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Eager to build the true virtual branch, credit unions are embracing solutions that instantly fund and open new accounts online-and that can spike new membership rates at their websites.

In efforts to automate account opening and funding and provide same-day service, seven more credit unions will use the Andera Inc. New Accounts Online solution. The CUs include State Department Federal, American First Federal, Jax Federal and General Mills Federal.

More than 20 CUs have signed on with the Providence, R.I.-based firm since the application service provider-based solution was released last summer, Andera said.

OpenNow and FundNow, automated solutions the New York-based CashEdge released in November, are also attracting CU clients.

The appeal of instant account opening and funding needs little explanation-credit unions can capture new members online while they are ready and interested, instead of losing potential membership to mail delays and apathy.

Credit unions with widespread memberships but limited brick-and-mortar are the prime candidates for Andera's solution, according to Ron Shevlin, principal analyst at Forrester Research, Inc. CUs with memberships spread across the nation-including State Department FCU and Toyota FCU-are more vulnerable to consumers walking out on the online application process in favor of the convenient, nearby physical branches of competitors.

"Cost savings is the big opportunity," said Shevlin. "Those online applications that are opened but never funded aren't just nuisance applications. They get processed and pose real cost to the credit union. (These applications reduce) the cost of wasted applications."

Though financial institutions are reluctant and sometimes unable to provide online application abandonment rates, Shevlin said he thinks the number is quite high.

By using an online, instant opening and funding model, credit unions can improve the number of online applications that are actually funded, according to Andera. Andera estimated that about 90% of the applications opened by the New Accounts Online solution are also funded.

In Torrance, Calif., Toyota FCU launched Andera's web-based platform in November 2004. The solution is bringing in a substantial chunk of the CU's new membership, said Brock Kasnick, chief operating officer at the $220-million credit union.

Of the total new accounts at Toyota FCU in November, 30% were opened online, said Kasnick. The 15,500-member CU opens 125 to 150 new accounts per month, he said.

"Our biggest gain is in turnaround time," said Kasnick. "We've been able to automate the steps necessary to verify, screen and fund new accounts online. We can start the relationship the next day instead of waiting two weeks for a manual process."

New Accounts Online allows real-time new account processing, including identity verification; automated decisioning against the consumer reporting agency ChexSystems, Inc. and credit bureaus; screening against the Office of Foreign Assets Control; automatic funding for the initial deposit; cross selling for loans and credit cards based upon the credit file; and real-time core systems integration.

Eliminating 'Cumbersome' Follow-Up

Although Kasnick opted to provide next-day service based on Toyota FCU's current risk factors, other credit unions allow consumers to apply for membership and use new accounts over the Internet the same day, said Charles Kroll, Andera's president.

Prior to the Andera solution, Toyota FCU offered consumers a downloadable account application. "The sales process was always frustrating," Kasnick added. "It was cumbersome to follow-up with members who had an application. We were at the mercy of the member mailing in the application."

The three-location credit union has a 32,000-employee sponsor company with production plants spread across the country, Kasnick said.

At the same time, the credit union is growing rapidly, with a 20% increase in assets and an 8% increase in membership in 2003, he said.

An "ambitious" business plan will add three more branches and boost membership up to 30% in the next year, Kasnick continued. "The automated application process will facilitate that plan."

Automated new accounts at Toyota FCU's website include membership, multiple types of savings and checking, said Kasnick. Soon the CU will enable automated share certificates and all types of share accounts online.

The Andera solution will eventually be the core application for opening and funding new accounts at Toyota FCU's call center and branches as well, Kasnick said.

CUJ Resources

For more info on this story:

* Toyota FCU at www.toyotafcu.org

* Andera at www.andera.com

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