The research found that only 30% of top banks and credit unions use the same provider for both credit card and debit card processing. The most widely used single provider was First Data, chosen by half of the banks or credit unions with a consolidated processing model (five of the 35 responding).

The arguments in favor of consolidation centered on economics (more favorable pricing by aggregating volume) and simplicity (single point of contact, same back end systems). Arguments in favor of separate processors for credit and debit also focused on economics (more competitive bidding) and simplicity (aligning debit processing with debit network affiliations).

Banks and credit unions choosing different providers also cited a desire to work with "best-of-breed processors" for each service, the company said.

CO-OP said there was evidence that a single processing provider is better positioned to manage and reduce a financial institution's card-based fraud losses on credit and debit than two separate processors. Credit and debit are distinct accounts and require specialized risk management tools; there does not appear to be any synergy in combining their processing, CO-OP said.

Meanwhile, a second white paper CO-OP released at the same time tried to tackle the extremely complicated question of whether a credit union should or should not outsource its ATM processing to a third-party.

CO-OP's research urged credit union managers to look at financial, operational and strategic factors when deciding whether or not to outsource their ATM processing.

When it comes to income, "uptime" or the amount of time an ATM is running and available to use is perhaps the single biggest factor impacting ATM profitability, CO-OP said. Another important element to the financial side of the picture is functionality, the paper added.

"New transaction types can increase foreign transaction volumes," CO-OP observed. "In evaluating this, credit unions should consider the internal and external providers' ability to support a given functionality currently, or attempt to estimate differences in time-to-market for functionality not currently supported."

One argument in favor of outsourcing, CO-OP said, is that while ATMs are a critical part of a CU's strategy, they are rarely enough to win competitive battles alone. In this scenario it might make more sense for a credit union to outsource its ATM processing to free up staff to work on other core products and services, CO-OP said.

"There is no simple answer as to whether or not credit unions should outsource their ATM networks. Instead, managers must individually and objectively evaluate the merits of in-house versus outsourcing options to select the best solution for their credit union."

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