Credit Unions Pay More

Dan Fisher

With over 35 years in the financial industry, Dan M. Fisher has proven himself as a leader in the financial industry holding roles as the former director of the Federal Reserve Bank of Minneapolis and former Chairman of the ABA Payment Committee.

If you were wondering if credit unions pay more than banks, here is your proof.

Credit Unions on average, hands down, really do pay more than banks for core application and EFT processing. No matter how you slice it (by member account or per million in assets) The Copper River Group has observed that proposals and contracts associated with credit unions are more costly than a bank’s of comparable size.

*Note: These observations are based solely on TCRG’s clients

Furthermore, interestingly enough it does not matter if the vendor sells core processing applications to both banks and credit unions or the vendor sells exclusively to credit unions. The prices across the board are higher than banks.

First of all, a vendor is clearly not going to tell your credit union that you are paying 20% more than the national average, nor are they going to tell you that a community bank in the same city or town is paying significantly less than you. They will tell you that you’ve been given best deal they have provided in years because you are a long-term client, or this is your first renewal, or they want you to know that you made the right choice.

In essence, they will tell you anything to make you think it is a great deal. On the flip side, your colleague credit union is unable to share their contract pricing with you due to non-disclosure agreements; but wouldn’t you like to know.

Our database of clients clearly shows that before we become involved, they are paying between 20% and 50% more per million in comparable assets than a bank does.

Why you might ask? Well, it is not that credit unions are so different, because they are not. System, hardware, staff and even products are the same. Online or mobile banking, new accounts, regulatory compliance are all the same. We have also found that vendors will be the first to tell you that you don’t need to use a consultant and they’ll give you a great deal if you bypass a consultant. Okay, first question… how would you know that your Credit Union is getting a great deal?

A major common denominator we found is that in most cases a credit union did not competitively bid their core processing or EFT contract. If the vendor knows you are going solo and not using a competitive Request For Proposal or a knowledgeable industry resource, you are toast! Burnt toast! Of course, we also find this situation common with banks when they do not competitively bid. Not to be cynical, but 80% of all banks and credit unions are not happy with their processing vendor regardless how outstanding they claim their service to be.

The key is to position your non-profit credit union in line with competition by virtue of a competitive bidding process. It is the only way you can realistically rein in the cost. Period.

Remember…

The vendor always works for the vendor.

The vendor is concerned only about their profits.

The vendor will never tell you that you could obtain a bigger discount.

The vendor will never tell you that your competitor is paying less and they are smaller than you.]

TCRG continues to work for fair pricing in the market. We have the added benefit of not only comparing credit unions to each other but comparing credit unions to banks similar in size especially when it comes to proposals. TCRG believes in competition in the marketplace otherwise vendor behavior can spiral out of control. The idea If you don’t use our consulting services, we still strongly encourage you to use a knowledgeable resource and competitively bid your business!