CUs and Vendors Seek Out Noninterest Income Streams
Sliver-thin interest margins, reduced consumer demand for loans, the looming slash in interchange income and paltry returns on their own investments have combined to make credit unions search for noninterest income in serious earnest.
Strategies for doing that abound. For instance, the $500 million U.S. Senate Federal Credit Union in Alexandria, Va., began buying member business loans just more than six months ago and has since added more than $10 million at a return of more than 6%, said John Hayes, the 32,000-member credit union’s executive vice president and chief operations officer.
Individual consumers are also being targeted as potential payers of fees for high-value services, and technology vendors are getting into the fray by creating the tools to make that happen.
“Our game plan is to introduce new for-fee products that are not yet threatened by the economy, regulators or ubiquitous market availability,” said Robert Broadwell, general manager of PM Systems in Chapin, S.C., a provider of online banking and security solutions to about 200 credit unions.
Eric Hansing, director of product marketing for CUNA Mutual Group’s MemberCONNECT insurance sales and support program, said interest in his company’s noninterest revenue channels for credit unions also has been intensifying.
“I think that will continue,” he said, citing the value add of deeper member relationships and retention as well as income opportunities. He said programs like his tend to rank fifth or sixth in terms of how much noninterest products generate at the typical credit union but that such income can be grown each year, especially now that debit interchange fees are set to be slashed by Congress.