BOSTON-A new report confirms that credit unions are clearly winners as a result of the Durbin rules, and the study's author predicts if debit interchange is cut even further CUs below $10 billion in assets will win even more.
"If interchange goes down as a result of this latest court ruling, virtually all credit unions will benefit big time," said Madeline Aufseeser, senior analyst in retail banking at Aite Group. "Banks will again find ways to add more fees onto checking and debit."
Aufseeser bases the opinion on what her report illustrates. The study polled U.S. debit card executives on checking and debit card account trends and shows that CUs began winning as soon as the Durbin rules took effect in October 2011.
"Those large debit card issuers, with $10 billion or more in assets, are the losers. As we know, the Durbin Amendment placed margin pressure on debit card portfolios. Big issuers had to find replacement revenue and had few choices but to raise checking account fees and minimum balance requirements. Free checking as we know it, among banks, was virtually eliminated."
Aufseeser pointed out that according to the FDIC, more consumers closed accounts in 2011 than in years past. She said more than 70% of credit unions in the study have seen steady increases in checking account growth, and more than 80% of credit unions have seen debit card account growth since 2011. "Executives expect that trend to continue through 2016."
Industry studies, too, have shown that credit unions have increased debit transaction volume in 2012 over 2011 and that is helping to offset any decline in swipe fees at CUs below $10 billion.
What The Study Also Shows
Aite Group conducted the survey in May and June 2013 and plans a series of reports from the data. This first report isolates results from 67 credit unions with assets of less than $10 billion and covers market trends, opportunities, pricing, focus for account acquisition, usage and retention.
Just as telling, noted Aufseeser, as the study showing the vast majority of credit unions have seen increases in account growth since 2011, is that few credit unions have seen a decrease in checking or debit card products and debit card transactions. "A rosy picture exists for credit union debit card transaction growth, which is expected to increase at 82% of credit unions through 2016; 16% of credit unions expect to see transaction growth stay the same, and 2% of credit unions expect declines."
The credit side of the house is winning as well. Of the CU execs surveyed, 70% say checking and debit card account acquisition is a key priority and that they are actively pursuing credit card accounts by cross-selling credit to checking and debit card account members.
Staying The Course
A big reason why Aufseeser predicts CUs will win big if interchange gets cut again is that they intend to hold the line on pricing, and will be able to afford to do that, at least in the near future, since most are exempt from the Durbin rules. "The study indicates most credit unions will stay the course on account pricing, holding the pricing components for checking accounts and account features steady. Twenty-one percent of credit unions may seek to adjust fee structures upward."
One area credit unions are not pursuing is prepaid (see related story). "Credit unions continue to ignore prepaid debit product opportunities, leaving the door open for other prepaid issuers and program managers," said Aufseeser, with 69% not believing that prepaid debit is an important product offering.
