EPS services can generate earnings, satisfy member demand, and attract new members to the credit union. For these reasons, a credit union may choose to offer or expand EPS services (for example, wire transfers, ATM access, payroll direct deposit, and mobile banking) as part of its strategic plan.
The costs of implementing EPS services can be significant whether outsourcing the product or service or purchasing an in-house solution. Costs can vary based on the level of the product offering and may include the purchase of additional software, hardware, server space; additional staffing needs; and increased compliance and oversight needs. Credit unions should have a sound expectation that there is a demand for these services by members. The credit union’s board should take into account the demographics of the credit union’s field of membership when determining what electronic services to provide.
A credit union should consider the costs, risks, competition, and member demand when pricing its electronic services. For some services like ATM transactions or wire transfers, it may be appropriate to charge a per-transaction fee; other services, such as ACH transactions, typically do not incur a fee.
Earnings
A credit union may assess fees for certain EPS services, such as payroll direct deposits, electronic bill pay, and wire transfers. These fees contribute to the credit union’s overall earnings.
Net worth
Any earnings from EPS services offered by a credit union can contribute to net worth. Conversely, any losses related to the systems (for example, due to system error, fraud, credit risk exposure) can negatively impact the credit union’s net worth. Bond insurance covers certain losses incurred in electronic transfers, but if a credit union cannot demonstrate adequate internal controls over its EPS activities, the insurer may deny the claim. These losses would impact the credit union’s net worth.
Liquidity
EPS are another method by which funds enter and leave a credit union. Credit unions must ensure they have sufficient liquidity to meet the demand for funds transfers. Large value transactions or a large volume of EPS transactions can impair a credit union’s liquidity if it has not prepared for this scenario. Credit unions that offer ACH services should closely monitor intraday liquidity.
Last updated September 25, 2017
