Perhaps it’s a sign of the times, but the CU Revenue Sources session played to a full, and fully attentive house. Hosted by the CO-OP trio of Caroline Lane, Lynn Kneebone and Gail Tofil, the discussion covered current legislation, how to run a profit analysis and how to use and benefit from a portfolio optimization tool.
Lane outlined how interchange revenue is being positioned as “an evil” by groups such as the Merchant Payment Coalition. However, fortunately, these groups’ attempts to convince Congress to enact legislation to set standard rates (which would effectively eliminate free market forces) are not getting much traction in Congress. She cited the U.S. GAO’s (Government Accountability Office) own study revealing that consumers have benefitted from competition in the credit card market. Cross your fingers.
Understanding the true cost of transactions was a key discussion point of Kneebone’s. She shared examples of credit unions that use two or even three processors and how a profitability analysis can reveal where pennies are being lost in every transaction. For one credit union, those pennies multiplied out by all their members’ transactions for the year added up to lost revenue of more than $500,000. Ouch. She encouraged the audience to carefully review their summary reports to get a true understanding of the cost of their transactions.
Tofil demonstrated the latest tools that credit unions can use to optimize their portfolios and maximize interchange income. She explained the importance of understanding members’ behavior (e.g., where are they spending their money), how to influence their behavior (e.g., selecting a rewards program that is relevant) and ultimately how to measure your results.
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