Just when it might become more important than ever to be able to track the interchange that debit transactions generate for credit unions, many, if not most, may have not begun to uncover their debit programs' bottom lines.
"There can be a lot of reasons for confusion about the debit program," said Dan Lozier, director of client relations at The Members Group, a payments CUSO affiliated with the Iowa Credit Union League.
"Debit programs often grew out of credit union checking accounts, not credit card programs, and thus, might lack the same sorts of software or back office support that credit cards have," Lozier explained, adding that debit cards are also, in a sense, two cards in one.
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"With debit cards, remember you have the transactions authorized with signatures and transactions authorized with PINs," he said. "Sometimes that means a credit union can have two debit transaction processors that might or might not talk to one another or might issue reports in different formats."
As a result, tracking debit income can be a challenge, particularly for smaller credit unions where employees already feel pressed for time and attention, Lozier noted.
Debit tracking has also languished somewhat because the NCUA has not asked for debit data on its Call Reports. This is due in part because noninterest income has not had as important a role in credit union overall income as it does now, Lozier said.
This is in sharp contrast to reporting on credit cards, which the NCUA requires credit union to indicate the number of card accounts they have, their highest interest rate on those accounts and the total amount in outstanding balances.
With relatively little effort, a credit union can look to its credit card data and get at least a thumbnail idea of basic card metrics or whether the outstanding balances and numbers of cards rising or falling, for instance. But not so for debit cards, Lozier pointed out.
As of press time, the NCUA had not indicated whether it might start asking for debit program data on future call reports.
This is important because the amount of interchange that credit unions make from their debit cards has become a hot policy question. Regulations flowing from the Durbin Amendment to the Dodd-Frank financial reform law capped debit card interchange for debit card issuers of more than $10 billion in assets. However, the amendment's regulations were not supposed to lower the debit interchange income for financial institutions with less than $10 billion in assets.
Whether or not the amendment actually succeeded in sheltering the debit interchange of smaller issuers while capping that of larger issuers, is likely the subject of charges and countercharges. Both Durbin Amendment opponents and supporters have cited a mixture of industry and government reports to support their positions, but actual data about how credit union debit card programs are doing has remained largely unavailable.
Barney Moore, senior portfolio consultant for Card Services for Credit Unions, largely agreed with the observations about credit unions not keeping track of their debit programs. However, he thought larger credit unions had begun to do a better job tracking debit interchange than they had been doing.
CSCU is the association of credit unions which process their payment transactions with FIS. Moore said CSCU had access to tools which credit unions of all sizes could use to get a handle on how their debit programs are performing including how to get data through an overview of the program to individual accounts and transactions as well as a new tool than can help a credit analyze cardholder behavior to drive usage.
"But in order for a credit union to use these tools, it has to have staff which knows how to use them and that means getting some help from us," Moore said.
Lozier said that TMG has a similar suite of tools available for its credit union clients that process their card transactions on the First Data platform.
Lozier and Moore agreed that credit unions should all try to at least understand the different elements of their debit program's metrics. Once those are better understood, they could start to deploy strategies designed to improve their card's penetration, activation and usage.
With penetration, Moore pointed out that credit unions should keep informing members about the facts in debit cards' favor: that they are faster and easier to use than checks, can be used in more places and operate similar to credit cards. Their features have also grown to include setting up regular, recurring bills such as gym memberships or utility bills.
Another tactic might be to issue debit cards every time a checking account is opened and to stop issuing an ATM only card, if the credit union is still doing that, Moore pointed out.
Lozier said continues to emphasize that even with the increased difficulty in tracking interchange, credit unions still have a significant completive advantage over the larger banks in debit cards and checking accounts. For that reason, they need to keep pressing that advantage.
"After all, we can't be sure how long it's going to last," Lozier said.
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