DES MOINES, Iowa-Credit unions are certainly feeling ROA pressure today, which prompts one person to ask if enough CUs have plans in place for creating alternative revenue sources.
Jeff Russell, senior advisor for The Members Group, noted there is much more pressure on fee income than in recent years, and that it will only get tougher to keep ROA at existing levels. "It does not feel like this pressure will change in the short term for sure. Credit unions have to begin formulating plan Bs, looking at new revenue streams."
Russell cited the pressure already on debit interchange from the Durbin Amendment, and now there is the possibility that credit card revenue will dip. "This Visa and MasterCard settlement has thrown a measure of uncertainly into the marketplace. It will impact credit unions at some point. If merchants accept the settlement, it will be about a 10-basis-point reduction in interchange for eight months in 2013. But the biggest question is what will happen if the merchants do not accept it."
Credit unions also have to pay close attention to what the fledgling regulator CFPB may do with overdrafts and all the attention the recent lawsuits around transaction posting polices could do to this deep revenue source.
"The pressure is coming from all sides, debit, credit, overdraft... How these things get replaced has to be a question more credit unions ask, and solve. Add in the low rate environment and spreads decreasing, and CUs need to address this now. It's not a burning crisis platform. But if you have not done your planning at a point in time when this becomes a burning crisis, you will have fewer options."
This special report on Strategic Planning is the second in a two-part series. Credit Union Journal readers can find part one, which featured one-dozen people offering different insights, in the Aug. 6 issue. Additional resources can be found at www.cujournal.com by searching "Strategic Planning," which will include not just coverage in these two issues, but coverage in previous issues as well. Credit Union Journal welcomes your feedback.