programs, Calabro says. “You get a strong marketing opportunity when you can present the card face to face when a member opens an account. That enhances bonding.” It also enhances income, he notes. “The sooner the member holds the card, the sooner he or she will use it, and the credit union will start to see interchange fee income.”

Richard H. Gamble is a freelance writer based in Colorado.