While nearly all credit union members appreciate the convenience of ATM use and the ever-expanding networks of surcharge-free ATMs, it's becoming clear that the real future of debit card usage lies in point-of-sale transactions. So how do credit unions take advantage of the income generating potential of POS transactions? How do they encourage their members to increase POS use?

POS transactions and the interchange income they provide for credit unions form the growing, dominant transaction set for today's credit unions, the one responsible for an expanding portion of a credit union's non-interest income.

More and more consumers are using their debit cards in more and more POS transactions each year. With all the issues out there, this shouldn't be construed to be the final battlefield for credit unions in terms of the primary transaction set upon which credit unions can rely for their future. However, POS is as important as any service today and should be given significant attention along with other key services.

By aligning themselves with a network that offers both ATM and POS services, credit unions will be in a position to take full advantage of the growing potential of POS interchange income. In fact, credit unions that do not participate in a solid POS network are missing out not only on growing interchange income but also on the chance to return that income to their members in the form of dividends or enhanced services.

So, sure, POS transactions are good for credit unions-but what about the members of those credit unions? Facts are emerging that indicate using debit cards for POS transactions has many consumer benefits as well.

A recent survey conducted by Visa Inc. uncovered some of those benefits. According to the survey, consumers cannot account for an average of $21 in spending each week. This “mystery spending” added up to more than $1,000 each year that consumers cannot account for. Younger adults ranging from 18 to 24 years of age lose track of even more spending money: $2,500 each year.

Visa found that this untracked money is spent in a variety of ways, including groceries, shopping for nonessentials, entertainment and dining out. However, no matter how consumers spend this money, paying cash makes it difficult, if not impossible, to track-which can wreak havoc on an individual's or a family's budget.

If consumers were to use debit cards-rather than cash-at the point of sale, they would find an easy way to track their spending. It is tabulated clearly for them each month in their checking account statement.

According to the Visa survey, two-thirds of U.S. debit-card users say that tracking their debit card spending helps them manage their budgets. That can be an enormous benefit for credit union members, especially in today's challenging economy.

This is one of the key messages that credit unions need to convey to their members: tracking their spending can help them better manage their money. Yet what are the other member benefits and how else do credit unions communicate those additional benefits to increase member usage of POS? One obvious method is educating members about POS signature debit, even though that along with ATMs is reaching an apex of usage and is actively discouraged by retailers due to additional costs. POS signature debit, however, benefits the credit union by generating increased interchange income (and therefore indirectly benefits the member as well).

Another approach, one that is gaining acceptance with credit union members and has general retailer support, is POS PIN debit, including the cash-back option.

The benefit of POS PIN debit and obtaining small cash-back amounts means members don't need to carry as much cash if they use their debit cards, making for fewer opportunities to lose track of cash. Also, using the cash-back feature makes for fewer trips to ATMs to withdraw funds, saving time, automobile mileage and potential surcharge fees (depending on the availability of surcharge-free ATMs).

In addition, members need to know that the interchange income generated by debit card POS transactions can be returned to them in the form of dividends or enhanced services. After all, they are the ones who own the credit union.

It's clear that POS debit-card transactions present a win-win situation for credit unions and their members. Furthermore, credit unions can continue to serve their members-just as they always have-by educating them about the advantages of using debit cards for purchases and getting cash back surcharge free.

Jim Gowan is executive vice president and chief operations officer for Credit Union 24. He can be reached at 877-570-2824 or jim.gowan@cu24.com

Instant Insights /

POS Debit Transactions: Good for CUs and Members

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