An In-House 'E' Solution

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As credit unions rush to beat postage hikes in a souring interest rate environment, electronic delivery of member statements promises big savings, say industry analysts Callahan & Associates and Celent Communications.

Callahan recently predicted that 70% of CUs that don't offer e-statements plan to do so in the next year. But there's a catch: e-statements can pose big upfront or maintenance costs.

With a $7,500 homespun e-statement product going live next week, MacDill FCU's has made the technology itself inexpensive, according to Steve Slawin, vice president of electronic services.

Electronic delivery can save anywhere from 10 to 40 cents per statement. With cost savings in mind, the $900- million MacDill Federal was presented with a couple choices when it decided to go electronic-it could either purchase an e-statement program outright for up to $132,000, or go ASP for $10,000 plus per-statement fees.

While the sizable initial investment for in-house purchased solutions can be recovered as the program becomes more popular, that recovery time can be lengthy, Slawin said.

And the initially affordable ASP model also cuts postage costs but quickly loses its attraction. "Vendors charge on a per-statement basis, so your costs won't decrease, even as more members use the service."

Instead, the 132,000-member MacDill FCU forged its own path, copying the existing code from its paper statement and applying it online. Slawin used Financial Fusion for Web server intelligence and the Adobe Acrobat PDF toolkit for statement overlay, which copies the custom code from MacDill FCU's core processing system.

"It really wasn't all that labor-intensive," reported Slawin. "We had already done all the hard work by producing the paper statement file. All we had to do was put the paper file into a secure electronic document."

With a $5,500 dedicated PC and $2,000 in software, the the credit union has saved a bundle. In addition, the technology comes free of additional costs, as the set-up requires no operating staff and runs on existent bandwidth.

To top it off, the MacDill FCU version is entirely customized. "None of the vendors offered the total solution we wanted," Slawin explained.

By retaining control over the program, MFCU was able to have its cake and eat it too: the application incorporates identical branding, utilizes trackable push and pull delivery models, enables monthly CU newsletter attachments, and allows members a transition period between traditional and electronic delivery.

Projected Savings of $125,000

Slawin expects about 10,000 members to elect electronic delivery by 2003, eventually capping out at a user base of about 20,000 members. All hardware, software and initial development costs will be recovered through reduced printing and postage in just six months. MacDill FCU projects that it stands to save $125,000 a year-without even considering increased postal rates.

Slawin is quick to point out that enhanced member service, not just increased savings, is a strong force behind the development of the product.

"While the cost savings should be great, that was not our motivating factor," Slawin said. "It was to provide better service to our members. They get their statements more quickly, they don't have to deal with the paper, and they can archive statements on their own PCs for future reference at tax time."

The 190-member beta test is showing all systems go; however, the trial has raised a legal dilemma.

"The only issue we're wrestling with is whether or not to attach the monthly newsletter to the e-statement,"said Slawin. "The newsletter includes disclosures required by law."

Before live deployment Feb. 1, the credit union will either push the newsletter, "or come up with another mechanism to notify members of the disclosures,"Slawin added.

Marketing opportunities are another matter still under discussion. E-statements are touted as revenue generators-CUs are able to attach newsletters and other marketing material to the e-mail. But MacDill FCU doesn't want to haphazardly inundate members with products and services.

"We've discussed it but we haven't come to any firm conclusion. E-statements are a great opportunity to communicate with members who are comfortable with technology. This could be a step in moving toward a more intense effort to provide an enhanced member relationship."

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