Hits & Misses Since Y2K
WEST PALM BEACH, Fla.-Credit unions are essentially helpless against hackers, according to some security vendors.
In fact, CUs had better cross fingers that a criminal doesn't target their website, those same vendors warned.
On a lighter note, credit unions will very soon be able to present check images-instead of checks themselves-to other financial institutions and the Federal Reserve, predicted another vendor.
These were the predicaments and predictions that made technology headlines 10 years ago. It was the year 2000 — Y2K — the year the computing world was fresh off having not self-destructed. Meanwhile, the credit union industry was busy with its own predicaments and predictions.
What follows is a look at what Credit Union Journal was reporting in 2000, and how it actually panned out.
In the year 2000, hackers did, in fact, hold credit unions at their mercy. For example, CUs had no defense against "denial of service" (DoS) attacks that shut down websites such as eBay and Yahoo without warning, according to homebanking vendors. Today, however, a bevy of tools and services successfully guard most CUs against hacking.
Check Image Presentment
"Imagine, a member deposits a check at the credit union and its image is presented to the financial institution from which it was drawn-it's only a matter of time," predicted one item processing provider. Today, that time has arrived, with nearly 90% of checks deposited presented as images, according to the Federal Reserve.
In 2000, Internet "portals" were being sold as the gold standard for delivering products and services to members. Credit unions could partner with a portal provider, which allowed members to shop online, apply for loans with instant decisions, play video games, watch soap operas, purchase Internet service, and even use early social networking tools. Ten years later, and credit unions (and other providers) have found most of the hype (and investments) didn't pan out. Instead, CUs have learned members want them to concentrate on their own line of business, providing mission-critical services directly within their own websites.
Electronic Bill Payment
Electronic bill payment wasn't paying the bills at credit unions 10 years ago-and it still isn't. "Don't count on bill paying to break even any time soon," said a now-defunct Internet portal company in 2000.
In fact, credit unions shouldn't expect more than 20% of online members to use bill pay, said a software provider that went out of business the same year. But a bill pay vendor that's still in business today argued that 95% of online members would soon pay bills electronically. The software provider was correct.
One analyst predicted that the CUs that offered electronic bill presentment to their members by 2002 would win the ultimate battle against banks. Evidently, CUs need more than bill presentment, as that technology still hasn't found a niche at CUs.
Wouldn't it be exciting if people could use the Internet to pay other people? In 2000, several providers thought so. Today, only about 1% of members are excited or confident enough to use person-to-person (P2P) payment services, though they are now widely available.
Members FCU in Aurora, Colo., raced to build an Internet banking site after 70% of members said they'd use it. The $22-million CU offered online account information, funds transfers and loan payments. Ten years later, the CU is at $70-million in assets, and about 50% of members have kept their promise. New services include P2P payments and bill pay.
Meanwhile, a "whopping" 25% of members at Premier CU of Des Moines, Iowa, were logging on to Internet banking, reported Credit Union Journal in 2000. Today, about two-thirds of the membership banks online at the $92-million CU.
Account aggregation was making a splash a decade ago. Online banking vendors offered "screen-scraping" technology, allowing members to view all their financial relationships at their credit union's homebanking site. The idea dried up about a year later, however, with generally less than 2% of CU members using aggregation. In 2010, aggregation hasn't completely disappeared: some CUs are bringing the technology back within their personal financial management software product.
In 2000, a CEO from a credit union on the East Coast rightly questioned the staying power of account aggregation. However, that same CEO was way off when he said that Internet banking and wireless communications would fade.
A Revolution Called 'Wireless'
A "wireless revolution" is on the way, numerous sources predicted in Credit Union Journal. People would opt to conduct financial business on mobile handheld devices instead of hardwired desktops. By 2002, CUs that don't offer wireless access would see members walk away, said a marketing VP at a Texas CU.
In 2010, about one-third of credit unions participating in Callahan's annual spending survey identified mobile banking technology as a priority. Although more than 90% of Americans are wireless subscribers, CUs are lucky if even 5% of the membership uses mobile banking.
More than 75% of consumers would opt for electronic statements by 2005, suggested one research tank. But today, e-statement adoption rates for most financial institutions stagnate at less than 25%.
Virtual Safe Deposit Boxes
Virtual safe deposit boxes would join Internet banking and bill pay as standard fare at CU websites, suggested one consultant. The Credit Union Journal is hard pressed to find any credit unions currently offering document storage space to online members.
Credit unions were learning some new words during the economic boom of the early 2000s: Data mining. Business intelligence. Dashboard. Customer Relationship Management. Click forward to the economic bust in 2010, and many credit unions are relying heavily on these technologies to offer the "right product to the right member at the right time" and to more accurately gauge risk.
One word that wasn't in the CU lexicon in the year 2000: virtualization. Now, the act of consolidating dozens of physical servers into one virtual server has captured the attention of many a CIO concerned about hardware, software patching and energy costs.
IBM Southeast Employees FCU in Boca Raton, Fla., was fed up with the 56-kilobyte telephone line between its headquarters and a lending office two miles away. The CU got radical by connecting the two buildings through a wireless network. Data moved fast, from 10 to 100 megabits per second. In 2000, however, the technology was only able to connect transceivers that had an unobstructed line of sight. CUs are now accustomed to using underground cable and satellites for fast network connections that span the globe.
In 2000, one company was selling a workstation computer housed completely within a rather substantial keyboard. The machine featured a 500-megahertz processor with 32-megabytes of SDRAM memory, a 4.3 gigabyte hard drive and a floppy drive. It's 2010, and CFE FCU in Lake Mary, Fla., this year deployed pint-sized virtual desktops that have no processor, memory or drives, instead running applications off a powerful central server.
Credit unions would "cease to exist" due to the "closed" nature of their core processing systems, predicted one CU in the Southwest 10 years ago. As evidence, the CU exec pointed to the fact credit unions couldn't plug into superior data warehouses in order to make timely marketing decisions. Today, many systems are still "closed," preventing credit unions from quickly deploying "best-of-breed" technologies-but the industry somehow survives.
Integration between back-office applications and with new member-facing applications on the Web would make or break the IT department, said one consultant in 2000. Yet integration issues continue to vex IT managers as they struggle to make third-party applications share data.
Electronic signatures were born, allowing CUs to close loans in record time. Today, electronic signatures not only help many CUs quickly close loans but have helped some modify or foreclose on them.
ASP to Cloud Computing
Application service provider (ASP)-or distributing business software via dedicated communication lines-was "hot" in 2000. In the 1990s, ASPs were known as "outsourcers." In the 1980s, they were called "on-line service providers," and in the 1970s, "service bureau providers." In 2010, there's a new buzzword to describe the same basic idea: renting your software over the Internet is now called "cloud computing." Many CUs choose to keep their applications in-house.