Interchange Optimization Guide for Credit Unions in 2019

Yes, loans and interest-based income will continue to be prime income generators for you. Non-interest income just isn’t as lucrative or glamorous. Still, those pennies and dollars from each swipe can stack up. With the right approach, it’s possible to supercharge your interchange income.

With that in mind, we figured we should put together an interchange optimization guide for credit unions. The following vendors provide ways to increase your share of wallet—and the revenue that comes with it.

Why You Need to Increase Interchange Income

You know more about your credit union’s Profits & Losses than we do. We don’t have to tell you what you already know.

The truth of the matter is that credit unions need every penny they can get. The more revenue a credit union can generate – the more they can help their members.  Especially when the revenue is not directly from fees or higher rates. Although credit unions are in the money business, they’re also in the member care business. Each penny earned is given back to members in the form of goods, services, waived fees, great rates, and opportunities. Without those benefits, credit unions are just over-regulated banks, right?

So, with more revenue comes improved services. Your ability to earn directly improves your competitive advantages.

Even if interchange income accounts for a fraction of your total income, every dollar counts. And, if you’re able to increase your share of wallet—or even hit top of wallet—then your interchange revenue might go from an also-ran to a central part of your strategy.

How We Evaluated Interchange Income Providers

There are many ways to evaluate interchange income vendors. However, it’s a little tougher than it would be with the other guides we’ve written because there are several different strategies.

With that in mind, it might help to find a vendor whose approach aligns best with your goals. Are you looking to issue more credit cards to your members? Do you want to increase your share of wallet with existing card holders? Or do you want to leverage analytics to target members for credit increases and balance transfers?

Maybe you’d like a combination of those. Or, just maybe, you’d like to pick up one vendor to complement another!

We’ll look at several vendors and the strategies that make them tick. With any luck, one (or more) will be a match for your credit union.

Interchange Revenue Optimization Vendor Comparison Guide

Provider
  Increases card ownership Improves member purchasing power Member rewards features Promotes top of wallet status Reduces fraud Mobile App or API support
FlexPay 2 2 2 3 5 No
Cardlytics 2 3 5 4 1 No
Clutch 1 1 5 3 1 No
Buzzpoints & other rewards programs 2 2 5 3 2 Yes
WalletFI 4 3 5 5 2 Yes
CO-OP Financial Services

  • Prepaid Cards
  • Rewards Programs
  • ATM/Debit
  • Fraud and Risk Management
3 2 3 3 3 API
PSCU

  • Prepaid Cards
  • Rewards Programs
  • ATM/Debit
  • Fraud and Risk Management
3 3 3 3 4 API
Trellance

  • Prepaid Cards
  • Rewards Programs
  • Fraud and Risk Management
4 4 2 2 3 Via App Store
Vantiv/Worldpay

  • Prepaid Cards
  • Rewards Programs
  • ATM/Debit
  • Fraud and Risk Management
3 4 2 3 3 API

Interchange Revenue Optimization Criteria Definitions

This section details the various metrics by which we ranked the interchange revenue optimization vendors above. It’s worth noting that our metrics are subjectively compiled based on our understanding of each vendor’s services.

Increases card ownership

The best way to increase your interchange income is by increasing the number of people who have and use your cards.

This metric is designed to assess how well a vendor promotes increased card ownership. Will they help you increase the number of cards you distribute to your membership?

The more cards you have out there, the more cards there are to pay for things. That’s more interchange income for you.

Improves member purchasing power

Most people are bad about updating their income. Ditto that for requesting credit line increases, or otherwise improving their purchasing power. Unfortunately, most financial institutions aren’t super on top of it either.

Some vendors go out of their way to find ways of increasing cardholder buying power. These vendors will help increase interchange revenue by enabling consumers to use their card more.

It also helps people use their cards more responsibly. Increasing member purchasing power doesn’t necessarily help people max out their credit cards even harder. More often, it allows people to borrow or charge more without utilizing too much of their credit. This also protects their credit score.

Member rewards features

Member rewards have become pretty standard for most credit cards. And, they’re becoming more popular for debit cards as well.

Whether rewards be cash back, balance transfers, points, miles, local discounts, or whatever, people love a good deal. And, if that good deal can save them money or get them a little bonus, they’ll prioritize that card even more.

Vendors that offer rewards of some kind for their cards and services are more likely to promote card loyalty. That card loyalty also extends to the issuing financial institution. So, if someone loves their card, then they will probably also love you.

Promotes top of wallet status

Top of wallet doesn’t mean the same thing that it meant twenty years ago. Top of wallet now also includes top of app. For mobile wallets, apps, and other card not present transactions, you still want to own the go-to card there.

Many vendors can help you issue a card. Many more vendors can offer rewards or access to ATMs. But how many vendors can turn your member’s newly issued card into their primary card?

This metric differentiates vendors that merely support your cards from those who encourage more loyal and frequent use.

Reduces fraud

Online shopping and other card not present transactions have become increasingly popular. Consequently, false positives and fraud alerts have been increasing.

Many vendors include some capabilities to help you and your members avoid paying for things that thieves bought. Consequently, reducing fraud is an important way of increasing interchange income.

Fraud costs both banks and cardholders time and money. Also, false positives—legitimate transactions erroneously classified as fraudulent—rob credit unions and merchants of income. (Not only that, but it’s very frustrating for consumers.) Reducing fraud is important for all parties involved in a transaction, including the buyer, seller, and financial institution.

Mobile App or API

Members want to know the status of everything anytime anywhere.  This can be accomplished by white-labeled or partner-branded apps.

Or, if you have your own development team, you will need access to key APIs.

 

Further Considerations, Etc.

One difference between this guide and many of our other guides is this:

Most of these vendors take very different paths towards increasing your credit union’s interchange income. While this might seem like a conundrum at first, it’s not. In fact, it presents a unique opportunity.

Combining one service with another might significantly increase your interchange income. For example, combining WalletFi and Trellance provides a well-rounded approach. Cardlytics and Flexpay are also a good match.

Our list is not exhaustive, nor is it necessarily definitive. There are many vendors out there working to help financial institutions maximize their interchange income. If we missed anyone—of if you think we got something wrong—please let us know!

 

CU 2.0’s Credit Union Data Analytics Provider Guide for 2019

CU 2.0’s Top Online Account Opening Vendors of 2019