When it comes to offering credit card services to your members, credit unions face a critical decision: should you manage the program in-house or outsource it to a third-party provider?
Both options have their advantages and challenges, and the right choice depends on your credit union’s unique needs, resources, and goals.
In this blog post, we’ll explore the key factors to consider when choosing between managing a credit card program in-house or outsourcing it to a third-party provider.
Should my Credit Union Keep Credit Cards In-house?
Given the high revenue and risk potential associated with credit cards, it is crucial to thoroughly consider all the potential advantages and disadvantages before making a decision.
Advantages
- Control and Customization: Managing your credit card program in-house allows you to have complete control over every aspect of the service. You can customize card offerings, set your own interest rates, fees, and rewards programs, and tailor the program to meet the specific needs of your members.
- Member Relationship: An in-house program enables you to maintain a closer relationship with your members. You have direct access to data and insights that can help you better understand your members’ spending behaviors and preferences, allowing you to offer personalized services and build stronger relationships.
- Revenue Potential: By managing the program yourself, your credit union retains all the revenue generated from interest, fees, and interchange fees. This can be a significant source of income, especially if you have a large and active member base.
Challenges
- Resource Intensive: Running an in-house credit card program requires significant resources, including staffing, technology, and expertise. You’ll need a dedicated team to manage the program, handle compliance, and provide customer support.
- Compliance and Risk Management: Credit card programs are heavily regulated, and staying compliant with all the rules and regulations can be challenging. Managing risk, including fraud prevention and credit losses, also requires robust systems and processes.
- Technology and Innovation: Keeping up with the latest technology and innovations in the credit card industry can be costly and time-consuming. You’ll need to invest in infrastructure and continuously update your systems to stay competitive.
Should My Credit Union Out-source Credit Card Processing?
If your credit union is considering offering credit cards but is unsure about managing them in-house, continue reading to explore whether outsourcing your credit card services could be the ideal solution for your institution.
Advantages
- Cost Efficiency: Outsourcing your credit card program to a third-party provider can be more cost-effective, especially for smaller credit unions. The provider handles the majority of the operational tasks, reducing the need for in-house resources and expertise.
- Access to Expertise: Third-party providers specialize in managing credit card programs and have the expertise and technology to deliver high-quality services. They stay up to date with industry trends, compliance requirements, and security measures, ensuring your program remains competitive and secure.
- Scalability: Outsourced programs offer scalability, allowing your credit union to grow its credit card offerings without the need for significant upfront investments. This flexibility can be particularly beneficial if you’re looking to expand your services or cater to a growing member base.
Challenges
- Limited Control: When outsourcing, you have less control over the program’s features, pricing, and member experience. Customization options may be limited, and you may not have direct access to member data.
- Revenue Sharing: Outsourcing often involves sharing revenue with the third-party provider. While this can still be profitable, it’s essential to carefully evaluate the financial impact and ensure the arrangement aligns with your credit union’s goals.
- Member Perception: Members may perceive outsourced programs as less personalized or less connected to the credit union. It’s important to choose a provider that aligns with your credit union’s values and ensures a seamless member experience.
Making the Decision: In-house vs. Outsourcing
Choosing between in-house and outsourcing depends on your credit union’s specific circumstances. Here are a few questions to consider:
- Do you have the resources and expertise to manage an in-house program effectively?
- Are you looking for a customizable solution that aligns closely with your brand?
- Is cost efficiency and scalability a priority for your credit union?
- How important is maintaining direct control over member relationships and data?
Both in-house and outsourced credit card programs offer distinct benefits and challenges. Carefully evaluate your credit union’s needs, resources, and long-term goals to determine the best approach.
Whether you choose to manage your program in-house or partner with a third-party provider, the ultimate goal is to offer a credit card program that enhances member satisfaction, drives revenue, and supports your credit union’s mission. Click the button below to learn more about FLEX's in-house credit card program.
