Generating Non-Interest Income in a Highly Regulated Environment

By John M. Floyd

Credit unions looking for ways to remain viable and competitive can no longer rely on conducting business as usual. As the opportunities to generate fees from traditional services are reduced, many are concerned with how to maintain a level of income that allows them to offer the services that keep them competitive. It’s a challenging balancing act at best: increase your bottom line while staying compliant and delivering the services and service levels your members demand.

According to industry experts, service charges on deposits have decreased substantially from levels reported just two years ago. And with ongoing regulatory pressures during that timeframe, the
two products that produced the most non-interest income – debit card interchange fees and overdraft/NSF fees – have been greatly restricted.

What actions can credit unions take to offset the reductions in net non-interest income losses as a result of these pressures? By following these five strategies, your credit union can streamline your processes, increase your non-interest income and provide services that more accurately reflect what your members want and need:

1. Let go of unprofitable products.

Constantly review product profitability to determine if an offering has passed its prime. If you introduced a product as a growth loss leader and now have enough – or even too many – deposit balances, it is time to remove that product from your list of offerings.

2. Look outside of the traditional revenue boxes.

Limiting your focus to the standard checking and savings accounts, auto and signature loan product offerings will limit your marketability and revenue opportunities. In today’s environment, consumers demand more sophisticated financial products that help them reach and maintain their financial goals. By diversifying your product offerings, you can increase your revenue opportunities and
remain competitive.

3. Change your delivery to a “Sales and Service” culture.

Train your staff to cross-sell peripheral products that result in increased revenues. Universal Financial Services representatives who can provide members with access to multiple services – such as opening new accounts and taking loan applications – provide convenience and are part of a more cost-effective operating strategy for the institution.

Also, basing compensation on production can be a win-win for both motivated staff and the credit union as new business goals are met.

4. Combine compliant products with great service.

You can set your credit union apart by providing your members with access to the products and services they need to manage their finances, such as an overdraft privilege program. Just make sure you provide full disclosure of all fees and usage terms.

While consumers continue to be wary of hidden charges, they are willing to pay for services that add value to their lives. By providing transparent communication and education regarding eligibility, appropriate program usage and repayment policies, you can strengthen the relationship you have with existing members. Plus, you can avoid regulatory concerns while earning the non-interest income you need to reach your performance goals.

5. Determine the best way to provide service to members

As consumers rely more and more on untraditional ways of conducting business, it is imperative to learn how your members – as well as non-members – want to interact with their financial institution. Do your competitors offer mobile, person-to-person or business to-business banking? If you want to remain competitive, it may be necessary to change your existing business model.

If you’re not sure what types of products and services your members want or need, ask them. Create a short survey to gather input on the value your members place on your existing offerings and ask them about their level of interest in services that you don’t currently offer, but would be willing and able to add.

Also, train your front-line staff on how to begin discussions regarding financial products and services with your members. Face-to-face conversations are a great way to gauge interest in a topic and demonstrate that your institution is truly committed to providing excellent service and meeting the needs of members.


John M. Floyd is chairman and CEO of John M. Floyd & Associates, a leader in profitability and performance improvement consulting.

Strategic Link is the NWCUA’s wholly-owned service corporation, using the power of aggregation to provide the Association’s member credit unions with exclusive high-quality, competitively-priced products and discounted services. Contact Director of Strategic Partnerships Craig Reed today to find out how Strategic Link can help your credit union save money while meeting its goals in 2013 and beyond:

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