LAKE BLUFF, Ill.-Opportunity is knocking for credit unions.
That's the view of numerous analysts interviewed by Credit Union Journal who believe credit unions left a lot of bank business on the table following the CARD Act's implementation. Now they can't afford to miss an even bigger opportunity to steal market share thanks to the Durbin Amendment taking effect, they said.
Credit unions are being urged to take a bigger swing this time around, because the chance to grow share is greater, they predict, than right after the CARD Act. Media attention on Wall Street depositories is high, and banks are more aggressively adding fees, evidenced by the quick moves by Bank of America and Citigroup-BofA adding a $5 monthly debit fee and Citigroup a $15 monthly checking charge-as the new interchange rules took effect Oct. 1.
Those actions follow a long line of fee hikes by large banks that have been preparing for the new debit law. Many of them, several people believe, are looking to get rid of checking accounts that are less profitable following the reduction in debit interchange.
Michael Moebs, economist and CEO of Moebs Services, asserted that the mega-banks are bloated and too inefficient, compared with community banks and credit unions, and prefer to jettison some checking accounts. "If a credit union doesn't reach out and get business now, they never will. The doors of Main Street depositories-whether a credit union or community bank-are wide open to take the checking account customers the too-big-to-fail banks are gouging with fees, higher balances, and other conditions," Moebs said. "Now is the credit unions' time and I hope they take advantage of it."
Jeff Russell, reflecting on how credit unions reacted following the CARD Act's implementation, told Credit Union Journal that CUs missed out on a great deal of business. "All the large bank card issuers changed their rate and fee structures and reduced lines," said the senior advisor for The Members Group in Des Moines, Iowa. "There was a big opportunity to gain market share, but as things turned out, I don't know if credit unions really did. CU credit card market share inched up, maybe to 3.9% from 3.5%. Not that big of a change, especially when the economically rational thing for consumers to do would be to move to a credit union card."
If They Don't Move Now...
Russell, firm in his stance that CUs must be more aggressive this time around, reminded how difficult it is to get consumers to move their checking account, and how opportunities presented by the banks' reaction to Durbin do not come along often. "There are only so many times when consumers really focus on their banking relationship. This is one of those times and credit unions can showcase the difference they provide in many areas. Credit unions' overall value proposition is much better than banks'. Yet, sometimes, collectively as an industry, credit unions are not as good in terms of marketing."
Stan Hollen concurred that marketing is needed, stating there is a difference in bank behavior post Durbin compared with right after the CARD Act. The CEO of Co-Op Financial Services in Rancho Cucamonga, Calif., pointed out the adjustments banks made to the CARD Act were not made to intentionally drive away customers. But now the large banks know the checking and debit charges they are adding will more than make up for the checking accounts they will lose, making the potential for customer movement much greater, he said.
"BofA knows they will lose 20% of their checking accounts but that $5 fee will more than make up for what those lost accounts were worth."
Hollen added that the mega-banks' reaction to Durbin is a "watershed moment for credit unions, a phenomenal opportunity to gain market share. Nothing could be better for the industry right now. We have sort of been sitting at 6% to 7% of the consumer base for years. This is the kind of opportunity that doesn't come along often."
David Keenan, GM of the Brookfield, Wis.-based Fiserv's ACCEL/Exchange network, said what's in front of credit unions now is "the biggest thing in my 27 years in the payments industry. Credit unions have more weapons and tools at their disposal. They should be doing their homework and I expect they will come out of Durbin fine, if not much better."
Ron Silvia, VP of debit, ATM and prepaid products for the St. Petersburg, Fla.-based PSCU, also believes credit unions get it now. "Durbin has now opened credit unions' eyes that it's time to really compete. We have been passive, happy with just having customers unhappy with their bank come over, and some believe in that still. But there are many who know that the gloves are off now."
