The importance of a payments strategy

I recently came across a shocking statistic: 87 percent of U.S. banks do not have a formal payments strategy according to the American Bankers Association 2017 Payments Strategy Survey. Given the large number of technology firms entering the financial market and positioning themselves among consumers, merchants and financial institutions, it seems that banks would see the competitive threat and quickly take action. Instead, they may be simply ignoring it and continuing with business as usual.

For credit unions, the survey findings highlight the value of a clear payments strategy for increasing membership. Several factors come into play as you plan for growth, including interchange, credit and debit cards, and person-to-person payments.

Interchange is enormously important to the financial services industry. Based on data from Raddon Performance Analytics, income from the combination of debit interchange (28 percent) and credit interchange (19 percent) now represents nearly half of all non-interest income for the typical institution. Part of the reason for the low numbers is the decline of overdraft. However, Americans’ continued use of cards as their primary method of payment is making an even bigger impact. The result of the shift can be positive for credit unions that have a large number of members using cards and even better if those members are doing so responsibly.

 

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