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