OLYMPIA, Wash.-EvergreenDIRECT CU here reports it stands to save about $60,000 per year on EFT processing after hiring DaLand Solutions to keep vendors honest on pricing.
EvergreenDIRECT is hardly the first to report such numbers. In 2009, Metrum Community CU banded together with DaLand and two other CUs to cut costs by 37% over its previous contract for debit card processing, said Steve Kelly, president at the Centennial, Colo.-based CU. In just two months, the CU was able to recoup DaLand's fee from the money saved in its new contract.
These dramatic price cuts are typical when a CU works with DaLand, according to Jon Ungerland, owning partner at the Thornton, Colo.-based consultancy. "Many credit unions realize reductions in operating expenses between 20% to 30%, via a review of their core and EFT processing agreements."
Run by two former Bellco CU employees, DaLand helps credit unions develop optimal strategies at optimal prices for electronic funds transfer (EFT), core processing and ancillary services, Ungerland said.
"DaLand added expertise to our team," Kelly said. "With $50 million in assets, our management team is spread thin, and our expertise is geared toward operational issues. In negotiations with former vendors, we hadn't been overly successful in greatly reducing pricing or adding language to the vendor contracts to protect the credit union."
"If the credit union doesn't have the expertise to do the negotiation, then it makes sense to hire someone, especially now that margins are getting squeezed," added Ed Danz, president and CEO at the $43-million EvergreenDIRECT. As EvergreenDIRECT begins its search for a better contract, "DaLand will take care of the entire negotiation process for us."
That's what DaLand did at Metrum Community and others, said Kelly. DaLand also delivered an analysis of several vendors "in areas we would have skimmed over," along with a scoring system and bids for comparison. "Their understanding of the processing industry gave us great insight into the companies we were reviewing."
Metrum Community's group of three CUs held better sway with vendors than Metrum would have alone, said Kelly. "DaLand aggregated the three credit unions in the price negotiations. Instead of bringing one $50-million institution to the processor, they were bringing a $200-million institution. The percentage we saved on transaction costs and line item costs is a direct result of DaLand aggregating the three institutions."
Danz said he tried getting a better deal by speaking directly to his two current ATM, debit and credit processors. "My representatives said they'd help us out, but I'm not sure they would do everything in our best interest."
Time works against credit unions in the vendor negotiation game, suggested Ungerland. "Vendors have clever ways of capitalizing on the scarcity of an executive's time." DaLand effectively buys time for the CU, "assuming the point position for clients and managing all correspondence, inquiries, scheduling and tasks. Credit unions get to focus on evaluating potential processing partners."
DaLand is constantly conferring with vendors, which gives the consultancy plenty of opportunity to find the best deals for credit unions, said Ungerland.
As part of the negotiation process with DaLand, EvergreenDIRECT will choose just one processor for all EFT needs, said Danz. The CU currently has two processors, one for signature-based and one for PIN-based transactions.
Juggling two processors creates additional work, say, when the CU has to reissue a lost card, Danz said. One processor requires a telephone call to block the lost card, whereas the other allows cards to be blocked from a secure website.
