Credit unions set to take on banks with launch of debit cards
ELEVEN of the largest credit unions in the State are set to launch debit card services, allowing them to compete head-on with banks by offering full current accounts.
The move is expected to give 250,000 people access to the debit cards by the end of the year, the Irish Independent has learned.
Banks are likely to see the development as a direct threat to their traditional strength of providing day-to-day current accounts and payment cards to their customers.
The 11 credit unions already offer their members online payments – where members can have their pay and pensions electronically paid into their credit union accounts.
Members can also put in place direct debits, and make electronic payments out of the accounts.
Now the credit unions are set to add a MasterCard debit card.
The cards will allow members to take their money out of their credit union account though most ATM machines, as well as pay for goods and services in retail outlets.
The move is set to transform the services offered by credit unions, which have been concentrated on small loans and savings facilities up to now.
Thousands of people are expected to take the opportunity to ditch their bank’s current account in favour of the credit union option once the new debit card option is operational, something that is expected by the end of the year.
The piloting of the new debit card option is set to be carried out at Tullamore Credit Union, which is currently conducting “systems testing” of the debit card option.
Fintan Ryan, who chairs the 11-member credit union group, said the new debit card option will have lower charges than banks for the same service, although the fees and charges have yet to be finalised.
The 11 credit unions collectively have 250,000 members.
Mr Ryan said: "Pricing has yet to be set, but as credit unions are not-for-profit organisations, the pricing will be very competitive, and vary from credit union to credit union depending on the local circumstances."
Mr Ryan, who is the manager of Tralee Credit Union, said the credit unions involved have been working on the project for two years.
"Should the trials meet with our expectations, and subject to satisfactory discussions with the various stakeholders, we hope to be in a position to roll this out to the membership of each participating credit union during 2015," he said.
He said that having a MasterCard debit facility would "complete the suite of account services and enable participating credit unions to compete on an equal footing with the banks".
Once the trials are complete at Tullamore, the debit card service will be rolled out to members of Health Services Staffs CU, one of the largest in the State with €190m in assets.
Gurranabraher in Cork is next on the list. Others in the debit card scheme include St Canice's in Kilkenny; Waterford; Ballyphehane in Cork; Tipperary; Mullingar, Co Westmeath; Navan, Co Meath; Mitchelstown in Cork, and Tralee in Kerry.
The credit unions have the potential to attract thousands of disgruntled bank customers, annoyed at the closure of a local branch, the constant increase in bank charges and the cost of the banking bailout.
AIB, Bank of Ireland and Ulster Bank have introduced and then hiked charges and fees for day-to-day consumer banking services in the past few years.Research by Dublin City University finance lecturer Dr Michael Dowling has found a family with two current accounts can end up paying €260 a year in fees and charges.
Currently St Paul's Garda Credit Union is believed to be the only one offering its members a debit card.
The move by the 11 lenders comes as another body, the Credit Union Service Organisation for Payments (CUSOP), is rolling out electronic payments systems to credit unions.
By the end of this year some 200 credit unions - more than half of the total - are expected to be electronically enabled for payments, through CUSOP and other arrangements.
CUSOP is also planning to offer credit unions a debit card option, but has yet to finalise a deal with a card provider.
A Central Bank spokeswoman said the debit card move does not need its approval, but added: "It is incumbent on credit unions to ensure that they are operationally capable of providing such services without placing undue risk on members' savings."
The league, a lobby group for the majority of the lenders, said members were looking to their credit union for a range of enhanced services, including electronic services such as direct debits and debit cards.
"It is important that people have an adequate range of choice for personal financial services in their credit union."