Payment Trends and Community Banks: Do We Need to Pay Attention or Is it Just Another Squirrel to Chase?

While it is vital to pay attention to payment trends in the community bank space, an FI would be foolish to focus on trends over building a solid foundation for its debit card program. The debit card program, which should be handled as a product, holds the key to greater profitability and long-term growth and performance. 

There are three main ways to strengthen the existing debit card program: 

• SIG brand relationship. Enhance the FI’s relationship and incentive agreement with your debit card brand (Visa, Mastercard or Discover) to ensure your net signature interchange income is as high-performing as possible. An optimal brand relationship can provide valuable income incentives, expense reductions, and even increased interchange through improved portfolio performance.

• PIN POS network arrangement. Optimizing your PIN network arrangement could be the best income boosting project in next year’s plan. All card-issuing FIs are required by Durbin to have at least one PIN network that is not affiliated with their card brand. Network choices should be made according to whichever offers the best net interchange rate for the FI, with both income and processing expense in consideration.  And do not take the processor’s word for it! Always keep in mind that limiting merchant options to your preferred network ensures the FI gets paid as much as possible on each POS transaction. 

• EFT processing system. Some FIs are unaware that their core provider’s EFT network may not be the most cost effective, even when considering full relationship pricing. This is also true for their PIN networks. The EFT system must be negotiated simultaneously, but separately from the core contract, much like brand and PIN. A simultaneous but separate approach allows all vendors to bring their best EFT pricing to the table and ensures that the FI can choose the lowest cost system. 

Once a strong debit card program foundation is built using these principles, the FI is in a great position to focus attention on growing portfolio performance and keeping an eye on payment trends that will enhance its profitability and customer service. 

Profit Resources specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes, and effective use of technology. Contact us to learn more about our personalized approach to propel growth and improve profitability.