While One Small CU Takes A Pass On Member-Directed ACH...

Member-directed ACH transfers are the latest online banking essential and, according to many credit unions that say the technology is breathing new life into the Internet.

But one small credit union here has decided to wait for online bill presentment instead.

"ACH transfers are attractive but cost prohibitive," said Karen Knight, comptroller at $31-million Tarrant County CU. "Right now, we charge members $5.95 per month to use bill pay, and ACH transfers would drive up that fee even more."

Also known as account-to-account transfers, or A2A, the service allows members to transfer funds from their credit union accounts to other financial accounts over the Internet. Gradually, members can begin to aggregate and manage their financial relationships from a CU website.

A recent Callahan & Associates' survey found that more than 80% of credit union members would prefer to transfer funds online as opposed to over the phone or at a branch.

And Boston-based research firm Celent Communications recently confirmed that no financial services website should be without online A2A.

Several large credit unions, including Navy FCU and State Employees CU in Michigan, are already offering the service.

Wescom CU in Pasadena, Calif. launched A2A two years ago, and saw usage increase by 90% last year. Brian Siegel, vice president of e-commerce for the $2.3-billion CU, said A2A is turning Wescom's website into a money management center.

Marlborough, Mass.-based Digital FCU is beta-testing A2A. The $1.9-billion CU expects that A2A will increase loyalty from its tech-oriented membership, 13% of which is already using electronic bill payment.

These large credit union are charging a variety of fees for A2A. For example, Digital FCU will charge members up to $5 for outgoing transfers, but offer the service free for incoming funds.

But Tarrant County CU just can't absorb the costs and doesn't want to charge members, according to Knight. "If we had more of our membership interested in bill payer, then offering A2A would also make sense. If we could bump up our adoption numbers enough, then we could absorb more of the costs."

Less than 2% of Tarrant County CU's 5,500 members actively use online bill pay, provided for three years by iPay of Elizabethtown, Ky.

Despite periodically promoting bill pay by offering free months of use, members aren't biting, Knight said. "Members mainly use homebanking while they're at work. My guess is that they don't want to pay their bills at work."

Even though most members aren't taking to bill pay, Tarrant County CU's membership seems to be interested in the Internet branch - a healthy 30% use homebanking, according to Knight.

Knight believes that bill presentment will be more appropriate than A2A as a means for members to manage their financial relationships.

"Bill presentment will be less work for the member, and therefore more attractive to the member" Knight explained. With bill presentment, the CU and iPay would be responsible for receiving bills and setting up payment accounts for members.

"We're going to compare the costs of bill pay to bill presentment as soon as it becomes available," said Knight.