FLINT, Mich. - Dort FCU is going head-to-head with online rivals such as ING with a new high-yield, self-service online account that has one very important thing the ING’s don’t: the credit union reputation.
“There’s been a lot of concern in the news today about the stability of some of the online-only banks in the market,” Dort CEO Marty Smith told Credit Union Journal just hours after the $350-million credit union launched its new IndiGO program. “We saw the popularity of this type of program, and we saw no reason the credit union couldn’t do the same thing locally. We have 22% capital, and in our market we are very well-established. We’ve been here since 1951. People know us, they know who we are and can take comfort in doing business with an institution they know and trust.”
IndiGO includes both an online savings and checking account and is entirely managed online from account opening to account funding. In order to be eligible for the 3.05% APY savings account and the online checking account that boasts a tiered APY of between 1.80% and 3.45%, the member has to manage all aspects of the account online with no branch access. A debit card associated with the account allows the member to access funds, but deposits cannot be made via ATM–they must be deposited into a traditional account and then can be transferred electronically to the IndiGO account.
The idea: if ING can offer better rates in part due to the efficiencies of operating solely online, then the credit union can leverage similar efficiencies. “The way this is all set up, everything is done remotely,” Smith explained. “Even the marketing is being done externally only. We are not promoting this in the branches or the newsletter. That’s how we’re differentiating this account.”
The aim is to reach out to non-members, particularly the much-coveted Generation Y that is more comfortable with online-only transactions and expects to be rewarded for the self-reliance required in such an environment.
Existing members are welcome to open IndiGO accounts, and while they can fund an IndiGO account from a traditional account already set up at the credit union, the hope is that they will choose to move money they’re keeping somewhere else.
“Like ING, the initial funding of the account is electronically from another source, hopefully an account you have with some other institution,” Smith offered. “We are trying to minimize the cannibalization of our existing accounts, so again, we’re only promoting this externally.”
To start, Dort has a direct mail piece targeting demographics most likely to be interested in an online-only bank account. While some of Dort’s own members are likely to fall into those demographics and therefore receive the direct mail piece, the credit union is really after non-members, and in particular, Gen Y. “How do you attract that group,” Smith asked. “My 23-year-old daughter is not interested in going into a bank branch at all. You look at the success of ING and eBay, and you know people are interested and comfortable transacting online.”
In addition to the direct mail piece, the credit union will be going with a variety of mass media, including print, radio and television.
Though the IndiGO account has been in the works for about four months, it remains to be seen how and if the credit union will grow its online-only offerings beyond checking savings. “We have not resolved whether to set up a credit card or car loan through IndiGO. We’re just getting started,” Smith observed.
A key point of differentiation between IndiGO and other high-yield accounts, according to Smith, is simplicity. “Most of these accounts (elsewhere) require a higher level of participation in some way, and direct deposit, IndiGO doesn’t. We felt we could offer the cost-savings of the online product but still keep it really simple and convenient for the member.”
Because IndiGO is the first of its kind at Dort, the credit union hasn’t set any goals for the program the way it normally would for new product launch. “We don’t have a benchmark to compare to,” he commented. “But what we hope happens is that we’ve created something simple and straightforward and people will want to sign up for it and feel confident in it because they know the Dort name. We really took our time to structure this just right. It was a lot of fun to build something from the ground up.”
THE FIVE W’S
Who: Dort FCU, $350 million in assets, 48,295 members
What: IndiGO is a high-yield, online-only account
Where: Members can open an account online at www.go4indigo.org or by using the CU’s automated telephone system, Fabulous Freida.
When: Launched June 24.
Why: to attract Generation Y. Learn more about Dort FCU at www.dortonline.com.(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
