Improving Credit Unions Rewards Programs

Like most Americans, I use rewards cards almost exclusively. Whether cash back, travel perks, or discounts at national and local businesses, I some of the money I spend to come right back to me.

And that’s only part of the reason why rewards are table stakes for credit unions today.

The other reason? It fuels massive growth in interchange income, especially if done right. Read on to learn more—and see how Revenew cuts the cost of rewards programs for credit unions.

 

Why Credit Card Rewards Are Necessary

For a minute, let’s not focus on the cost of funding a credit card (or debit) rewards program. Instead, let’s talk about the benefits to the credit union.

First, the average American has almost 4 credit cards in their wallet. Be honest with yourself:

Does your credit union’s card compete with the likes of Discover, American Express, or Capital One? The competition is fierce. You may not be top of wallet, but are you even in the running for a meaningful share of wallet?

Other credit unions (such as American 1 Credit Union) saw a massive increase in card use and spend after revising their rewards program. Members will use whichever card makes the best financial sense for them. That means using cards that explicitly tout their benefits and give a little back after purchases.

 

The Cost of Rewards Programs

Of course, rewards programs are generally pay to play. That is, you pay, they play. Your credit union is on the hook for the rewards payouts, sometimes to the tune of millions of dollars per year.

Obviously, balancing interchange income with rewards payouts cuts card profitability. Furthermore, not all rewards programs give credit union members something they can use. You wouldn’t want to shell out for a rewards program that your members never use!

Also, not all rewards programs are created equal. Some in-house programs are highly bespoke and effective. Others are generic, but still valuable, as is often the case with cash back rewards.

However, the best rewards programs will have these three things in common:

  1. Ease of use. If you make members jump through hoops to get rewards, they’ll use a different, easier card.
  2. Broad appeal. Cash back, travel, and national retailers are safe bets. Local and regional rewards are safe if your membership hasn’t spread out too much.
  3. Low cost / low risk. It doesn’t matter if you increase your share of wallet if you also make less interchange.

New Rewards Options for Credit Unions

Ultimately, this is a Fintech Friday post. Which means we’d like to showcase a fintech that’s changing the way credit unions approach things. In this case, we’re discussing Revenew.

Revenew is a standalone rewards program that can also augment existing rewards programs. So, credit unions can get turnkey credit and debit card rewards for their members. Or, if they already have rewards, they can add more.

But here’s where things get interesting:

Revenew is merchant funded, meaning that credit unions don’t pay for rewards. Instead, retail partners offer discounts and incentives for using the issuers card. That money is then distributed through Revenew to the credit union, turning the rewards program from an expense item into a revenue generator—even before the increase in interchange and share of wallet.

 

Members get perks. Credit unions get a rewards program and a new income stream. Retailers get new and loyal customers.

Win-win-win.

Revenew has already been working fabulously for Citadel Credit Union, a ~$4b institution in Pennsylvania. If Philadelphians can embrace something, you know it has value! (Sorry, Ben Simmons.)

 

Additional Resources

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If you’d like to know more about Revenew and how they’re shaking up rewards programs, contact us!