Checking without overdraft fees, card security and access to liquidity.
By Bob Giltner
Credit unions take great pride in their service to members, so it may be surprising to hear that many CUs are, unintentionally, underserving their members. Based on member demand, credit unions should be providing additional services in three areas: a checking account without overdraft fees, a secure debit card and easy online access to liquidity.
No-Overdraft-Fee Checking Currently, few or no U.S. credit unions offer checking accounts without overdraft fees. Meanwhile, Wal-Mart, prepaid cards and neo-banks like Simple make a living by promoting checking accounts without such fees. Some argue all accounts have no overdraft fees if members just balance their checkbooks, and that overdraft services protect members from merchant return check charges. Yet such a perspective misses the changes in member needs and the marketplace. Millennials, those aged 18 to 35, now comprise the largest age segment in the nation, and they are clearly opting for non-bank payment providers, as shown in the recent Viacom report, “The Millennial Disruption Index,” which surveyed 10,000 people within this age group. Roughly three quarters of those surveyed felt better about transaction services with Amazon, Google, PayPal or Square than traditional checking accounts. Why? These alternatives and prepaid cards do not have overdraft fees and enable this group to more easily set and adhere to their budgets. Credit unions should offer such accounts and will find it does not cannibalize existing revenues because those who choose to incur such fees are likely satisfied, and will continue to do so.
Debit Security There is a never-ending news story chronicling the latest retailer whose cards were compromised, and consumers are increasingly frustrated. PayPal and prepaid cards promote that use of their services gives more protection and control. They assure the consumer that if a transaction is compromised, the transaction has no ties to card numbers with access to the complete checking account. As a result, there is a growing demand for their card products, which now capture nearly 25 percent of all U.S. debit transactions. To compete for this business, credit unions could simply offer a “companion” debit card as a separate checking account with a zero balance when not in use. Otherwise, this business will be lost to prepaid card suppliers.
Real-Time Online Liquidity Credit unions have long been the best at meeting the loan needs of their members, but unfortunately, mobile apps and the Internet have changed the delivery of such liquidity significantly. Online players like Lending Club, LendKey, FlexWage, Float and BillMeLater by PayPal provide real time loans in minutes. These solutions are very attractive to consumers because they offer automated, mobile loan services that enable purchases while on the go, even without having an available account balance. Using cloud-based technology, credit unions can automate their underwriting processes to make something similar happen in real time. Doing so would allow credit unions to easily provide similar services via an app or online. Non-CU competitors are stealing revenue from CUs by appealing to these documented member desires. Credit unions could easily provide these services without investing in expensive technology or complex services.
Bob Giltner is CEO of Louisville, Ky.-based R.C. Giltner Services, a provider of PaySound®, a consumer payments checking solution that offers no overdraft charges ever for a flat, monthly fee, enabling community and regional banks and credit unions to acquire new customers, increase revenue and cannibalize no existing fees. Also read "Tech Time: Do 'Delivery Redirect' Now" and "Replace Fee Income--and Improve Service--With the Opposite of Disruptive Technology" from Credit Union Management magazine.
