Durbin Can Give Credit Unions An Edge

Credit unions can find a “tremendous pricing opportunity” under the proposed Durbin Amendment, says one industry expert.


Credit unions may see more messaging and branding opportunities when the Durbin Amendment takes effect July 21, capping debit swipe fees for larger institutions, says Tim Kolk, a Boston-based credit card industry expert with TRK Advisors.

Many credit unions have joined banks in opposing the Durbin because they are worried that the new law will hurt their revenue by shrinking income from debit swipe fees. Although Durbin exempts financial institutions with less than $10 billion in assets, the credit union industry is worried the exemption will not be enforced.

But Kolk says there are signs that credit unions will be able to keep their fees, such as Visa's promise to uphold duality for credit union credit cards. That should give credit unions a significant advantage over banks in catering to consumers who value rewards programs.

“If you can keep your current debit card rates ─ even if they only survive for two or three years ─ it’s a tremendous pricing advantage you have,” Kolk says. “If Durbin settles, be ready to talk about relationship awards for as long as this advantage holds. … It can really be an engine to card growth.”

Out of the top 100 financial institutions, 39 offered rewards programs in 2010, down from 51 in 2008, which gives credit unions that offer rewards an even sharper competitive edge lately, Kolk says. Credit unions can start to integrate rewards programs into all the services, using credit cards as the platform to relationship building. For example, credit unions could offer credit card rewards for direct deposit or better rates on CDs.

“Everybody hates Durbin,” Kolk says. “I don’t really see why we hate it as much as we do.”