Now Is A Good Time To Re-evaluate Entire Product Line-Up
NEW ORLEANS-If there is a silver lining in pending changes to Reg E, the CARD Act, and overall margin compression, is it critical need for credit unions to review their entire line-up of products and how they are priced.
Raddon Financial Group's Fabio Biasella told the CUNA CFO Council's annual meeting, "The one good news of this new scrutiny is that many clients are finally back to looking at their product menus, which are woefully in need of updating in most cases, and how they price."
When Raddon Financial looks at fees in general, said Biasella, it has found that punitive fee income is about $100 per household, non-punitive income about $75. "The beauty of this is when I look at this data from client to client it's all over the board," he observed, "So beginning to examine what's inside each bucket has some merit."
Biasella said the "overarching" theme he is seeing at CUs is efficiency, but it's not being driven by cost control. "It's knowledge and intelligence of the member base that allows you to make efficient decisions and to deploy resources efficiently. We really don't understand with any level of clarity how we deploy the resources and the people we have. With online services, they should be deployed to facilitate member development."
Among Biasella's other points:
• It's "great" to offer credit cards right now. "It's a member-building product, and our deal is so much better than everybody else's deal. Our default (APR) on credit cards is often the same as the base rate. How could you not tell your member to use it?"
Biasella noted the typical CU has a 23% penetration rate with credit cards, with average income of $80 per card. "When you know that 85% of the consuming public has a credit card in their wallet, you have tremendous growth opportunities here. It's the fee revenue, the interchange revenue. The real advantage is that for 99% of you is you don't have to change the product."
• Biasella suggested "there are lots of little ways to mitigate the regulatory threat to fees. You will find you are not collecting fees in the ways you thought. ATMs is one example, especially with surcharge income. We had a client that installed ATM collection software six year ago and never updated it, so any new machines coming online were not being collected. For this CU (updating the software led to) about $3,000 a month. These sorts of things start to add up when you get down to the nitty-gritty. Another CU found it was never charging a late fee on auto loan payments, because it had been set up as "automatic waive" in the system. Examine everything!"