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Getting on the right Side of the Durbin Amendment
Ronald Regan served as the 66th United States Secretary of the Treasury from 1981 to 1985, an equally troubled economic time for the nation. Later he would serve as President Ronald Reagan?s Chief of Staff. So it?s safe to say he had been around the block a few times. When asked about loyalty, he responded, ?You?ve got to give loyalty down, if you want loyalty up.?
Regan?s quote is appropriate and can be applied to just about any business success story from the late Steve Jobs to Wendy?s founder, Dave Thomas. Credit unions are not in the ?apple? or burger business but rather in the financial industry business, and no other subset better defines loyalty. After all, banks have customers and credit unions have members.
Recently, one of the ?big hitters,? Bank of America, announced that it will charge its basic customers $5 per month for using a debit card. This came�as a result of the Dodd-Frank�Financial Reform and Consumer�Protection Act and more specifically the Durbin Amendment,�which expands the Federal Reserve powers for setting interchange fees related to debit card�transaction processing. Whereas�banks could charge 42 cents per�swipe to merchants, now they�can only charge 24 cents. For�BoA this means an approximate�loss of $1 billion annually. So�what did they do? They placed�that burden on customers?not a preferred loyalty program. This debit fee hike has sent shock waves throughout the industry as competitors know that BoA is taking a calculated gamble that their customers won?t jump ship because the other ?big? banks will soon have to follow suit to remain afloat. They were right as J.P Morgan Chase & Co. and Wells Fargo & Co. are�now testing $3 monthly fees in certain markets.
Credit Union Stance
Watching smartly and safely (for the time being) from the sidelines are credit union c-level executives. This is for good reason as the aforementioned federal guidelines apply only to those institutions exceeding $10 billion in revenue. What this means for credit unions is an opportunity to capitalize on the shifting market simply by fortifying its anchor tent pole: loyalty. However, the playing field hasn?t been leveled and c-level executives�are encouraged to reach out to industry experts to better understand the situation at hand.?According to a recent Bankrate.com survey, in 2010 45 percent of U.S. checking accounts were free; however, that was down from 65 percent the prior year, and in 2009 that statistic was 76 percent.?
Enter the Rancho Cucamonga, California based CO-OP Financial Services, which recently announced its CO-OP Total Revelation, a newer version of its comprehensive portfolio management solution. CO-OP is the largest debit processor Credit Union Service Organization serving 3,400 credit unions for Debit Issuer Processing, Credit Issuer Processing, ATM Processing, ATM Network, Shared Branch, and Call Center services. In 2010, the company processed more than 2 billion transactions.
Stan Hollen, president/CEO of CO-OP Financial Services, noted that the new product includes Revelation Reports, which provides pre-built management summaries and custom report templates; Revelation Analytics for high-level data analyses, including alerts, benchmarking and profitability modeling; and Revelation Consultation, outsourced consulting to help credit unions determine cardholder segmentation strategies, profitability analysis and marketing campaign management.
?This enables credit unions to understand how legislation and regulatory changes impact their earning potential, which is especially relevant now as the Durbin interchange amendment threatens to limit our industry?s ability to provide low-or no-fee debit programs to members,? Hollen said.
Hollen said that CO-OP Total Revelation provides in-depth insight into credit union members? ATM and debit transaction behavior and demographics. The product also lowers fraud costs by reducing the time it takes to identify fraud patterns and vulnerabilities. Additionally, CO-OP Total Revelation reduces once manual labor-intensive management reports.
Erlinda Seib, electronic services supervisor for the Roseville, Michigan based Christian Financial Credit Union of Roseville, said the new CO-OP Total Revelation makes reporting easier to interpret.
?CO-OP Total Revelation is an invaluable tool in a variety of respects,? Seib said. ?It has helped us make it easy to get transaction data and export raw data into useful reports. The new version of CO-OP Revelation will allow us to generate reports with graphs and charts to make it easy to view report data, compare data on a monthly and annual basis and analyze card usage distribution and trends.?
Whether it is CO-OP or another provider, the time for change is now and the writing is on the wall. Not only are executives reading the message but so are consumers who are fed up with increasing fees and cumbersome services. As a result, they will be shopping around. According to a recent Bankrate.com survey, in 2010 45 percent of U.S. checking accounts were free; however, that was down from 65 percent the prior year, and in 2009 that statistic was 76 percent. Now banks require customers to meet certain requirements such as going green (paperless) or maintaining minimum balances before giving a ?free? checking account.
Mobile Wallet
The ways in which fees are allocated and collected are changing as is the way consumers are approaching methods of spending. Whereas the collective banking movement changed (positively) from a paper checking system to a rewards-based debit system due to technological advances (which also made it possible for larger banks to create a lucrative submarket i.e., interchange fees), new advances are once again changing the way in which consumers connect with their money.
The term ?mobile wallet? is not new but it is gaining steam especially after Google announced its Google Wallet, an Android app that stores virtual versions of your existing plastic cards on your phone. The app offers near field communication, or NFC,�which essentially allows devices located within centimeters of each other to communicate.
While still in the initial phase of adoption (and acceptance), the Google Wallet is an open commerce ecosystem, and eventually it will store countless payment cards, loyalty cards, gift cards, receipts, boarding passes, tickets, and somewhat unbelievably, your keys will be seamlessly synced to your Google Wallet, too. The ease of use is attractive to customers and the statistics logged from transactions are attractive to financial institutions that will be forced to study consumer behavior in hopes of capturing more business. As with all new technology, the pace is slow. The Google Wallet currently operates on Nexus S 4G by Google (available on Sprint) and consumers can pay with Citi MasterCard cards and the Google Prepaid Card.
Google is not the only game in town. CoVantage Credit Union (CVCU), with more than $900 million in assets and has 64,000 members in nine branches in Wisconsin and Michigan, recently selected Tyfone to provide its comprehensive suite of mobile wallet services. Mark Miyamoto, director of mobile banking at Tyfone, explained that the mobile wallet services include Symitar Episys core integrated mobile banking, enhanced strong ID authentication mobile security and NFC contactless payment technology.
?After careful consideration, CoVantage chose Tyfone because of its unique and innovative perspective on the mobile channel which is reflected in its current features as well as its future road map of features,? said Robert Van Abel, CIO of CoVantage. ?Tyfone?s Episys core integration gives CVCU the ability to offer unique features such as account aggregation
?The google Wallet currently operates on Nexus S 4g by�Google (available on Sprint) and consumers can pay with Citi MasterCard cards and the Google Prepaid Card.?
While still in the initial phase of adoption (and acceptance), the Google Wallet is an open commerce ecosystem, and eventually it will store countless payment cards, loyalty cards, gift cards, receipts, boarding passes, tickets, and somewhat unbelievably, your keys will be seamlessly synced to your Google Wallet, too. The ease of use is attractive to customers and the statistics logged from transactions are attractive to financial institutions that will be forced to study consumer behavior in hopes of capturing more business. As with all new technology, the pace is slow. The Google Wallet currently operates on Nexus S 4G by Google (available on Sprint) and consumers can pay with Citi MasterCard cards and the Google Prepaid Card.
Google is not the only game in town. CoVantage Credit Union (CVCU), with more than $900 million in assets and has 64,000 members in nine branches in Wisconsin and Michigan, recently selected Tyfone to provide its comprehensive suite of mobile wallet services. Mark Miyamoto, director of mobile banking at Tyfone, explained that the mobile wallet services include Symitar Episys core integrated mobile banking, enhanced strong ID authentication mobile security and NFC contactless payment technology.
?After careful consideration, CoVantage chose Tyfone because of its unique and innovative perspective on the mobile channel which is reflected in its current features as well as its future road map of features,? said Robert Van Abel, CIO of CoVantage. ?Tyfone?s Episys core integration gives CVCU the ability to offer unique features such as account aggregation
and the ability for non-online bankers to participate in mobile banking, providing significant value for both CoVantage and its members,? he continues. ?Additionally, Tyfone?s mobile financial services include a seamless road map for enhanced security and NFC contactless payments, which coincide with CoVantage?s long term mobile strategy.?
Miyamoto adds that standard features include balance, history, transfer, and bill pay, and Tyfone?s multi-mode mobile banking (SMS, App, Web) will allow CVCU to offer several industry first features: account aggregation, rate watch, Regulation D counter, bill pay and an array of customizable alerts.
?Tyfone?s financial institution customers tell us that consistent branding and cohesive operations are top priorities in selecting a mobile banking vendor,? Miyamoto said. ?By integrating mobile banking with digital wallet services, Tyfone is enhancing convenience and enabling more mobile money features for CoVantage members. To help strengthen relationships with its members, Tyfone?s fully integrated mobile money solution features the CoVantange brand from mobile banking services through to the digital wallet, providing CoVantage invaluable brand recognition with every purchase.?
I?ve chatted with a few Industry analysts who all agree that the next 12 to 18 months mark a unique opportunity for credit unions to maximize service offerings without having to increase fees (at least not yet). Whether it is partnering with CO-OP, Tyfone or another provider, executives should be taking a good hard look at existing card programs because now more than ever, credit unions have to be ahead of the curve.
One CU executive I spoke with said since the Durban Amendment was enacted said call volumes increased by more than 200 percent per week. He and his staff were fielding queries from disgruntled bank customers who asked the simple question: What made the credit union experience different (as many callers have never used a credit union before)? While we both agreed that loyalty was the main ingredient, he said they wanted to be assured that fees wouldn?t be raised and services would remain competitive. ?They are looking for the proof in the pudding,? he said.
W. B. King has more than 10 years? experience writing for business and technology publications. Email him at wbradking@hotmail.com.�