Exploring Strategies to Manage Interchange Income

Team up with networks that value CU interests

August 30, 2011
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Consider a single PIN debit network strategy as a way to relieve downward pressure on interchange income. That comes from Stu Bloom, payments industry consultant, during a recent webinar hosted by Credit Union 24.

Bloom reviewed the Federal Reserve’s final interchange regulation’s main components:

  • The interchange cap, which limits interchange income to 21 cents per transaction (plus five basis points for the transaction’s value) and a fraud adjustment fee of one cent. This applies to financial institutions with $10 billion in assets and more (currently just three credit unions).
  • The exclusivity prohibition, which requires financial institutions to employ at least two unaffiliated networks, and limits financial institutions’ control in merchant routing options.

In a single PIN debit network strategy, credit unions use one signature-debit network and one PIN-debit network, he says. And because few cards are registered to PIN networks, merchants must choose the only valid routing option—the one more profitable for your credit union. This way, your credit union is compliant and receives income.

Bloom advises credit unions to team up with debit networks that:

  •  Value credit unions’ best interests. “You want an organization that is an advocate for credit unions, is involved in the payments world with a credit union perspective, and operates with common objectives, under a philosophy that is in tune with your own,” he says.
  • Support the dual interchange schedule. This allows eligible credit unions to continue receiving market-level interchange income. “Credit unions are entitled to market-driven interchange under the law,” said Bloom. “We believe that that part of the law is equally as important as the caps themselves.”

Additionally, credit unions may find an advantage in that most competitors (primarily banks) will be subject to the interchange fee cap, Bloom says. 

Many larger institutions already are increasing fees to make up for lost income. Credit unions products and service will appear even more outstanding in comparison, he says.

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Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

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