Visa/Mastercard Settlement With Retailers: Credit Union Opportunity and Challenge

The settlement this past week between retailers and the two major credit card associations will reduce one of the most important sources of credit union non-interest income: interchange fees. The change should benefit members by lowering transaction costs paid through card settlement options. However, in the short run, credit union income will probably fall.

 
 

The settlement this past week between retailers and the two major credit card associations will reduce one of the most important sources of credit union non-interest income: interchange fees. The change should benefit members by lowering transaction costs paid through card settlement options. However, in the short run, credit union income will probably fall.

The settlement will have the most immediate impact on debit card fees. Retailers will be able to insist on PIN-based transactions that do not provide the same interchange revenue that signature-based sales offer. Debit card income has for many credit unions been the single fastest growing source of non interest income. To help mitigate the potential income loss, some credit unions are introducing a small fee for each PIN-based retail transaction that a member completes.

Moreover, now that the duopoly pricing strategies have been successfully challenged by retailers, there is speculation that credit card fees may also come under review.

Responding to the Challenge

To help credit unions respond to this new environment, Callahans is seeking data that will provide complete detail on the 10 major sources of non-interest income that is reported only in summary totals on the quarterly call report. If your credit union could use more information about strategies credit unions are using to grow non-interest income, please click here to participate in the Augmented 5300 Data project. All participants will receive complete summary reports of the consolidated data.

After card fees and, more recently, mortgage income, the area of greatest revenue opportunity has been insurance sales. Credit unions are increasingly looking to accelerate their activity in this market through the purchase of local agencies. To explore this option, Callahans is offering a webinar on May 13 to discuss the issues involved in taking this strategic step. Full seminar details are available by clicking here.

 

 

 

May 5, 2003


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