Do the Math on ATM/POS Networks
When DCCU realized that ATM/POS network interchange varied dramatically among networks, we conducted an in-depth network analysis. From that analysis, we determined to discontinue participation in the "credit union owned network" in January 2006. We moved all POS transaction routing to Visa's Interlink network. Our interchange fee income increased 27% from what we had been experiencing with sales increasing only a modest 8%. Bottom line is this represented approximately $100,000 per month income increase over what we had been realizing from the previous network.
My suggestion to all credit unions is to do the math yourselves. We have been pleased with the services we receive from Interlink and especially with the increased interchange income.
Delta Community Credit Union
MSB Conversions a Certainty
The cost of the collapse of the two largest corporate credit unions and the billion-dollar contingent liability looming at dozens of natural person credit unions are of paramount concern to credit union managers throughout the country. Thousands of credit unions are facing ongoing hits to capital to pay the bill. Since capital supports growth and member services, the far-reaching consequences are manifold.
In the short term, if competitive factors allow and in an effort to restore capital, some credit unions will seek to boost revenues and lower costs. Will members and employees pay the price? Will the hard earned consumer franchise dwindle?
For credit unions, more fees, higher loan rates, lower deposit rates, fewer services and employee cuts are among the only options other than merger. So, thousands are likely to merge in just a few short years.
What about the promise of industry saving fixes of business lending and secondary capital being promoted by the industry's lobbyists?
Won't higher business lending authority just entice marginally capitalized and inexperienced players to stretch for yield and thus further elevate risk to the share insurance fund-thus setting up another cycle of NCUSIF capital calls?
What about the promise of secondary capital? Third-party capital takes the onus of growth off the backs of members and employees and helps save the institution's franchise. As large institutions retrench and community institutions become more important to the banking equation, it may even help fund expansion opportunities. However, credit union secondary capital is untested and in the form proposed fraught with obstacles, more management liability and a regulator with no implementation experience.
In 1998 Congress, recognized that some credit unions would face the need to have access to capital and higher business lending authority. Therefore, it provided a simple path to converting to a bank. That path is available today.
In the months ahead, in order to maintain independence and relevance, dozens of credit unions will be converting. Even credit union managers who in the past would never for a minute entertain the thought of conversion, when faced with preserving member capital, saving a hard earned franchise and the clear directive from the board to explore the bank charter, will join the converted list.
Credit unions are facing an uncertain future. Therefore, now more than ever, executives need to give fresh consideration to all their strategic options, including conversion from the credit union charter.
Alan D Theriault President
CU Financial Services
Editor's note: CU Financial Services advises credit unions on charter conversions and business lending.
CU Cooperation Is Alive and Well
The headline of the editor-in-chief column in the March 11 issue, "What's Wrong With the CU World Today," reminded me of the need to share an example of what is right.
There can be legitimate differing views on a national branding campaign and the role of TARP funds in resolving financial pressures at some credit unions. This is not necessarily ego driven; and the challenge in finding consensus on these issues should not be used to question credit unions' ongoing commitment to cooperation in ways that other sectors of the financial services industry cannot even fathom.
The cooperative nature of the credit union movement is not skin deep.
As the organizer of the recently chartered REALTORS Federal Credit Union, I can give numerous examples and testimonials on how remarkably unselfish cooperation is alive and well in the credit union community.
It would take a book to detail all of the guidance and assistance received by the organizing team of REALTORS Federal Credit Union from dozens in the credit union movement.
Underscoring this cooperation is the fact that many of the people from established credit unions have individual Realtors or Realtor organizations within their own fields of membership. Therefore, the chartering of REALTORS Federal Credit Union could be seen as a competitive threat. Nevertheless, they were unhesitating in offering their guidance and suggestions.
The next time we get frustrated with current events, let's not be too quick to ask what is wrong with the cooperative spirit of the credit union community. It is alive and well.
W. Robert Hall
Independent Credit Union Consultant
Organizer, REALTORS FCU