RUTLAND, Vt.–Another CFO has offered some thoughts on what the eventual elimination of the U.S. penny could mean for the bottom line—it could even raise costs, she suggests—and whether credit unions might want to borrow a strategy from casinos.

As the CU Daily reported earlier here, the Treasury Department has placed its last order for blank pennies and plans to stop minting the one-cent coins as soon as that supply is exhausted. According to the government, the penny costs nearly four cents to produce. Stopping production of the penny will save the government $56 million a year. 

In that report, two credit union CFOs shared their insights on the changes they believe CUs will have to make in response.

Christine Messer, chief financial officer with Heritage Family Credit Union in Rutland, Vt., also has some thoughts on what other credit unions and their CFOs will need to be thinking about in the years ahead.

A Larger Transition

The elimination of the penny, noted Messer, is just part of a larger transition in currency.

“When we look at the future of currency, as a whole, and its evolution over time, I see us moving more towards digital as the standard.  We have been playing there for years, with wires, debit, and credit cards and direct deposit,” Messer said. “Right now, in the GENIUS Act, the U.S. government is trying to get a regulatory framework around the stablecoin.  This is landmarking for financial institutions because it could allow them to advance deeper into digital currency. That said, the coin could become less relevant to daily operations in a financial institution in the future.  To that point, if the penny disappears, on the digital side, I do not see any large impact. However, we all know that change can be met with lots of resistance, so currency will still be around for those that do not believe or trust digital currencies.”

Following the Lead of Other Countries

For traditional currency, Messer expects the U.S. to follow the lead of countries that have already stopped producing the penny, and “resort to rounding.”

“I think retailers will start to shift pricing to whole numbers, like a zero or five, to simplify the checkout process,” Messer said.

Within credit unions, she cited loan payments as an example.

“The majority of our loan payments are paid digitally or through a check,” Messer said. “When I say digitally, this could be online through a debit card or an automatic withdrawal from their account(s).  In these instances, nothing will change. If a payment is made through a check, again, I do not see an impact to the payment process.  

“Where I see impact is if someone pays in cash.  In this case, if someone does come in to pay a payment that is $365.21, as an example,  and gives the front line $365.25,” Messer continued. “I see the four cents being deposited to their checking or savings account. We will not round the payments up or down.”

A Pending Shift

Messer said both members and their credit unions will have no choice but to adjust to a world without the U.S. penny. 

“Whether that is through the opportunity for savings–by not spending every penny–or whatever our marketing team can come up with, I do not know,” Messer said. “But education will be a thing that a credit union will need to invest in to make sure consumer expectations align with what we are able to offer. If a member wants to come in and cash a check, it would be the same as the loan payment; the cash given out will be rounded to the nearest five cents and anything remaining will be deposited to their account.”

Lesson from Casinos?

But what about non-members who are seeking to cash a member check?

“In this case, there isn’t the opportunity to round and then deposit the difference,” suggested Messer. “I would like to see credit unions do something I have seen in casinos before.  At a casino, you take your ticket from a slot machine to a dispenser.  From there, it will not give coin.  You can choose to donate the change to a non-profit from a preselected list or you can keep a ticket with the change on it and hope you can combine it with a future ticket to make a whole dollar. For us, I would give these folks an option to donate to our foundation. Will that be met with resistance? Most likely, but then I would encourage the person to open an account with us or deposit it at your own financial institution.”

Credit unions won’t be alone in adjusting to the changes a market without pennies will bring, with Messer noting that unless the whole world moves to whole pricing, there will always be cents involved.  

Branch Reports

Messer doesn’t believe it will be necessary to add a “penny adjustment” to branch reports.

“I will go back to how we could process as I outlined above,” she said. “The branch cash report would just be a summary of all the transactions.  If they aren’t receiving or distributing pennies, they wouldn’t show, anyway.  But their teller totals for the day could be to a cent level because that includes checks. From a financial perspective, most all of us round now in reporting.  We still go out to the dollar, but many only go to the millions.  Based on that, I do not see an impact.”

Cost Savings?

When it comes to any cost savings the credit union might realize, Messer doesn’t see much if anything. In fact, it might be the opposite.

“If we need to enhance our digital payment processes and/or add stable coin, that will most likely cost us more in software/training/reconciliation,” Messer said. “If we aren’t ordering pennies or sending back bags of them from our coin machines, I do see a small financial impact, but nothing substantial.”

The Longer-Term View

Longer term, Messer said the financial effects on any CU’s bottom line will depend on the strategy it adopts moving forward.

“If you are a rounding shop and think, ‘Eh, let’s just round down or up on all the things like loan payments and dividend payments,’ I would ask them to review the long-term impact that can have on the bottom line,” Messer said. “Specifically, think of the fraud case from the 1980s where a programmer stole a fraction of a cent from bank accounts and netted over $50,000 in a short amount of time.  If the rounding up and down doesn’t equal out, you could lose money over time. And if you are rounding, be prepared to put controls in place around the process to protect from disparate treatment of members and potential fraud.”