Four smart strategies for maximizing debit interchange revenue

by Bill Prichard, Co-op Solutions

Credit unions have a limitless need for non-interest income (NII). Often more stable and predictable than its interest-based counterpart, NII can be a reliable port during even the most turbulent of economic storms.

Having just lived through such a tempest, credit unions are emerging from the COVID-19 crisis with a renewed sense of urgency around NII growth.

Aside from a continued focus on business continuity, credit unions are also staring down potentially disruptive clarifications to Reg II, the implementing regulation of the Durbin Amendment. As card-not-present (CNP) transactions continue to grow, the Fed is seeking to clarify that CNP transactions must comply with Durbin’s prohibitions on network exclusivity and routing restrictions.

While CO-OP strategists are big fans of trying new things, we are also strong advocates for leveraging existing strengths. For debit card issuers, interchange income is one such strength. Optimizing revenue from the debit card portfolio is among the most efficient ways of earning unprecedented levels of NII volume, while keeping member best interests in mind.

What follows are four strategies for doing precisely that, each cultivated from the experiences of CO-OP’s SmartGrowth Consultant Services team.

Simplify Network Relationships

Credit unions that want to boost debit card interchange may find that consolidating network relationships to one major brand, such as Visa or MasterCard, and one unaffiliated network, such as CO-OP Pay, may do the trick. Streamlining partnerships benefits credit unions in two ways: 1) It gives merchants fewer options for least-cost routing; and 2) concentrated volumes set credit unions up for better network agreements.

After consulting with CO-OP’s debit network experts, Five County Credit Union made network changes that ultimately spiked its debit interchange revenue 22 percent.

Put a Stop to Auto Renewals

It is not uncommon for a credit union cards team to discover auto-renewal terms within their network contracts. Many are under the impression their network agreement is coterminous with their debit processing agreement. This is not always the case. Indeed, CO-OP continues to hear from credit unions that are surprised to learn of different terms for network agreements vs. processing agreements. Even when those agreements originate from the same vendor, one may include easy-to-miss auto-renewal notifications, a circumstance that certainly reduces negotiating power.

As soon as possible, cards teams should review their existing contracts to see if they are governed by such rules. If auto-renewal terms are in place, the credit union has options. One is to serve the network with a non-auto renewal notice to prevent contract terms from rolling over while the credit union conducts its due diligence to streamline agreements.

Ramp Up Top-of-Wallet Strategy

Regardless of network agreements, every credit union must continuously check in on its top-of-wallet strategy to ensure it’s on par with fast-changing consumer expectations. This is truer now than ever, as the metamorphosis of physical wallets into digital ones accelerates exponentially.

Achieving top-of-wallet positioning today can take many shapes depending on what is most important to priority stakeholders:

The most successful card issuers take an agile approach to top-of-wallet and are enthusiastic about frequently surprising and delighting cardholders with modern features. That’s how the best issuers continuously exceed expectations and earn primary financial relationships with more cardholders.

Leverage CO-OP’s Collaborative Approach to Debit Processing

Interchange income is a crucial piece of every debit-issuing credit union’s NII pie. It is worthy of the extra attention and strategic maneuvers necessary for optimization. That is why CO-OP’s strategists are continuously looking ahead to changes in market realities, cardholder preferences and behaviors, network rules and federal regulations. It’s how we ensure our team is helping credit unions make the right maneuvers at the right time.

Our experts regularly consult with individual credit unions to provide analysis that takes both interchange income and processing expense into account. We also offer experience-based suggestions on marketing and incentivizing debit use to maintain top-of-wallet positioning and boost cardholder experience through integration with emerging digital payments solutions.

Credit unions that partner with CO-OP for debit processing and the CO-OP Pay network benefit not only from our consultative approach to income optimization, but also from a continuously growing ecosystem of capabilities, including analytics and reporting, cardholder account servicing, digital payments and banking API integration, consolidated administration and so much more.

Learn More

To request more information on debit processing, please contact a CO-OP Client Business Executive by calling 800.782.9042 or email

Also read “A Credit Union CEO’s Guide to Winning the Payments Game” by clicking here.