WASHINGTON — The Durbin Amendment's sting, for the majority of credit unions, continued to be less painful than expected throughout 2013.
Overall, the first 24 months under the Durbin Amendment were not as difficult as many credit unions had predicted when the rules took effect in October 2011, analysts indicated this year.
In fact, the per-transaction revenue decline for exempt credit unions in the last two years has been fairly modest, they reported.
Industry insiders agreed that the debit interchange world among most credit unions has not been altered substantially for those below the $10 billion Durbin threshold.
Currently, four credit unions are above the Durbin carve-out: BECU, Tukwila, Wash.; Navy FCU, Vienna, Va.; Pentagon FCU, Alexandria, Va.; and State Employees' FCU, Raleigh, N.C. Jim Blaine, CEO of the $27 billion State Employees' told CU Journal this year that the lower interchange rate takes away $48 million annually from his CU, and that started back in late 2011.
While the effects of the new swipe rules have varied by credit union, industry experts said that collectively CUs below $10 billion have made up for a slight drop in per-swipe-fee revenue - some estimating from 4% to 10% - covering any shortfall with increased transactions.
After examining CUNA data through the third quarter of last year and Federal Reserve numbers through 2012, CUNA Chief Economist Bill Hampel told Credit Union Journal that the industry concerns about debit interchange plummeting when the Durbin rules passed have yet to be realized for credit unions below $10 billion in assets.
Debit Interchange Holds Up
"So far debit interchange is holding up," said Hampel, noting growth in transaction volume has been sufficient so that credit union debit interchange income has actually risen gradually since the Durbin Amendment. "The good news is interchange did not plummet, the bad news is that growth has slowed, due largely to PIN network interchange falling."
Several market forces are driving up transaction volume, analysts stated. They include: new credit union members, many of whom joined because Durbin forced big banks to shed free checking and add fees; CUs employing more debit activation and usage strategies, and consumers' financial habits moving more in line with debit usage.
Michael Moebs, economist and CEO at Moebs Services in Lake Bluff, Ill., noted that in 2011, debit transactions among banks, thrifts and credit unions totaled 110 billion. He expects the number to rise to 117 billion by the end of 2013. "In 2011, 43% of the debit cardholders were actively using their cards," Moebs said. "We are already over 50% and I expect that percentage to rise to 51% by the end of 2013."
Predictions Came True
Moebs previously stated that financial institutions should not be overly concerned about debit interchange, and that by the end of this year banks, thrifts and credit unions collectively will post $16 billion in interchange revenue, exceeding the 2012 low of $13.7 billion. (The previous high was $18.8 billion in 2010.)
He also predicted that by 2014 FIs will make $17 billion in interchange revenue, and almost $19 billion by 2015.
"In other words, for everything we lost, at a minimum, we will be back to where we were before Durbin," Moebs added.
However, as noted in a previous Credit Union Journal report, going forward the world could dramatically change if the ruling by U.S. District Judge Richard Leon earlier this year is upheld.
In July, Leon struck down the new limits on swipe fees, raising a great deal of uncertainty about the future of credit union debit programs and the impact the decision could have on members.
The decision now lies with the U.S. Court of Appeals for the District of Columbia, which has received written arguments from merchants and the Fed. Oral arguments from the Fed and merchants are scheduled for Jan. 17.
