Payments P&L

By Scott Hodgins

My clients often wonder if they are driving the payments train or if that whoosh sound they hear is the train passing them by. We’ve heard about the massive changes in the payments world that are either here already or rapidly approaching: mobile wallets, prepaid debit, real time P2P payments, Durbin, etc.

Cornerstone Advisors estimates that the credit union industry makes between $6 billion and $8 billion annually in non-interest income from payments services alone, and regulatory pressure is pushing these numbers down. According to the National Credit Union Administration, annualized first quarter 2013 net income for the CU industry was also about $8 billion. So we need to look no further than NCUA’s data to find a big reason to be concerned about payments. What’s at stake? Only the profit margin for an entire industry.

Yet most credit unions do not even take a stab at measuring the performance and profitability of their payments channels.

Cornerstone is a huge proponent of developing a detailed, quarterly review of the profitability of all payments channels: debit, ATM, checking, online bill payment, credit cards, etc. We call this the “Payments P&L.” A P&L for the credit card channel might look like this:

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