Industry insiders know credit unions are frequently on the cutting edge of new technology, but a new report shows that CUs are spending as much as twice as much money on technology as mid-size banks.
For the study, 62 credit unions with assets of at least $350 million took part and defined a mid-size bank as those between $1 and $30 billion in assets.
Cornerstone Advisors, Inc. President Scott Sommers said his credit union clients had been asking for a way to measure themselves against comparable sized banks as long as two years ago. The requests resulted in the inaugural issue of "The Cornerstone Report: Benchmarks and Best Practices for Credit Unions 2006" authored by Sommers, Steve Williams, Terence Roche and Carl Faulkner.
Sommers said the new survey sets 250 benchmarks and can take a credit union up to 50 hours to complete, providing an exhaustive analysis of how a particular CU operates and interacts with its membership.
"This is not stuff you're going to get off of NCUA," he said. For example, Sommers said the survey measured average call center wait times and the number of retail loans closed per month that had been originated by the same loan officer. Sommers said the result that stood out more than any other was how credit unions far outpace their banking rivals when it comes to spending money on technology. Sommers said the survey showed that the median CU spends .497% of assets versus .268% by mid-sized banks, nearly double the amount spent.
"Credit unions are much more willing to experiment on the cutting edge. Due to their non-profit nature, they're willing to do it."
Credit unions around the nation have made a considerable effort to start and approve loans online to fight the competition and better serve the membership. Sommers said the study showed this with CUs reporting that 13% of their consumer loan applications originated through the Internet, while mid-size banks reported "immaterial" amounts of online loan origination.
"Members seem to be more comfortable with technology than customers do," he said.
The numbers are even more drastic regarding online mortgage generation with credit unions listing 18% beginning online and banks reporting only 2%. But, the report also states the mortgage closing function is lower for credit unions and suggests CUs could benefit from "better mortgage document systems and usage of electronic document delivery."
The study also showed CUs performing better with Internet use and online bill pay. CUs reported 68% of its checking account holders are enrolled Internet banking users compared to 32% reported by banks for the 2005 banking study. Credit unions also stated that 15% of its members use online bill pay with banks reporting 4.22%.
"Credit unions are enjoying about two times the penetration. That's huge," Sommers said.
Sommers said credit unions are well behind the banking industry when its comes to business lending and services, but said he recognized that most CUs are still new to the category. Sommers said he expects a large increase and improvement in business services from CUs for the next survey, scheduled for 2008.
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