Members who use online banking services at their credit unions tend to make the credit union their primary financial institution and have a higher level of profitability than non-online banking users, but CUs are still struggling to get more members to use this important channel, according to a study conducted by CUES, CUNA, CUNA Mutual Group and the University of Wisconsin Consortium for Global Electronic Commerce.
But even as credit unions must work to increase the home banking and online lending adoption rates, there is such a thing as "too much," according to the study, entitled "Adoption of Home Banking and Online Lending by Credit Union Members-Learning from Credit Union Practitioners."
"A major less is that 100% member adoption of either home banking or online lending cannot be achieved and therefore should not be the primary goal," the workgroup. "The most successful applications of either home banking or online lending have been when credit unions have recognized this electronic medium as an alternative channel to reach their members. As an alternative channel, it will coexist/compete with existing delivery channels. Based on this recognition, these credit unions have built a system to increase overall member satisfaction by promoting member choice and service. Benefits of successful implementation were often immediate."
And just as the benefits of offering these programs can be immediate, so must the credit union's response to its members who utilize them.
"(I)mmediate response (less than 60 seconds) to online loan applications is critical," the study said. "Unless such responsiveness exists, members usually do not value the online loan option and refuse to endorse and use it, thereby resulting in a low adoption rate. The ability to offer instant loan approval has a number of technical challenges and can be expensive. However, credit unions that have undertaken this investment have seen immediate benefits."
Among the other findings:
* Online loan quality may be different from offline loans because non-qualifying members may be more likely to try an online application rather than go to the branch and face a loan officer; thus credit unions must recognize that online lending can boost the volume of loan applications, there may also be a higher rejection rate among those loans.
* Web security continues to be an issue and must be addressed through member education as well as implementing appropriate processes and technologies.
* Most credit unions lack the needed e-marketing tools and techniques, but CUs are working on this. Training branch employees to use online services increases adoption rates.
"While it is clear that the tech meltdown has had a negative effect on online business, it is also evident that people in general will increase the use of the web for various tasks and functions," the study concluded. "Online business may have taken a hit, but it is sure to reemerge in a different and stronger format in the near future."
In addition to surveying CU members, the workgroup conducted case studies of FORUM Credit Union's online lending program and Downriver Crecit Union's home banking program.