LAKE MARY, Fla.-A number of analysts are concerned that credit unions in their rush to embrace Bank Transfer Day may end up having "transferred" numerous unprofitable new members.
Banks are not just adding fees to recoup interchange losses, the analysts told Credit Union Journal, but to also jettison unprofitable accounts. If credit unions let consumers come over without a switch process that encourages more than just the checking relationship, ROA and capital could suffer, experts caution.
"Credit unions can't let this happen," insisted Sam Kilmer, VP of market development for Harland Financial Solutions. "They can't just get in $5 share accounts and $50 share draft accounts from high-transaction users. That's not going to work. If credit unions remain on autopilot they will get membership growth, but it won't improve their financial performance. They will simply get higher operating costs and potentially more deposits."
Credit Union Journal spoke with a number of industry analysts who feel CUs need to get more automated in their switch kit process to grab more products-especially loans.
Many feel that high-growth credit unions do a very good job with the switch, while others don't have a formal switch process or rely on an outdated program. There is consensus, too, that almost all credit unions can benefit from broadening the switch process so that it is integrated throughout all member touch-points.
No matter what shape the switch kit is in at the CU, Kilmer believes the industry can benefit from ramping up their switch kit prowess. "The first thing to do is make sure that the process asks for loans. There has to be an ability to get loans and ask for them intelligently," he said. "The switch kit also has to be part of the broader account opening process that asks for the rest of members' business, as much of their business as you can get right away."
Kilmer pointed to Harland clients who use the company's uOpen online account opening solution averaging 2.5 accounts when an individual goes to open one service. "Even when the consumer is applying for membership we are finding on average they open more than one account. For aggressive credit unions, that means they could be averaging three to four accounts when a member signs on."
Scratching The Surface
Fiserv Business Development Manager Scott Bowen contended that CUs have a way to go to automate and fully integrate the switch kit process throughout all member touch- points. "Credit unions have really just scratched the surface, with less than 15% of all CUs having an automated or integrated process in place in our estimation. But the trend is positive, especially looking back three to five years when this figure was much lower."
The Brookfield, Wis.-based Fiserv has 180 clients on its Account.Create online account opening tool and about 135 are credit unions. "Last year we had 70 credit unions using Account.Create, so you can see where this is heading."
An advantage of automating the switch process is that more consumers follow through, contended Bowen. "Switch kits used to be just a paper form you picked up at the branch and then there is two-week, or longer, process during which the credit union hopes the new member shows back up. But there is a lot of fallout during that time."
According to Kilmer, industry research shows that 20% to 30% of people stop in the middle of the account- opening or switching process. But if the CU has an automated account opening process, Kilmer said the credit union can track those who bail and can follow-up quickly.
"If the dropout rate is 20%, that means if the credit union is currently growing at 1%, by being more proactive and reaching out to those who don't follow through, they could move their growth to 1.5% or more."
Kilmer noted that if the credit union has integrated the switch process throughout all member touch-points, it is easier for the member pick the process back up.
"Because the member may start in the branch, then go to the call center, and finish online. If the process is seamless and integrated throughout all the channels, the member does not have to start over again."
Martin Ferreira, director of debit, ATM, and prepaid services at PSCU, St. Petersburg, Fla., encouraged CUs to make sure the switch kit is located prominently on their Web sites.
"It should be easily spotted so the kit is top-of-mind, and it should be easy to navigate. The forms-generally account opening, direct deposit authorization, automatic payment, and account closing-should be simple," Ferreira said. "And the instructions for the kit must be clear and concise. This is probably the first view the consumer has of your financial institution so you want the experience to be as user-friendly as possible."
Internal staff training on the kit is important, as well, said Ferreira, not only to ensure the process goes smoothly for the new member but to make certain staff promote the switch kit. "I think credit unions need to be more proactive in seeking out new members by promoting the switch kit. So when a non-member comes in, say to cash a check, the front-line team should be talking about how easy the credit union makes it to switch over their checking account."
Where Consumers Need Help
At the $3.8-billion Pennsylvania State Employees CU in Harrisburg, Penn., CEO Greg Smith is a big proponent of the credit union providing a comprehensive checklist to help consumers identify all the relationships they have tied to the checking account, especially with bill pay and mobile applications increasing.
"I was just talking with my marketing team about this the other day. I asked them, 'Off the top of your head, can you say right now what are all the things you need to change if you were to move your checking account today?' I know I couldn't."
Consensus is that consumers need a lot of assistance to make the change from their bank to the credit union. However, opinion is that CUs, too, may need some help. If credit unions are to make this latest round of consumer anti-bank sentiment pay off, they need to get more than just the share draft account.
"Many credit unions view this latest opportunity as a way to stick it to the big banks," Kilmer said. "But if they do not handle this new business correctly, banks will be the winners and credit unions the losers."
