TAMPA, Fla.—As the year 2020 approaches, credit unions will likely need to institute more relationship pricing and fees to support existing free services, as many new competitors will challenge current revenue structures, predicts CSCU.
Tom Davis, CSCU chief technology officer, told CUToday.info that all the new providers will not only push the limits of CUs’ existing revenue structures, they will also present new revenue opportunities.
“Non-interest income will become a bigger part of overall income,” said Davis. “As many of the providers in the space change the way they earn revenue for their services, existing financial providers will need to evolve to compete. FI revenue may have to come from other products to subsidize free services. Fee structures may have to be implemented for relationship pricing.”
Fees, too, may need to be implemented for non-profitable members to incent more profitable behavior, added Davis. “For example, free checking accounts may require a certain level of debit/credit card activity.”
Fees For Services
Fees for services may also need to replace traditionally free services, as well. “For instance, checkless checking accounts utilizing prepaid cards.”
Tom Davis, CSCU
Davis asserted that relationships with non-traditional partners, like merchants, may become more commonplace. “There may be ways to work with these partners to drive volume to their business in a synergistic means to provide new revenue streams.”
All financial services providers will need to examine their loyalty structure to incent profitable behaviors, noted Davis. “For example, rewards just for using a credit card, may be replaced with rewards on multiple products used in the more profitable ways.”
Just as many experts have been suggesting, Davis said CUs will need to make better use of member data.
“Data will be a critical asset to the credit union. Monetizing the data is just one situation financial providers will have to consider,” he said. “They will also need to implement programs to collect the data and provide predictive analytics to be used internally was well as externally. Partners that provide services in this space will start to become more pronounced. Systems and processes will need to be implemented to take advantage of this opportunity in the future.”
New Fraud Attacks
Davis cautioned that by 2020 fraud will also be coming at FIs in non-traditional ways.
“EMV and tokenization will drive fraudsters to other weak links in the payment space,” he said. “With many new payment providers riding on top of our traditional services, for example Venmo, we will need to educate and protect our members.”