Latest debit issuer study finds credit unions can benefit from “new normal”
Guest post written by Steve Sievert, Executive Vice President, PULSE Network. Steve brings the debit issuer study to life on October 30, 2:00 pm–3:00 pm ET during a free webinar. Register here »
Discover Financial Services is the NAFCU Services Preferred Partner for PULSE Network Debit Card Programs and Debit Networks.
Credit unions are experiencing a “new normal” in the debit business, even though most are not bound by the interchange cap imposed by Regulation II. Despite some downward pressure on interchange rates and increased caution throughout the financial services industry, credit unions have competitive advantages when it comes to growing their debit card portfolios.
In the 2013 Debit Issuer Study commissioned by PULSE, we found that issuers continue to grow their debit volumes even in the face of significant regulatory changes. Fraud continues to be a challenge, but issuers are seeing success in mitigating fraudulent activities. And many are looking beyond classic demand deposit accounts with debit cards to other means of expanding their payments businesses.
Of course, just because a credit union does not have $10 billion in assets to classify it as a “regulated issuer” under the terms of Reg II does not mean that it isn’t impacted by the new regulatory era. The study found that “exempt issuers” saw competition among debit networks drive down their average interchange rates by $0.02 per PIN and signature transaction. The decrease has been far less extreme than expected just a couple years ago. Exempt issuers surveyed in the 2011 Debit Issuer Study (conducted prior to the implementation of Reg II) expected an average decline in interchange revenue of 73 percent. In reality, the decline has been less than five percent.
Despite regulatory and economic changes in the debit industry, one aspect of the market has remained constant: the number of debit transactions continues to grow, providing credit unions with opportunities to differentiate themselves and improve their portfolio economics.
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