The regulatory arena for credit unions is constantly evolving, and one of the most active areas in recent years pertains to debit interchange. The Durbin amendment requires debit issuers to maintain a minimum of two unaffiliated networks.
Co-op Pay Network is an unaffiliated debit network designed to enable credit unions to meet regulatory requirements as well as maximize non-interest income generated by their debit portfolios. Since it was launched over a year ago, more than 200 credit unions have signed up to participate in the network.
PSCU/Co-op Solutions hosted a panel discussion focused on the benefits of Co-op Pay Network at the 2024 Government Affairs Conference in Washington, D.C. The panel included Scott Rabe, SVP of Innovation and Automation at STCU and Rob Goodwin, Vice President of Network Strategy at PSCU/Co-op Solutions. Kasey Stinson, Vice President of Sales Enablement and Product Marketing at PSCU/Co-op Solutions served as moderator.
Kasey Stinson: Rob, what are some of the key benefits of Co-op Pay Network?
Rob Goodwin: The regulatory piece is important, as issuers need to support two unaffiliated networks to be compliant with the Durbin Amendment. Credit unions are covered with Pay Network, but there are also a lot of economic benefits, particularly in regard to expense control.
Since the Durbin Amendment was passed in 2011, debit expenses have slowly gone up and interchange has slowly gone down over time. It’s important to get control of that expense piece in order to maximize interchange income. If more of it is eaten up by expense, it results in less net revenue.
KS: Beyond some of these economic advantages, what are some of the other benefits of Pay Network?
RG: Within the PSCU/Co-op Insight Center, credit unions that participate in Pay Network have access to dashboards and analytics that give them a better handle on interchange income, where it's coming from, different merchant category codes and other portfolio performance data. This allows credit unions to analyze and guide member behavior and derive more non-interest income from their debit card program.
KS: Pay Network is issuer driven. Why is that important for credit unions?
RG: That’s my favorite part about Pay Network. In the past, almost all of the networks in this country were issuer-owned, which meant that the networks’ primary interest or concern was focused on the issuer. Fast-forward 40 years, and most of the networks in this country are now controlled or owned by a publicly traded entity. There’s nothing wrong with that, it's just that we feel that there's real power in being issuer owned.
PSCU/Co-op Solutions was founded on the philosophy of credit unions getting together to do something bigger that they can't do on their own. I love that four decades years later, that mission is still relevant. We are dedicated to getting more credit unions together on this network and offering them better terms for them over time. It’s really powerful to have a network where credit unions—the users and issuers of the network—also own it.
KS: The pandemic is behind us, however, it did really accelerate digital adoption as well as debit usage. What are some ways credit unions can take advantage of rising volumes and what impact does it have on network choice and management?
RG: Historically, debit volumes tend to grow at rates of about 6 or 7 percent a year, so over time your volume grows. The problem is, increases in expense or declines in per transaction interchange tend to be covered up by this top line growth in revenue. As an issuer, you might miss what's happening because a rising tide lifts all boats.
One way to think of it is it’s like the tire pressure on your car. If your tire pressure isn't optimized, then your miles per gallon goes down, and you're going to spend more on fuel over time. It's the same thing with your debit network. If you're not optimized, even though volume may be increasing, it’s costing you more, and you might not earn as much interchange because it’s being eaten up by more expense.
KS: Scott, thank you so much for joining us here today. When did STCU onboard with Pay Network and what was the process like for your credit union?
Scott Rabe: STCU has been on Co-op Pay Network for about six months now. We were looking to manage expenses, as well as add some services and features. What was pretty cool about it was PSCU/Co-op Solutions said, "Just pick a date, and we'll do everything else for you and you'll see it on the bill." So that was generally what the process looked like, and it was no work on our part.
KS: Great. That's what we like to hear, that it is easy for our credit unions. So, what was the catalyst for STCU to participate in Pay Network?
SR: Debit is very important for STCU. Members love to use it. It's the number one way they interact with the credit union, so it must always work well. We have to provide a lot of features and functionality on top of earning a competitive interchange and managing the expenses that happen behind the scenes.
So, when we looked at Pay Network, we saw that we got to keep all the benefits we had with our existing network only with the economies of scale, the bundling, the packaging, and in the future, all the better ways of looking at the data that we couldn't get on the previous network. For all those reasons, it was a no brainer. For other credit unions, there's really no reason that you wouldn't want to jump over to Co-op Pay Network. I suggest you just do it.
KS: Scott, you mentioned joining Pay Network was a no-brainer. What are some of the benefits you've experienced at STCU?
SR: One of the biggest benefits in partnering with PSCU/Co-op Solutions is that the dual network requirement is taken care of for us. It checks a couple of boxes and we know we have a trusted partner.
Participating in Co-op Pay Network truly does not take any effort on the credit union's part—the transition was seamless. PSCU/Co-op Solutions will do all the work and the savings are real. Over the contract period, it’s a significant difference in income, to the tune of millions of dollars. This allows us to finance other cool features that we'd like to bring to the table.
Previously, it was really challenging for us to see what was happening with our members on the network level. Now, Pay Network gives us access to data that will allow us to coach members on how they could better use STCU. I'm excited to start digging into that data and being able to be more proactive with how we drive debit.
With billions in incremental interchange income up for grabs, competition is fierce. Co-op Pay Network is a debit network designed to give credit unions a unique competitive edge.
Partnering with Co-op Pay Network can make all the difference for credit unions looking to grow interchange income, minimize network fees and feel supported as they navigate the complex world of point-of-sale debit. Choosing Co-op Pay Network as one of your unaffiliated debit networks gives you a strategic advantage to maximize non-interest income and support your bottom line.
