Debit Card Competition Helps Credit Unions, Credit Card Competition Could, Too
You recently may have heard from credit unions, but they probably didn’t talk about how much debit card competition has helped them.
They didn't mention it? Well, just take a look at this report from the American Banker.
Credit unions use debit card competition to their advantage in the marketplace.
Credit unions formed Co-Op Pay to take advantage of their ability to negotiate among debit card networks. How does that work?
Co-Op Pay can do this because federal law ensures there must be at least two debit networks competing on debit cards. Without that, credit unions wouldn't be able to bargain among competing debit networks.
"Co-Op Pay is an effort to match larger banks' ability to use size when negotiating with payment networks. It also resembles recent moves from large merchants to push back on transaction fees."
– John Adams, Executive Editor, Payments for American Banker
This effort helps credit unions control the fee costs imposed by debit networks through bargaining.
Co-Op Pay is using the STAR network – a smaller competitor to Visa and Mastercard – through the bargaining process to help credit unions control their costs.
"The big thing for us is this provides some insulation from the impact of fees. We're taking the scale of the credit unions to bargain, and we can also add more functions for our members."
– Dean Michaels, Chief Strategy Officer for Co-Op Solutions
And get this: Co-Op Pay is not just helping with fees. It's also improving fraud protection by giving credit unions access to “predictive fraud scores”.
Big banks have a built-in advantage over credit unions on credit and debit cards – but with debit cards, competition gives the credit unions a chance to try to even the playing field.
Credit unions, just like merchants, should have the ability to bargain to get the best deals they can on credit cards, just like they do on debit cards.
The Credit Card Competition Act would allow everyone - credit unions, community banks, and merchants - to bargain because it would ensure there was a competitive market so that the big networks (like Visa and Mastercard) would have to compete to be on big banks' cards.
Every credit union and bank should have the ability to work with more than one network on its cards and use that bargaining power to get the best deal possible.
Congress should pass the Credit Card Competition Act to give credit unions a chance to bargain for the best deals.
COMPETITION IS BETTER FOR EVERYONE
IT'S TIME TO PASS THE CREDIT CARD COMPETITION ACT