BROOKFIELD, Wis.-Fiserv recently released Relationship Advance, a new product that allows credit unions to provide a short-term, open-end line of credit linked to members' checking accounts.
Jeff Burton, Fiserv's VP and managing director of revenue enhancement, explained that while his company's new solution may not make up the entire gap, as CUs stand to lose 30-50% of their overdraft revenue, it helps provide superior member service, takes a bite out of the payday lending competition and cuts down on charge-off rates.
"There are a numbers of members in CUs today that, aside from using overdraft products, are using payday lending alternatives," Burton noted, adding the number of those using overdraft is declining, while those who use it most frequently are becoming greater credit risks. "By offering a product like this the organization will be able to slow down that charge-off rate. The reason is because I'm putting the member into a better-suited product."
Members qualify for the product by simply establishing that they have a checking relationship with the credit union, have a regular deposit pattern and are in good standing with the institution. They then choose to take out advances, with repayment through subsequent deposits into their checking accounts; the typical charge is $10 per $100 advance.
"Overdraft services really don't promote very sound account management. With overdraft it's very reactive. I have to do something that isn't in the best interest of my account to get these benefits to kick in," Burton noted. "In this product you have to physically move money in to provide the benefits to the member."
