ARLINGTON, Va. – Credit union card issuers may remember 2004 as the year their card options really opened up. For many years, Visa and MasterCard regulations prevented their card issuers from issuing any other card brand, such as American Express or Discover. The U.S. Supreme Court put an end to those policies in early October when it declined to hear an appeal from Visa and MasterCard of a lower court ruling which found their restrictive policies unconstitutional. Now credit unions and other Visa and MasterCard issuers are free to issue American Express and Discover cards if they wanted, but the question remains, “how many of them want to do so?” The first hurdle most credit unions may have to overcome is size. American Express, so far, has only signed card issuing agreements with card giant MBNA and Citibank, and it is unclear that the card brand is particularly interested in credit unions or community banks as issuers, preferring to work with larger issuers. The only credit union that has stepped forward to issue American Express cards is the $2.1 billion Desert Schools FCU, headquartered in Phoenix. Desert Schools will issue the cards through its agent relationship with MBNA. The second hurdle blocking credit unions from issuing American Express may be history. American Express has a history of failures when working with financial institution issuers. Issuers in Canada have stopped issuing the cards, citing lack of demand among the customers and the expense of the card brand which requires issuers to start their own rewards plan for the cards. In the case of Discover, the issue may be one of familiarity with having financial institution issuers. Discover Financial Services and the Houston-based Pulse EFT Association have announced the intent to merge which, should it go through, will bring over 1,000 credit unions to the Discover brand. But Discover CEO David Nelms has admitted that there will be a learning curve when working with financial institution issuers for the first time, and skeptics have doubted whether credit unions which often feel challenged to manage Visa and MasterCard portfolios will be eager to take on yet another. The bottom line is that 2004 represented opening the door to a potentially much broader and deeper card market, but credit unions will probably not see how far that door will open until sometime in 2005. Meanwhile, in the ATM and EFT markets, 2004 saw the steady increase in credit unions seeking different ATM strategies as the number of transactions per machine in the industry overall continued to fall and members continued to list ATM access as one of the more important things they want from their credit union. A big winner in the meeting of these two trends has been the Bethesda, Maryland-based Allpoint Network. Allpoint offers credit unions a way they can provide their members with fee-free ATM access to 32,000 ATMs nationwide for a monthly fee and without having to waive ATM fees on their own machines. This model has found favor with both credit unions and community banks, as Allpoint more than doubled the number of credit unions participating this year and signed a preferential deal with trade group America's Community Bankers that should give it an entry to more than 1,000 community banks across the country. The combined trend of fewer ATM transactions and steady member demand also favored CO-OP Network, the largest credit union owned fee-free ATM network based in Ontario, California. In addition to adding another 400 CUs to its network this year, CO-OP upped the number of larger credit unions participating. It's latest member, the $4.4. billion Suncoast Schools, headquartered in Tampa, Florida, became the 33rd of the nation's 50 largest CUs to join, according to the network. But the ATM pressure is such that credit unions also opted to strike out on their own with innovations. In Texas, enough credit unions from around the center of the state have announced fee-free ATM deals among themselves that they appear to give the state almost its own mini-fee free ATM network. While in Ohio and other Midwest states, some credit unions have been signing on with banks that have a large ATM footprint in their local areas to provide the members fee free access to the bank's machines. The deals resemble Allpoint's in structure in that the credit unions pay a monthly fee for the ATM access and do not have to sacrifice any ATM income from their own machines. -

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