RANCHO CUCAMONGA, Calif.–CO-OP Shared Branch said it has made pricing changes and is now working to further alleviate “concerns” expressed by numerous credit unions in the Pacific Northwest that BECU’s cashless branches are forcing unreasonably high costs and other strains on them.
The $18.6-billion BECU operates more than 50 branches in the Puget Sound area, in addition to branches in the Spokane market and across the country in South Carolina.
The BECU branches are both smaller in physical size and staffing, using a no-cash model that encourages members to visit the ATM. But in many cases members want more cash than they can withdraw from those machines—in some cases far larger amounts as they make withdrawals for items such as cash purchases of automobiles—and BECU, a participant in CO-OP Shared Branch, points those members to nearby branches of other credit unions that are part of the CO-OP network.
The volume of transactions from BECU, which has more than 1.1 million members, has numerous credit unions in the market upset, with those CUs arguing the current pricing model is not adequately compensating them for the in-branch and cash-handling costs the giant BECU has offloaded to them.
New Pricing
But CO-OP Shared Branch President Jim Hanisch told CUToday.info new pricing that will go into effect in February of 2019 should help address the expense concerns of the Puget Sound-area CUs, and that it is further looking to meet with credit unions in the area prior to the price change to resolve other differences.
“We had been hearing some noise from a number of markets that compensation to acquirer (CUs) was not fair,” said Hanisch. “The big thing is the imbalance between acquirers and issuers, between supply and demand. We needed to look at adjusting the pricing.”
To that end, approximately two months ago CO-OP Shared Branch announced plans to adjust its interchange rate from approximately $2 per transaction to $3.60.
Response from Regions
CO-OP Shared Branch is organized into 28 regional groups, including four regions directly under the control of CO-OP: California, the Pacific Northwest, Michigan and the D.C. area. Hanisch said the reaction from the majority of regions has been that the new pricing is appropriate, while some have thought it high and others too low.
Hanisch acknowledged that some acquiring credit unions have pushed to raise the interchange rate to $5, declining to say if credit unions in the Pacific Northwest have been among them.
“We are hopeful the pricing changes will address market imbalances,” he told CUToday.info.
‘Distinct Market Problem’
But he also admitted that the Pacific Northwest has its own “distinct market problem” and that there is a “lot of emotion in the market.”
Indeed, during the Northwest Credit Union Association’s MAXX Conference in Tacoma, Wash., recently, three different credit union execs used the word “implode” in describing what would happen to shared branching if pricing changes aren’t made and their concerns aren’t addressed.
It should be noted that CUToday.info also spoke with the CEO of another large CU who confirmed his CU sees a significant number of BECU members looking for cash, but who also said many BECU members end up moving their membership since they are coming into the branch anyway.
Addressing One Rumor
Hanisch said CO-OP Shared Branch isn’t waiting until the February price increase to see how things work out in the Puget Sound market. Instead, he said it is planning to pull together CU executives in the area and that “regional pricing” may have to be considered. Hanisch added that one “rumor” that not everyone credit union will be treated the same is incorrect; they will be, he said.
Issuer premiums will be “assessed to the organizations that meet the criteria,” Hanisch said.
“We are going to facilitate this before the end of the year,” Hanisch said.
What Report Indicated
Hanisch said CO-OP had earlier retained Cornerstone Advisors to review the shared branching model and the interchange issue between issuing and acquiring credit union. Cornerstone’s report found a decline in shared branch transaction volume of $4-5% per year, which was “no surprise,” said Hanisch, but “it also confirmed shared branching is a key feature and asset of the credit union movement.”