Experts: Interchange Could Provide Opportunity for CUs (Misc News: September 6, 2011)
As hard as credit unions and their supporters fought against the Durbin amendment on debit interchange rules, it now looks like the new rule could help give credit unions a competitive advantage over banks.
Media outlets have reported recently that bank fees are on the rise and free checking accounts are becoming rarer. Those reports have suggested that consumers move their accounts to a smaller institution that is not subject to the new interchange fee, such as a credit union.
Implementation of the new interchange rules begins Oct. 1. The new rules limit debit interchange fees charged by institutions with more than $10 billion in assets to 21 cents per transaction with additional money available for institutions that meet the Federal Reserve’s requirements for security measures. If all conditions are meant, the average transaction is expected to generate an interchange fee of 24 cents.
Credit unions pushed hard against the Fed’s original proposal to implement the Durbin amendment to the Dodd Frank Consumer Protection and Wall Street Reform Act of 2010. The original Fed rule instituting the law would have capped interchange fees at 12 cents for large institutions.
Many in Washington described the fight over interchange as the most intense they had ever been a part of. And credit unions were credited with creating a large amount of that heat. Many have suggested that the Fed’s revised rules were heavily influenced by the loud voices coming from the credit union community.
In an article titled 10 Steps For Choosing an Online Bank, Time magazine points out that as recently as 2009, 96 percent of banks offered free checking accounts, compared to just 34.6 percent today. Although the story is primarily about choosing an online bank, it points out that many people are moving their money to smaller institutions such as credit unions that have lower fees.
Caroline Lane, senior vice president of business development and marketing at CO-OP Financial Services, suggests in an opinion story titled Seize the Day on Fed Rule Changes posted on CU Times, that now is the time to for credit unions to exploit the difference in interchange fees and attract new business.
“It won’t last forever, so take advantage of it,” Lane writes.
In a blog post titled The Little-Known Marketing Strategy for Gaining Market Share Quickly, Acton Marketing in Lincoln, Neb., makes a similar suggestion. The marketing firm says that now would be a good time for smaller financial institutions such as credit unions to engage in what it calls “disruptor marketing campaigns.” The blog suggests that new bank fees that will result from the Durbin amendment could be the impetus consumers need to make the switch.