Carrie Hunt, the senior vice president of government affairs and general counsel for the National Association of Federal Credit Unions, said in a Wednesday editorial that credit unions will have to adapt to a changing payment industry.
Hunt pointed to the July court ruling on debit card swipe fees, in which Judge Richard Leon for the U.S. District Court for the District of Columbia invalidated most of the Federal Reserve’s interchange rule.
She said the ruling is “just one of many developments” that will result in major changes to the payments industry as financial institutions work to remain competitive.
“The Fed is appealing Judge Leon’s decision and has asked that a stay remain in effect while the appeal goes forward,” Hunt said, according to CUInsight. “The judge may grant that request, or he may not. Regardless of the outcome, other developments in the market make it clear that changes are ahead for card services providers.”
Hunt also pointed to other changes, such as the growing prepaid card market. Prepaid cards are used to disburse government benefits and by those working for certain employers—a market that could become an opportunity for credit unions that may be unable to sustain debit card services programs.
Another potential market change involves the widespread adoption of the EMV standard, a global standard for smart card chip-based payment. Europay, Visa and MasterCard have already begun the switch as part of an effort to combat fraud, a risk associated with the magnetic stripe technology currently in use.
While not all financial institutions will adopt EMV, consumer demand may encourage the shift.
“While EMV is safer and more secure for consumers, the cost to switch systems and issue new cards to customers is more expensive than the traditional magnetic strip credit and debit cards,” Hunt said, adding that NAFCU estimates costs to at least double, according to CUInsight. “Financial institutions will have to prepare for these changes and be ready to incur the extra costs.”