A Value-Added Non-Interest Income Stream Members Will Gladly Pay For

After enduring years of compressed net interest margins, credit unions leaned into non-interest income to maintain profitability. Debit and ATM transaction fees, overdrafts and nonsufficient funds (NSF) charges became particularly important, especially as account maintenance fees have lost popularity for competitive reasons and consumer disdain.

However, Washington has other plans. The CFPB announced a proposal late last month to eliminate so-called “junk fees,” including overdraft and transaction fees declined at the point of sale. Additionally, Capitol Hill has legislation before it – again – to reduce interchange fees. Should these come to pass, they will have a substantive impact on non-interest income (NII) streams that credit unions routinely depend on.

While the pressure to uncover new sources of revenue outside of traditional channels is intensifying, successfully installing a stable, new NII revenue stream is not easy. Credit unions will do well to rely on the following triple-play of factors when selecting a new offering designed to improve members’ financial lives while also earning fee income they can feel good about.

1. Choose an Offering Members Will Value

The death of a loved one is traumatic and confusing. Throwing financial headaches and uncertainty into the mix only exacerbates the pain. Questions around how to distribute that loved one’s assets and who’s in charge can be particularly volatile, even with modest estates.

Credit unions specialize in serving everyday people, and they can play a unique and helpful role by making it easy and affordable for members to create and maintain estate plans, such as wills and trusts. They can also help members understand and monitor the consequences (estate analysis) of their end-of-life wishes. While there are differences, wills and trusts achieve the same end: They ensure the deceased person’s belongings, financial assets and real property are distributed according to their wishes. Without that, a person has died “intestate,” and state laws on “intestacy” kick in, and that means leaving those crucial decisions wrapped in the red tape of probate court.

About two-thirds of Americans don’t have their estate planning in order, according to a 2024 Caring.com survey. Helping to ensure families address this critical aspect of financial planning before it is too late is one of the best ways a credit union can promote members and their families’ financial well-being.

2. Implement an Embedded Versus a Referral Model

When incorporating a new value-added offering, it is critical to design the execution to do both – deliver a high uptake of the product or service and realize the NII aspiration of the credit union.

It’s easy but ineffective to partner through a basic referral-commission model with a fintech platform. An arm’s length approach will deliver lackluster results and not help the credit union achieve its utilization or NII revenue goals.

To deliver effective outcomes, the fintech partner must be able to embed its estate planning offering into the credit union’s ecosystem while reinforcing core revenue-producing products. An embedded implementation versus a loosely-coupled commission arrangement is necessary to earn enduring NII. Critical characteristics of an embedded estate planning implementation include the ability to:

• Make it uniquely discoverable at specific points within the context of the credit union’s offerings;
• Leverage the credit union’s strong brand to amplify brand loyalty rather than handing ownership of members over to the fintech partner;
• Maintain ongoing relevance for the offering by keeping lockstep with the progressing lifecycle of the member journey (e.g., estate analysis and health);
• Provide rich, real-time, data-driven insights for the credit union to uncover new opportunities to deepen member service further; and
• Embed customizations into the estate planning platform that are unique to the specific credit union offering.

By embedding the new estate planning offering into the ecosystem of the credit union’s offerings, the endeavor is firmly positioned to deliver a double bottom line: Provide a life-legacy protection service to members while garnering a remarkable NII revenue stream.

3. Obtain Margins to Sustain Meaningful NII

The crucial element to support a durable NII revenue stream is that the credit union be empowered with “real options” in terms of pricing control and flexibility to optimize its revenue upside. Unlike pricing in a referral or commission arrangement, the credit union will receive one (fixed) price to serve the full membership. Further, the business arrangement must provide latitude for the credit union to modify pricing, offer discounts and selectively subsidize the cost of the estate planning offering when bundled with certain core products.

In essence, the credit union should be able to set a price it deems most rewarding for its members and capable of sustaining a remarkable NII revenue stream to make the endeavor economically consequential. Further, related fringe benefits of the embedded implementation model will accrue, such as the ability for the credit union to provision its own paywall to accept revenue receipts directly, eliminating the transactional overhead of reconciliation with the fintech partner.

The year has begun with heightened uncertainty around the imminent disintegration of NII-producing line items, such as fees from overdrafts, NSF and interchange. It is time to proactively identify a portfolio of new offerings with capacity to restore the impending loss in NII. Implemented with the right provider, platform and model, digital estate planning can be a prudent choice for any credit union to bolster NII while also demonstrating care for the well-being of the members who credit unions serve so well.

Sonny Kapoor is CEO and Co-Founder of the McLean, Va.-based online estate planning platform provider OneDigitalTrust.