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Contrary to popular belief, breaking up with a bank doesn’t have to be difficult thanks to the assistance of switch kits.

With anchors such as direct deposit and automatic bill pay, switching financial institutions is often burdensome for the consumer, seldom simple and takes time. But in a continued attempt to lure more banking consumers to credit unions, more CUs are adopting technology to make the process easier.

“We’ve really seen more robust digital switch applications and again, obviously, by easing the data entry from the customer standpoint and back office standpoint it lowers the cost of exit,” said Steven Reider, president of Bancography.

Right now credit unions are searching for deposits to help boost liquidity and fund loans. For the fourth quarter, the national loan to share ratio jumped three percentage points, to 85.6 percent, from a year earlier, according to data from the National Credit Union Administration.

That means credit unions are motivated to sign up new members and encourage them to move their primary banking relationship over. But enticing consumers to switch primary financial institutions is difficult given the sticky nature of these relationships. Just 11 percent of banking customers switched banks in 2016, according to data from Accenture.
To help lure in new business, some credit unions are using switch kits, which allow consumers to seamlessly close an account with one institution and transfer those funds to a new account at a different institution. The kits also make it easy to switch over things like direct deposit and automatic bill payments.

Perhaps the most attractive advantage that switch kits offer is the time members save. What once was a time consuming process involving mountains of paperwork and hour-long calls has now been reduced to as little as two clicks online.

Switch kits mainly help members switch their checking accounts to a new institution but they can also help with transferring over payments for items such as newspaper and magazine subscriptions, Reider said.

Dupaco Community in Dubuque, Iowa, partnered with ClickSwitch, a fintech that offers switch kit technology, at least five years ago because it liked the streamlined nature of the technology.

“Our usage went through the roof,” said Tamara Schepler, Dupaco’s vice president of member experience.

The $1.7 billion-asset Dupaco went from converting 30 new accounts per month to over 100. Overall, the credit union opens about 1,100 new accounts per month. Using ClickSwitch has also increased its active checking accounts from 62 percent to 73 percent.

When ClickSwitch was founded in 2014, one challenge was creating a database with information on how billers handle payments and employers complete direct deposit.

The Minneapolis, Minn.-based fintech works with companies ranging from small businesses to mega employers, such as Amazon and General Electronic, for payroll information. The company is also looking to develop relationships with payroll companies such as ADP and Gusto for direct deposit information, said Cale Johnston, founder and CEO of ClickSwitch. The fintech also works with hundreds of companies who bill consumers for services to ensure payments for the cable or phone bill aren’t missed.

ClickSwitch offers two options to financial institutions. The first is a core integrator solution that includes online banking and account opening, though this requires a greater investment upfront from the credit union. The second option is a stand-alone product where an institution can start the switch at a branch and then provides the member with a customized code to be entered on the ClickSwitch website to complete the process.

Set up costs can run between $5,000 to $10,000 depending on the institution. Once ClickSwitch goes live, the fintech charges credit unions between $20 to $30 per user. Johnston believes the return on investment is worth it. He estimates that a checking account is worth $212 to a credit union.

Around 350 financial institutions work with ClickSwitch. About 70 percent of those clients are credit unions ranging from $50 million to $10 billion in assets.

Still, switch kits aren’t a full proof solution to getting new members to bring their business over to a credit union. Even with this technology, members are still required to take some steps, such as identifying to ClickSwitch what bill payments need to be transferred to the new account. Members also have to reach out to companies to let them know about the new account information.

And a consumer's reluctance to switch financial institutions may not have to do with the inconvenience of the change.

“Even if it’s easy to switch direct deposit information and bill pay, consumers aren’t doing it much,” said Stephen Greer, a senior analyst with Celent. “I think a lot of it has to do with consumers thinking all banks are the same and they don’t really see a differentiation in the products.”

For credit unions who haven’t used switch kit technology yet, Reider recommends that they look for seamless integration, a streamlined interface and options to bring on additional ancillary accounts besides checking.

It’s important that the kits make the process easy for the consumer thereby “earning their appreciation and loyalty,” Reider concluded.

Will Hernandez contributed to this report.

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Digital banking Fintech Client acquisition Client retention Consumer banking Deposits