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Posted: Dec 14, 2017
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It’s imperative for credit unions to understand interchange – the biggest component of non-interest income.

One of the most misunderstood, and possibly the most misaligned topic in the credit and debit card world is interchange. At a summary, it is a fee paid by a merchant, paid to the issuer, each time a credit or debit cardholder uses a card, in a store or online. The fee covers the cost of processing the credit or debit card; for a credit transaction the fee reimburses the issuer for the interest on carrying the balance during the cardholder’s debt repayment grace period; and the fee is intended to address the cost for zero fraud liability, which reimburses the cardholder in case of fraud. In addition, higher interchange is charged for signature rewards credit cards, to cover the cost of additional cardholder benefits such as cash back or auto rental collision damage waiver. The practice of a merchant paying the issuer interchange was established in 1971, when Bank Americard set 1.95% as the standard rate as compensation for the risk of card-issuing banks. Interchange is also paid to the ATM owner each time a cardholder gets cash out. Seems simple enough, but there’s much more complexity to it.
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Posted: Jul 13, 2017
Categories: Regulations, Consulting
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Thanks to recent NCUA changes to open up and simplify member business lending.

In Callahan & Associates’ most recent credit union Trendwatch, record high loan originations was one of the highlights of the growth of credit unions’ portfolios, placing the total loan portfolio held by credit unions in the U.S. at close to $900 billion. While auto loans led the growth in percentage terms at 16.8%, a surprising category emerged in second place at 15.5% growth – Member Business Loans (MBL). The driver of this come-from-behind category of lending is the recent changes made by the NCUA to open up and simplify member business lending. While some credit unions have jumped on the opportunity created by the changes, many credit unions still have not dove back into granting the type of loans that first created credit unions – member business loans.
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Posted: May 30, 2017
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Declining authorizations may have unintended negative consequences on your members.

Some credit unions are declining authorization for Facebook payments due to the relatively high number of fraud cases being reported for that merchant category code. But declining these authorizations may have unintended negative consequences on your members. Here’s why.

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Posted: Nov 3, 2016
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How Credit Unions Can Grow Profits From This Opportunity

People don’t like to pay fees, and many credit union members love their credit unions precisely because they don’t like the fees that big banks charge. But there is one area where members may be willing, and actually want to pay fees. Credit cards with high annual fees that also come with equally generous benefits are in high demand. And credit unions should take advantage of this increasing appetite for what are known as signature, premium, or elite cards, along with the high interchange rates that come with the card.
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Posted: Jul 22, 2016
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A follow up to previous TPR article on this topic

Fraud continues to be the number one reason why a cardholder moves a card from top of wallet. And fraud isn’t cheap, costing the issuer in liability for the fraudulent charges plus the cost of reissue.  Additionally, there is the potential of lost revenue from the card being moved from the number one position in the cardholder’s wallet.

A previous thought leadership article on ThePaymentsReview.com introduced the concept of putting the cardholder in the middle of the transaction, meaning enlist the cardholder to take ownership of monitoring card purchases and respond quickly to potential fraud.

A shining example of success implementing this strategy took place over the 4th of July weekend. FIS, CSCU’s processing partner and international provider of financial services technology and outsourcing services, rolled out a new product, SecurLOCK Communicate.  The product alerts credit and debit cardholders of potential fraud in real time via a two-way interactive text message (SMS), or a voice call, or an email.

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