In the Interest of Interchange, Plus …

graphic with words interchange fee
Lisa Hochgraf Photo
Senior Editor

3 minutes

Payments University is teaching credit unions how to maximize their card programs for both income and relationships.

The Kroger grocery chain is poised to expand its ban on Visa credit cards: 21 supermarkets and five gas stations in California no longer will accept Visa credit cards starting Aug. 14. And Mastercard may be the next card to be rejected.

Why? The issue is the level of fees Kroger has to pay Visa.

Players in the payments marketplace are clearly duking it out to maximize the income they receive. The Kroger-Visa war is between two traditional kinds of players in the card ecosystem, a retailer and a card network. Fintechs are now adding an additional layer of complexity to this space, Tony DeSanctis told Payments University participants in the program’s second online session last week.

Senior director with CUES Supplier member and strategic provider Cornerstone Advisors, Scottsdale, Ariz., DeSanctis pointed out that each of the three major segments in the payments market—financial institutions/networks, retailers, and fintechs—has specific financial goals and customers to serve. When they are at odds with each other, as in the Kroger-Visa example, things can get dicey and even reduce payments options for some consumers.

DeSanctis noted that fintechs have only been significant players in the last five to seven years and that they’re much like credit unions, focused on serving people in the online space.

“They see things, as do we, migrating to online commerce even for in-person transactions,” De Sanctis said. “[Take the] Amazon Go store for example.”

Notably, fintechs are leading the way in leveraging payments transaction data for insights and marketing. “That’s really where the displacement (the unexpected marketplace changes traditional financial institutions fear fintechs may create) is a concern,” he explained, encouraging credit unions to look closely at the data they have on members and their payments—and how they can best leverage them to help them provide ever better products and service.

In the first Payment University online session, held July 18, DeSanctis described a different use of data—to examine and optimize a credit union's internal workings in the payments space. During that earlier program, he described a methodology for participants to collect such data as the number of PIN versus signature transactions for debit cards, and interchange income and net charge-off rate for credit cards. This data will be used in the in-person segment, Aug. 13-14, to help participants develop a payments strategy for their CUs.

“When we talk about your strategies, [we’ll also discuss how] you leverage your data to increase your relationships and member experience,” DeSanctis emphasized. When it comes to competing with other big players in the market, credit unions need to “figure out what your competitive advantage is more broadly and how you can position yourself. You don’t want to be in a place where you’re trying to outmuscle the big guys.”

Lisa Hochgraf is senior editor with CUES.

If you found this post intriguing, it’s not too late to sign up for the in-person segment of Payments University on Aug. 13-14—and the two online sessions are available by playback.

In The Future of Payments: Scenarios for Credit Unions 2018, CUES and Decision Strategies International (DSI) combined forces to apply scenario methodology to one of the industry’s most significant strategic topics.

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