NCUA Says Debit Is Extremely Profitable For CUs
ALEXANDRIA, Va. – NCUA released a study this morning showing that many small credit unions currently lose money on their debit cards but for most credit unions debit is extremely lucrative.
The study shows that the larger the credit union, the greater the profit margin on debit transactions. So that it costs credit unions over $1 billion in assets about two cents and they earn an average of 38 cents per transactions; it coss credit unions between $500 million and $1 billion ten cents and they earn 45 cents per transaction; and it costs credit unions from $100 million to $500 million eight cents and they earn 27 cents per transaction.
But the profit margin decreases significantly for smaller credit unions, with costs for those from $50 million to $100 million at 19 cents and revenues 29 cents; $10 million to $50 million costs are 21 cents and revenues 27 cents; and credit unions under $10 million paying 31 cents per transaction and earning the same back.
Many credit unions actually money on the average transactions, NCUA found.
The NCUA study confirms what many in the industry have suspected, that debit cards are extremely profitable for card issuers. CUNA estimates that credit unions earned $2.6 billion from debit fees last year.
The study was attached to a letter NCUA Chairman Debbie Matz released this morning to Federal Reserve Chairman Ben Bernanke, who is writing rules to implement the Durbin amendment’s cap on debit fees.
Matz told the Fed Chairman she is concerned that proposed caps of 7 cents or 12 cents per transaction for the largest car issuers–those over $10 billion in assets–will eventually be applied to all issuers because of market forces that will drive more debit transactions to lower cost cards.
Matz told Bernanke she believes that the Fed’s final rule should include “meaningful exemptions for smaller card issuers related to network exclusivity and merchant routing” to protect the smaller issuers from market forces.