ST. PETERSBURG, Fla. — As banks move quickly to add fees to recoup projected losses in debit interchange, industry analysts are mixed on how CUs will react.
Most, however, agree that credit unions will first look for ways to drive greater debit usage, and when fees are involved, try to give members some addition services.
Steve Salzer, EVP with PSCU Financial Services, believes it is clear what banks will do as a result of the new rules—fee the consumer to recoup the losses. Yet CUs may not go down this same path, Salzer suggested, due to the fact the two-tier payment system could minimize CU losses. "Right now we don't know what effect the two-tier system will have. So credit union management of checking accounts, debit cards, and fees could look completely different than the banks' approach. If credit unions end up losing a lot less income than banks, they will have much more flexibility on the fee side."
When credit unions begin making adjustments, Salzer is confident the industry will not act in unison, adopting a "herd mentality" often displayed by big banks. "Solutions will be very customized to each credit union. Each will determine the kinds of changes that fit with their field of membership."
Salzer believes many credit unions will pursue greater relationship pricing and product bundling to make up lost revenue. "They will be looking at minimum balances on checking accounts, usage requirements with debit cards, and taking a very close look at rewards."
Jeff Russell, EVP of Des Moines, Iowa-based The Members Group, believes checking is the first area credit unions will examine to offset potential revenue loss. "I don't think consumers will accept a per-transaction fee on debit cards like we have on ATM. This could be the end of free checking."
Russell suggested that bundling products and services onto a checking account could make fees more palatable. "Could you structure an account that has some things like e-alerts, mobile access, and free ATM withdrawals that people might be willing to pay $5 to $10 a month for?"
CUs, too, are expected to drive activation of inactive debit cards. "I think people have to look at ways to encourage members to activate inactive cards," Russell said. "There are a lot of inactive checking accounts out there."
In Rancho Cucamonga, Calif., Caroline Lane, SVP business development and marketing for CO-OP Financial Services, said her early conversations with credit unions indicate repricing is a topic of discussion. "Everyone I have talked to has said they are absolutely looking at repricing. I have not gathered enough data to say whether credit unions are favoring a per-transaction or per-account fee. But they are looking at everything."
Lane pointed out the big banks are backing off free checking and debit rewards. "They are starting their repricing. Credit unions will have to figure where they want to be in the competitive landscape."
