DES MOINES, Iowa-Credit unions still have plenty of opportunity to boost their non-interest income streams through interchange revenue, but they need to take action now if they don't want to lose that business once mobile and EMV become major players.
"If I'm looking four or five years down the road, and Visa and MasterCard are saying we have to move to EMV, a lot of players in the marketplace are playing in that mobile space," said Brian Scott, VP at The Members Group. "What could be different in 2013 is a lot more people are focused on how to get all of those non-card-based transactions onto a card now, so that as that space migrates into something else-mobile and EMV-I've got those with me; so that as I move to EMV I'm taking those transactions with me versus them going to a different channel."
Scott observed that some surveys show that as many as 50% of U.S. consumers still conduct transactions with cash and check, and "if you look at some of our more successful clients, from just the debit perspective, they're earning $100 to $130 (per card) in interchange income per year. That's a huge opportunity to continue to grow that, even as regulatory pressures are putting downward pressures on interchange income."
What Drives Usage
The Members Group executive noted that rewards programs and instant issuance can help drive members to use their cards. Scott pointed to a recent study from MagTek showing that FIs that instantly issue cards see cardholders conduct four transactions on that card within the first 10 days, as opposed to 0.2 transactions on average in that same time span if the card is not instantly issued.
For older members who may still regularly carry cash and write checks, Scott stressed the importance of financial education, either walking the member through the process at the time they join the CU, or even offering seminars on financial services and home banking.
Many members also need a reason to swipe beyond just the convenience of it.
"Any time a member wants some financial service from the credit union, that's the time to say we're going to give you an incentive: we'll lower your rate on your auto loan if you'll sign up for home banking and use your debit card a minimum of five times per month," said Scott. He added that similar strategies can also work for rewards points being traded for better rates. "Those types of incentives that tie to other products are probably the most effective."
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