Credit union interchange revenue is a key part of every credit union’s bottom line. Credit Unions have seen impressive growth and the industry looks to continue this expansion by growing markets size and keeping pace with improving technology trends. However, despite this growth, there are several factors that can limit your interchange revenue if you don't keep a careful watch on them. You should be regularly monitoring these four areas:
Membership trends are moving in a positive direction. Reports from December of 2016 show an increase in overall membership, customer spending, savings and loan balances, and an increase in overall credit union industry assets. However, the card industry remains highly competitive. This means that despite positive growth across the board your credit union may still be missing interchange revenue opportunities due to customers shifting spending to other credit unions or banks. The competitiveness of the industry continues to be a unique challenge and differentiating yourself from your competitors becomes a key part of any marketing. Good service is expected as a given by account holders so specific advantages you offer have to be highlighted. Make sure you're diligent in launching marketing campaigns to your members to remind them of the unique benefits you offer them.
Technology is changing the way customers interact with their financial institutions. The phrase ‘top of wallet’ is an important one because as a card issuer you want your credit union’s card to be the one your members reach for. However, payment apps are changing the way customers interact with their debit and credit accounts. Apple’s Apple Pay system has seen growth that is expected to continue in the future along with other digital wallet platforms.
Aside from payment methods vendors such as Amazon, Netflix, and iTunes use apps to initiate payments. You want your customers to enter their CU debit or credit card information into their various apps as the default payment method. So in this respect becoming "top of app" becomes a new goal. If you're seen as behind the times and not current on technology then you risk losing interchange revenue as customers use other accounts that better integrate with their preferred platforms.
Data breaches sadly have increased in recent years as businesses in all industries update their security and phase out vulnerable legacy systems. The only way to prevent cyber attacks is awareness of the issue itself and active, ongoing actions to thwart them. As threats to your credit union's data are ever changing, your plan of action concerning cyber security must include having a preventive process in place as well as well as up-to-date means for responding to threats.
Breaches damage your credit union in three ways; one by frustrating your existing customers, two by damaging your reputation in the community, and three pure financial loss. Also, breaches commonly do not even originate as a CU breach, however, the CU deals with the resulting customer service expenses. Many customers are not even aware of which retailer had a data breach before reaching out to their CU due to fraudulent charges.
The Great Recession has greatly affected financial laws. The Durbin Amendment in particular reduced debit interchange revenue, while legal changes seen as overreaching by many made compliance expense a concern for many financial institutions. Now that there is a new administration in place major changes continue to develop. Keeping track of proposed legal changes is always of utmost importance for both finical and legal compliance.
As the above information shows, credit union interchange revenue can be lost through several different threats. Despite a healthy market, heightened competition, advancements in technology, security concerns, and legal matters are all issues that can substantially impact your bottom line. The only way to respond to so many different threats is diligence, awareness, and keeping business practices and methods current.
Best Innovation Group
John Best is recognized as a thought leader and visionary of technology advancements and financial application development within the credit union industry.
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