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Connexus : Issue 36
Indue is aiming to reduce and potentially eliminate the cost of transactional payment services to its members. connexus www.abacus.org.au 8 NEWS Service providers to the mutual sector face a diminishing number of clients as consolidation continues through mergers and acquisitions. Finding new ways to maintain and increase profitability while keeping costs under control has paid off for Indue, an organisation that's owned by mutuals and one of three major providers of banking services to the mutual sector. CEO Manuel Garcia, who joined Indue in 2003, has been spearheading an aggressive diversification strategy with a goal to protect the organisation from the risks of further structural change in the mutual sector. "I'm talking about creating sustainability in our business model. In other words, how we can avoid increasing our prices to credit unions and, by default, making them sustainable," says Garcia. An investment strategy over several years saw a new product range created with greater reach and appeal Eight credit unions and building societies have topped the list for best value credit cards, according to financial comparison website RateCity (see table). RateCity's research has found that the average purchase interest rate is 16.40 per cent for cards with no annual fees and 17.58 per cent for those that charge an annual fee. Meanwhile the Teachers Credit Card, from Teachers Credit Union, has been rated in the top three fairest credit cards by Choice. With an ongoing rate of 11.50 per cent and no annual fee, the card has been awarded five stars by Canstar Cannex. Teachers Credit Union was named one of the top three credit card issuers in last year's Money magazine awards. underpinned by the acquisition of a software development company. "All of a sudden that made Indue a product manufacturer, enabling us to compete with major banks and other institutions," says Garcia. "The benefit is that we gained full control of the cost base and it also meant that we could now offer solutions that were competitive and robust and -- because of our size -- more flexible than our larger competitors could bring to market." The pay off came in 2009 when Indue was the successful tenderer and signed a contract with the Commonwealth Government for the supply of the Government's replacement BasicsCard. The BasicsCard was introduced by the Australian Government in 2008 to provide streamlined access to income managed funds for both customers and merchants. This major win positions Indue as a credible supplier for future government payment business and it has already bid for another major contract. Bigger business benefits CUBS top the list for cards Cards with ongoing fees Cards with no ongoing fees Company/product Annual fee Purchase rate Company/product Purchase rate Community First Credit Union -- Low Rate Visa Credit Card $40 10.49% Heritage Building Society -- Visa Classic No Frills 11.80% SCU -- Low Rate Visa Credit Card $30 10.49% Horizon Credit Union -- Visa Credit Card 12.95% Greater Building Society -- Credit Card $30 10.74% Hume Building Society -- Visa Value 13.15% MECU -- Low Rate Visa Credit Card $59 10.74% ECU Australia -- Low Rate Visa Credit Card 13.50% Source: RateCity (www.ratecity.com.au). Based on lowest rates, excluding intro rate cards, non-bonded institutions only, other fees and charges may apply. *As at April 11, 2011 Meanwhile, in a deal expected to be announced later this year, Indue has built a premium credit card processing platform for a major international bank. And, Indue is working with a church organisation to help improve payment administration. "The church came to us for help and we used our payments knowledge to design the solution. Because we have links to a manufacturing plant, we can build the solution ourselves," says Garcia. Building a business outside the mutual sector has "changed the characteristics" of Indue's bottom line, according to Garcia, with more than 40 per cent of income now earned outside the sector. "It's helping Indue to sustain its pricing structure irrespective of any further structural changes in the mutual sector." Looking ahead, Indue aims to "significantly reduce and potentially eliminate the cost of transactional payment services to our current members in the next few years". "We want to become big, be successful and grow profits -- we don't apologise for any of that. But we're doing it to strengthen the mutual movement."