WILMINGTON, N.C.-One analyst contends there is a revenue source CUs have not tapped that can some day bring them as much or more income than debit interchange.
Bob Giltner, chief DDA strategist for Velocity Solutions, told Credit Union Journal that one of the biggest growth opportunities for credit unions this year and into the future is merchant revenue.
"This could be the fastest-growing revenue source for credit unions. I have heard it said that within three years financial institutions can earn $5 for every checking account per month," Giltner said. "That's $60 a year, equal to-and more in some cases-than a CU's debit interchange."
The money will come from merchants in trade for member transaction behavior data financial institutions can pass along that allows the merchants, in conjunction with the credit union's member touch points, to offer members discounts.
"For example, if a member swipes his card for a pizza, a merchant like Papa Johns can offer that member a $5 discount the next time he buys a pizza from Papa Johns. It doesn't cost the merchant anything to make the offer unless the member takes them up on it. It's very attractive to merchants."
The opportunity is very appealing to FIs and non-financial institutions, as well, because there is a lot of money up for grabs, said Giltner, who pointed out that is why Google and PayPal have entered the payments space.
"Google Wallet is set up not to provide a better tool for people to pay for things, but to make money from merchants. This is why PayPal is doing all these things in payments processing because there is all this merchant revenue and this will finally sink its teeth in during 2012 as one big, new, revenue source."
