Durbin has been decided. Now how will credit unions respond?
On Wednesday, the Federal Reserve approved a 21-cent (plus fraud-related costs) limit on debit fees. Although the cap is 10 cents higher than the original proposed limit of 12 cents, it still puts a hefty sum of credit union revenue on the chopping block.
In the debate during the run-up to the Fed’s vote, many credit union and bank advocates warned that financial institutions would have to make up for losses incurred through limited interchange fees by adding fees elsewhere or removing perks. Free checking and debit rewards would become a thing of the past.
“Every major bank is looking to use the revenue reduction from new debit card rules as a reason to add monthly checking fees across its consumer base,” says Chip Filson in his blog titled “The Rate Of Opportunity.”
As your credit union decides what it will do A.D. (after Durbin), take a minute to consider what the credit union wants to be known for? What will be its competitive advantage?
For a notable example of what it means to stake a claim on a competitive advantage in an aggressive marketplace, credit unions need look no further than Rackspace Hosting, a tech company that is going toe-to-toe against formidable competitors such as Amazon in its hosting of websites.
According to the company’s CEO, it is Rackspace’s customer service that gives the company its competitive advantage. “We have to become one of the most trusted people in our customers’ lives,” Rackspace chairman Graham Weston says in a BusinessWeek article. And ordering pizzas for late-working customers or singing Happy Birthday over the phone are just two ways Rackspace does this.
“Rackspace is so insistent on customer experience as a competitive advantage that it’s willing to give away its technology,” reports BusinessWeek.
When faced with losing a major chunk of earnings-driving interchange, you can bet few players in the banking industry will be looking to give anything away. By resisting the temptation to play by the same mindset as banks, credit unions have the opportunity to gain new members. For inspiration, check out these credit unions that are using free checking to attract new members.