April 2009: I file my taxes. In spite of the economy, my finances aren't too bad. I'm one of the lucky ones. I'm employed, and my income is trending up. I'm motivated to do even better in 2009. I'm going to move my checking and savings accounts to a community bank or credit union — finally!
I work for a technology company that caters to community banks and the credit union industry. Every business day I read and think about credit unions and community banks. I talk to VPs at credit unions nationwide. More than your average consumer, I KNOW that community banks and credit unions are a better place for my money.
May 2009: I make the calls. I check with credit unions — and yes, a handful of banks — in my neighborhood. It looks like the best place for my money is a credit union that has a branch about 15 minutes away. They would love to have my business. I would be more than happy to give it to them. They offer a personal checking account with an unbelievable interest rate. The woman I talk with on the phone is knowledgeable, enthusiastic and helpful.
June 2009: My money is still at the bank where it's been since the late 1980s. Some days I hate my bank. I don't get outstanding service. They were all over the local news earlier this year for planning and then canceling an executive staff conference/vacation. The money in my checking account doesn't earn anything!
July 2009: My money is still at the bank I don't like. Does this mean I'm lazy, stupid — or both?
I haven't made the switch because I'm a single mother with a fulltime job, who is busy working to get ahead. I have a lot in life — a great kid, a nice home, good health — but time is in short supply. To transfer to the credit union, I have to get in my car during business hours — or on a precious Saturday morning — and spend an hour or two of my time filling out forms, signing paperwork, etc. If I could handle this online some evening from the comfort of my home, I promise you; it would be done already.
I am not aware of any community banks or credit unions in my home state offering this level of online automated financial services-membership application, new account opening, and loan processing and tracking. Is this because my need for automated online financial services is unusual?
Not according to the research I'm reading. One recent survey reported that 74% of the respondents preferred opening and funding a new bank account online, while 69% of the survey participants consider visiting their financial institution "a chore." Here's another startling fact: INGDirect has raised over $40 billion in four years with new online accounts. (Any financial institution you know like to have a part of that action?) And as for Generation Y — that's 75 million consumers — if it's not online, it's never going to even get picked up on their radar.
As a CU, what should be your next step? Find the best technology provider you can, one that offers a full array of solutions, from new member apps, to account opening, to loan processing and tracking-and understands how to integrate the platform with your core processor as well as your other program providers. A system that provides both automated account opening and funding as well as online lending provides the best cross-sell opportunities. With this kind of platform, when someone opens up a checking or savings account, the system can examine credit and qualify the individual for auto loans, mortgages and credit cards — in many cases saving the customer money by offering a better rate — all automatically.
What about costs? Plan on doing your homework, so you fully understand what you're paying for upfront and what charges may show up further down the road in upgrades or other services. You also will want to factor in the advantages and disadvantages of having your own in-house system with its requisite hardware and IT department costs versus a web-based system, where the vendor company shoulders these fees and spreads the costs among clients. Some technology providers require an investment upfront. Others allow you to "pay as you play." A fee structure that's transaction-based is often a better buy and more affordable for credit unions of every size.
Although you will need to allow for some employee training, most credit unions with automated member services are happy to report that they are able to manage the system with existing staff. In many cases they have seen their membership numbers and new accounts and lending business grow or even double without the expense of additional staff. This is another important advantage to offering online account opening services. According to Forrester Research, financial institutions can expect to reduce account acquisition costs by 30-55% with web-based account opening solutions.
Once you have the system available online and ready for business, you will need to work with your marketing staff to promote your new online capabilities.
From where I stand, it looks like the rubber is going to hit the road sometime in the next couple of years. If community banks and credit unions follow the trend in other industries swallowed by the Internet wave, those that hope to stay in business by offering a warm friendly atmosphere, excellent customer service, free coffee and great value for the dollar may want to take note of the fate of bookstores nationwide. I believe extended online services will be critical to growing and thriving in the new economy.
Branwyn Rhodes is the director of communications for MeridianLink, Inc., Costa Mesa, Calif., a provider of enterprise business solutions for over 26,000 end-users in the financial services industries. For info:
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