CUs Look To 'Grow Their Way' Out Of Income Reduction

Expecting revenue blows from the Wal-Mart settlement, credit unions are figuring ways to increase debit card use rather than impose additional fees to hedge against losses. Visa USA's and MasterCard International's one-third reduction on interchange rates for signature- based debit card transactions went into effect Aug. 1.

According to the Co-op Network, which is the largest electronic funds transfer network for credit unions and a card issuer processor, credit unions are expected to lose, on average, about $4,000 per month in interchange revenue. The Ontario, Calif., network said in a white paper last month that total income for CUs is likely to fall 2.6% as a result of the reduction.

James A. Hanisch, EVP with the Co-op Network, said most credit unions will try "to grow their way out of" the interchange hole by ramping up transaction volume rather than by adding or raising fees. Most credit unions have been experiencing double-digit growth in debit transaction volume in recent years, he said.

Hanisch also said that "rather than overreact right now, I think credit unions are going to defer any pricing actions until the longer-term interchange course is clear in the first quarter of next year."

The rate-reduction mandate ends Jan. 1, when merchants will gain the right to reject Visa and MasterCard debit cards and still accept their credit cards.