Amplify CU Doubles Down on Fee-Free Philosophy as Industry-Level Fee Transparency Dissipates

At the end of 2022, which was our first full year of being fee-free, we did a full look-back. At that time we were mostly focused on new accounts, so not necessarily new memberships. Then of course at the beginning of 2023 was when rates started to spike. So we spent 2023 enduring 400-plus basis points increases and then in 2024 another 100-point increase. So now we’re having to unpack what is related to fee-free versus what is related to what’s going on in the market at large. And so we actually shifted our focus. We didn’t just look at new accounts. We started looking at net new memberships, net new dollars. So in that first year we wanted to look at both new accounts from existing members as well as new members. Now we just look at it as, for people who don’t currently bank with us, is this becoming a reason to come and bank with us? And what we saw is we actually doubled the number of new members that we earned from 2024 as compared to 2023, and the average balances for those quadrupled in 2024. I do think the rate environment is helping with that, but the volume continues to be there and that’s really what we’re wanting to see.

The other piece of data we have that tells us it is specific to [being] fee-free is from a 2024 survey of our members [for which we partnered with MasterCard Advisors]. One of the things we asked was, is fee-free a legitimate value driver for our debit card holders in particular? And one of the biggest findings was yes, it is.

So we’re continuing it on the consumer side because it seems to be working, but we have expanded it into treasury management because that’s where we believe we’re going to find the balances, which are much higher than the balances of our consumer portfolio. The stickiness of a business relationship is much more significant, and while it’s common for consumers to have many different banking relationships, that’s not as common on the business side. And so when we said, where do we believe we can sustainably grow, and grow at the rate and the size that we need to, we think that growth is through business. So that’s when we said, we’re going to bring on a full suite of treasury management services and we’re going to do it fee-free.

CU Times: Since launching treasury management services, by how much have deposits grown?

Armijo: Timeline-wise, we went live with our treasury management suite in our soft launch in June 2024, and we did the public launch in September. So initially we spent a couple months talking about it with our current members and transitioning some folks that could be what we now call commercial banking members. So our distinction now is if we call it business banking, that’s essentially a small banking member and we still support that in our retail environment the way we always have. And then we have our commercial banking members who are the folks serviced by our commercial banking team.

The numbers I have handy are from May 31, 2024 through June 30, 2025, and over the course of those 13 months, consumer, or ‘person’ deposits, were down 3%. Meanwhile, we were up 44% in commercial, or ‘organization’ balances, and the portfolio as a whole, person plus organization, was essentially flat – down 1%.

Our current commercial portfolio is only 10% of our portfolio at large, so we’re talking about much smaller numbers on the commercial side and much bigger numbers on the consumer side. So 44% sounds amazing as a year over year, but it is still a smaller part of our portfolio.
So it’s really working. And when I look at our average balances, our average person balance is up 7% in that same time period, which is encouraging, and our average organizational balance is up 17%. So that brings our total deposit portfolio up in average balance about 9%.
When we broke these numbers out, we started to feel better about our deposits. You know, we went through the liquidity crisis like everybody else, so we’ve been in this fire drill for a couple of years, and then we were starting to see it sort of balance out and at least get flat, and up and to the right on some months. And then I dug into these differences and it is so clear the difference-maker here is the commercial for us.

CU Times: You also previously noted that Amplify planned to make up for lost fee income with interest income, interchange income, and non-interest income through mortgage origination and loan sales. How has this worked out?

Armijo: We now have the available liquidity to be able to do that. The timing of all this was difficult because of what happened with interest rates – we were getting new accounts and getting the funding in, and then all of a sudden the market essentially shut down from a lending point of view.

So the originations piece was difficult, but we’re in a position now where the market is operating in a more usual way. Nobody’s shouting from the rooftops about their excitement on the loan side, but there’s at least opportunity to do some loans and sell loans into the secondary market. So we believe we’re about to see that impact.

What we’re already seeing is the impact on our interest expense. So our play here is if we can’t get the funding from our own members, then we’re getting that funding from non-member CDs. It makes sense for [Amplify] to pay out of pocket for the services and cost of treasury management, and not carry any of those costs to our members because I’d rather keep their low-cost deposits than pay 5% on a non-member CD. Until every dollar we have the ability to lend out is a member dollar, then that math is going to make sense for me.

What our history has told us is we can lend really well when the market gives us that chance. So if I can keep fueling the funding side, I have confidence I’m going to keep going on the lending side and that we’ll see that income play out.

Let’s say we can get as much funding as we need to be able to get rid of every non-member CD that we’ve got at a rate that’s higher than what we want to pay. Well, then I’m just going to turn up lending at the same time. I’m just going to increase what I want from a funding point of view to be able to keep those in lockstep as much as possible. I say that to say there is no world in which we are anticipating ever charging fees for treasury management. There might come a time where the out-of-pocket expense that we’re paying towards this is not being compared to the price of a non-member CD, because we’ve rolled those off and that’s not an issue that we have, but there won’t ever come a time where we would institute fees.

CU Times: Since eliminating fees, how has member behavior changed in terms of overdraft activity?

Armijo: [When we were about to become fee-free,] a lot of the pushback from the industry was, ‘If you don’t charge for overdraft, people are going to go crazy overdrafting, and you’re going to have a bunch of charge-offs.’ And what we found was the opposite.

What would we have collected in fees for the way that people use overdraft today is probably significantly more than we did before because it is now for us a free service. And we still offer it with all the same limits that we previously had, so it’s not as if you can overdraft your account to unlimited amounts. We found that people actually use it as a service, and we actually found at the end of one year that we had fewer charge-offs from overdraft than we did in the previous time period.

When you realize that you didn’t make somebody’s financial problem worse at the very moment they were in their most vulnerable place by adding a bunch of fees to it, why would you be surprised that they recovered more successfully? So when you think about it that way, it makes sense that people aren’t out there trying to maximize your overdraft limit and walk away. I mean, I’m sure some people are, but they’re going to get reported on ChexSystems and that can happen in any environment. But that isn’t how the member at large is behaving.

CU Times: Back in March, the NCUA stopped publicly releasing credit union industry data concerning income earned from overdraft and NSF fees, a rule that had been in place for a year for credit unions with more than $1 billion in assets. What was your reaction to this announcement, and how do you think the decision to keep this information hidden negatively impacts credit unions and their members?

Armijo: I was not surprised, but I was disappointed. And I think the reason I was disappointed is because at Amplify, we have a philosophy that we call radical transparency, which essentially guides the way we communicate, primarily with our employees but also with our members. We state it that way because the default setting of our industry is ‘need to know.’ It’s sort of like, ‘I’m not going to tell you unless I have a reason to tell you.’ And we believe the opposite is a much more effective default setting. So to us radical transparency means unless there’s a reason you shouldn’t know it, I’m going to tell you and I’m going to tell you what the rationale is as to why we do things. I’m going to talk to my customer about how I make money, because I want them to know how I make money and then they can decide if they want to be a customer.

If we are not embarrassed about how we make money, we shouldn’t be afraid to tell people. And so why is our industry fighting so hard against revealing the income that comes from NSF and overdraft?

Banks have had to disclose this for a long time. Why do we as credit unions, who say we are people helping people, not want to tell you how much of our business model comes from fees generated because someone didn’t have money?

I believe it is contrary to what we say our mission is as an industry and the fact that we were so concerned about not releasing that information just makes me disappointed.

How much of our political capital was spent on this instead of on the tax exemption or interchange income? One of the reasons we can go fee-free is because we have interchange income, which is value driven income paid by the merchant who is benefiting from the transaction. I have no problem with fee income – I have a problem with fee income that is penalty driven, not value driven. So we’re spending, as an industry, all this time and energy and capital to try to protect penalty driven income that has an outsized impact on people of modest means, instead of something like interchange income that I can build a business off of and that has slowly been eroded for years, that has so much regulatory pressure. So we’re choosing the overdraft conversation instead of the interchange conversation, and where our industry landed is, ‘Stop looking at it and then we don’t have to fight about it.’ I understand how that’s politically expedient, but I don’t believe that is in the spirit of the mission our industry should have.

CU Times: Have other credit unions followed your lead and eliminated fees in recent years?

Armijo: Our hope was that we were just going to be the first credit union [to go fee-free], and that we were going to lose this competitive advantage because people would see that there’s a huge demand for this. Then we could just make money the good old fashioned banking way, and have other streams of income that are value driven. So our hope was if we do this, it can be evidence that you can run a financially successful organization without this fee income, but that hasn’t happened.

We’ve had a lot of phone calls and we’ve been on some industry webinars where it’s sort of, ‘Tell us how you did it,’ and every one of those opportunities that we get, we take. We want other people to do this. And you know, not everybody can do it the way we did. One reason we could do it the way we did, which was [to eliminate] all fees all at one time, is because that type of fee income was a smaller percentage of our non-interest income than it is for a lot of institutions. For most institutions of our size at that time, this type of fee income was about 25% of their non-interest income. It was only 4% of ours. So we already had less at risk than other organizations would. So I always say, you don’t have to do it like we did, but please move in this direction. There’s a way you can do it to gradually get there over time that your finances could absorb, even if you’re more reliant on this stream of income generally.

But I’m not aware of anybody who’s actually done it. There might be some who have reduced some fees, but I’m not aware of anybody else who’s done something similar to us.