Why Small FIs Rule

The financial crisis has taken its toll on local banks and credit unions – however, despite some erosion in consumer deposit share, Margaret Shine, Group Head, Managed Services, Segment Solutions at MasterCard, said that US community institutions did make some progress in gaining credit card business. Shine, who is one of the keynote speakers this week at the World Council of Credit Unions conference in Australia, sat down with PYMNTS in a recent interview to talk key takeaways from her new white paper, why community institutions emerged from the financial crisis stronger than ever, and how banks and credit unions should focus on the consumer in the future.

Your new white paper, “Five Lessons Learned from the Financial Crisis for Community Institutions,” talks about the impact of the financial crisis on local banks and credit unions. What’s the most surprising takeaway from your research?

MS: The premise of my paper stemmed from another MasterCard paper published just as the US was coming out of the financial crisis in 2010 – where, with the changes in the consumer market place, we suggested that regardless of size, community financial services institutions would be more formidable competitors to the larger banking institutions than their mere size warrants.  As I started to investigate what actually happened in relation to that premise, I was very pleasantly surprised to see that despite some erosion in consumer deposit share, the US community institutions made some nice progress in gaining credit card business.

Your study says the period from 2009 to 2013 showed a strong competitive environment and progress for community-based financial institutions. Can you provide some examples of this growth?

MS: During that time, credit card outstanding balances shrank overall by 12 percent. The large institutions saw the brunt of this contraction losing over 14 percent of their balances, equating to nearly $78 billion in receivables. But the rest of the marketplace, which includes local and community institutions like credit unions, grew this line by five percent. Similarly, when you look at U.S. credit card purchase volume, the market grew by 30 percent overall. Yet large financial institutions saw only a 26 percent increase versus a 66 percent growth rate for the rest of the marketplace. This resulted in a share loss for those market leaders, shifting three percent of their share.

Why do you think community-level institutions in the U.S. emerged from the crisis stronger than before?

MS: I believe community institutions emerged from the crisis stronger for three reasons.  First, they went into the crisis in a better position versus their large bank competitors.  Many of these larger institutions had higher risk business strategies and approaches that were significantly challenged during the crises.  The community institutions managed businesses without the same type of leverage and therefore risk.  Second, the need for government intervention and resulting media coverage during the crisis shook consumer confidence and trust in financial institutions, but credit unions mostly emerged from the crisis with solid, unsullied reputations.  And finally, as I referenced in the white paper, community institutions post crises continued to evaluate and refine their basic business strategies and tactics – for example, evaluating strategy, pricing, risk, and marketing – so they were continuously focusing on the foundational elements of a well-run business, which further helped to strengthen their performance.

Your study also talks about the need for community banks and credit unions to focus on the consumer for the future. What do you mean by this?

MS: When I speak of the need to focus on the consumer for the future, I mean the next generation payment solutions, which revolved around innovation and evolution for card products.  This challenge isn’t just for large institutions.  In fact, we see community-based institutions competing very vigorously in the market place and so they need to identify the payment trends and apply them to their community to stay relevant and differentiated.  So that means considering the role of EMV – especially in 2015 for the US – and how to leverage this new technology effectively for a credit union’s membership base.  Or looking at the role that prepaid plays with a community institution’s product suite to handle travel, or family-care products. Or the role of mobile applications to enable product capabilities.

The findings in the paper primarily focus on the U.S., but are the takeaways applicable in other markets?

MS: Yes, I absolutely believe the takeaways are applicable in other markets.  MasterCard fielded research, which correlated payments strategies in key international markets, specifically Brazil, UK and Australia to the U.S.  And what we found was a strong alignment around consumers need for easy access to their accounts via credit and debit cards.  These were the same services that drove U.S. success, making the lessons we have identified extremely relevant and applicable more broadly.

You are one the keynote speakers this week at the annual World Council of Credit Unions Conference in Australia. What will be your key message to attendees?

MS: I think the theme of taking action is most important for attendees at the World Council.  Credit unions in the U.S. market did a great job in being formidable competitive players post crisis; they have built momentum and should continue to do so, redoubling their efforts especially with some strong economic factors to their back.  So, for those other global participants, my key message is you can do it too. With the insights from our research, I hope the key lessons learned in the U.S. will resonate with them and make their action and progress easier.

Margaret A. Shine
Senior Vice President and Group Head, Segment Solutions
MasterCard Advisors

Margaret Shine is the Senior Vice President and Group Head, Segment Solutions at MasterCard Advisors, which uses analytics and deep payments expertise to provide clients around the world with insights and solutions that drive business impact and ROI. Margaret launched this global business in early 2011, and is responsible for developing and executing Advisors’ global strategy for small banks and emerging markets.

Prior to this role, Margaret was Senior Vice President on the Citibank North America Account Team for MasterCard responsible for the North America business sales strategy. During her tenure on the team she developed and executed significant business growth initiatives such as the launch of Citi’s debit card program, expansion & upgrade of the Citi / AA affluent product set, securing impactful new card launch and / affluent portfolio conversions, and the strategic implementation of Diner’s Club North America for MasterCard.

Earlier at MasterCard, she consistently held positions of increasing responsibility in the Sales / Account Management organization. Margaret’s contributions included introducing key brokerage account programs, launching new co-branded products, expanding consumer and small business acquisitions programs, and introducing debit and on-line banking programs.

Margaret earned a liberal arts B.A. from Fordham University and resides in Fairfield County, Connecticut with her husband and two children.