The future of your Credit Union depends upon how you adapt to the changing landscape of the financial industry. One aspect of the change is leveraging your greatest tool for fee income—debit and credit card interchange revenue. Take a look at some of the emerging strategies, then compare them to your CU's current approach.
Most credit unions recognize the growing role and incredible benefits of technology in the financial industry. Some have been fast adopters, but many more have found it challenging, especially as rising costs for software and third-party services squeeze IT budgets. If credit unions are going to survive in a mobile and app-driven world, though, they’ll need to adapt or face falling behind.
The widespread use of smartphones and the Internet is changing the way a lot of people live their lives and giving rise to a range of new terminology. According to research by Pew, smartphone usage is not just growing in America but around the world. This has lead to service providers in a wide assortment of industries creating apps for goods, services, and subscriptions. What this means for credit unions is the increased use of "apps" to make purchases using credit and debit cards.
Best Innovation Group was in booth 212 at the 2017 Symitar Education Conference in San Diego, California. #SYMSD The conference ran from August 29-31. We're already making plans for the 2018 event and hope to see you there!
Credit union interchange revenue is a key part of every credit union’s bottom line. Credit Unions have seen impressive growth and the industry looks to continue this expansion by growing markets size and keeping pace with improving technology trends. However, despite this growth, there are several factors that can limit your interchange revenue if you don't keep a careful watch on them. You should be regularly monitoring these four areas:
In the United States, the average credit union customer is 47 – in Canada, 53. Legacy members are entering a phase of life in which their spending may be more restrained. To continue growing, credit unions must seek new ground: The Millennial consumer.
While optimizing value for clients is the primary focus of credit unions, financial survival also requires CUs to generate a certain amount in annual earnings. Debit and credit card interchange revenue usually deliver a sizable chunk of most CUs’ non-interest income. As this is arguably one of the biggest avenues to generate revenue it’s important to keep it coming in, regardless of changes in the financial industry or disruptions caused by technology.
Most consumers have at least three credit cards from various sources. In addition, many people also carry one or two debits cards and a mix of gift and loyalty cards. A recent Gallup poll showed most Americans foresee the death of cash in their lifetimes, meaning all purchases will be made with credit and debit cards, as well as other forms of electronic payment. For the big issuers, this is rosy news, but for smaller institutions like credit unions, it can be stormy.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in response to the financial crisis of 2008 and the subsequent recession. Within it is a portion known as the “Durbin Amendment,” which affects how debit cards are processed. This seemingly small change to debit card processing – and interchange income – has, to say the least, been controversial.