BROOKFIELD, Wis.-Despite shrinking per-swipe debit interchange revenue, debit rewards are here to stay. But those CUs using rewards programs effectively-generating more transactions to offset the impact of the Durbin rules-are broadening their base of rewards.
That is the stance of Fiserv, which is seeing CUs successfully counteract the dip in per-swipe interchange through transaction-driving rewards programs that blend local merchant-funded rewards with national programs, as well as give rewards points for using certain CU services.
David Hall, VP of payment solutions at Fiserv, said the tie to credit union services is playing a key role in battling the drop in interchange swipe fees, which industry analysts have said ranged from 9% to 11% last year for those CUs below $10 billion in assets.
"We are seeing credit unions provide rewards points for doing something as simple as opening an account, or for taking out a loan. We've also seen some give points for members having a birthday."
What is happening with giving rewards points for CU services, said Hall, is greater loyalty building, deepening of relationships and keeping the credit union top of mind when members go to use their debit card.
"We can't say that adding rewards for taking out a checking account, for example, translates into 10 more debit swipes. We can't make that type of correlation. However, what we are seeing is that the credit unions are simply increasing the loyalty members already have for the credit union and that is getting members to use the CU's card over another institution's."
Significant Boost In Transactions
In a sampling of credit unions that use Fiserv's UChoose Rewards, which allows the CU to mix in merchant-funded as well as tie to credit union services, many are seeing a big boost in debit transactions. "That is very substantial," pointed out Hall. "We are seeing clients increase transaction volume, transaction dollar amount and overall debit revenue."
Hall said the wider base of rewards gives members more choice, which everyone wants today. "It's a more appealing program. Members like being able to use local merchants if they like, and contribute to the local economy as well, and have national retailer options. The big banks down the street are not offering this, plus they are feeing people to death. This is differentiating credit unions."
Hall acknowledged that the addition of merchant funded to rewards programs has become the norm, with not many credit unions choosing anymore to solely foot the bill for debit rewards.
Savvy credit unions, too, are handing out rewards points for use of electronic delivery channels, lowering operating costs. "We've seen some credit unions give 500 points for using bill pay," said Hall.
Right now debit rewards are helping credit unions transact their way out of the falling interchange rates, said Hall, who added no one is certain how long or deep the drop in swipe fees will go.
"We do know that credit unions' income from debit, overall, is increasing. That is a good sign. Will we hit a tipping point? I don't know. But anything credit unions can do to increase transactions is a good, and debit rewards-a broad base of them-are proving to be a good strategy."
