Eaton Family Credit Union had been interested in deploying mobile banking for some time, but its initial research into the technology turned out to be little more than expensive window-shopping.

"It was just way beyond our means," said Fred Siegel, a business development manager for the 11,000-member Cleveland-area credit union, which has about $39 million of assets.

So instead of buying an expensive software product, Eaton Family opted for a cooperative application from the credit union service provider Co-op Financial Services.

Using a cooperative approach "made a lot of sense," Siegel said. "The people who have signed up for it seem to love it. The co-op was the deciding factor for us."

A division of Co-op Financial Services, Co-op Mobile, lets credit unions deploy mobile banking with minimal up-front expense. The service has been gathering steam in the recent months, signing up seven clients in August for a total of 20 contracts. The vendor has also signed six reseller deals.

For Co-op, which contracted with mFoundry Inc. to provide mobile banking last October, then announced the Co-op Mobile link in February, the deals demonstrate growing demand among credit unions, which are starting to view mobile banking as a "must-have" application. The model also offers a possible alternative for community banks seeking low-cost entry into mobile banking.

Siegel said that the credit union's customer base has gradually moved out of the Cleveland area and has become reliant on the shared branching and mobile services offered by Co-op to compete with banks. "We need to be where our members are," Siegel said. "We're a small credit union with three branches that are rather close to each other."

Co-op Mobile integrates into Co-op Financial's proprietary Next Generation Network switch. Credit union members that use the switch can also use the Co-op Mobile application to verify balances, view transaction history and transfer funds. Credit unions do not have to change their host or home banking systems.

"What we have going for us is our approach to implementation," said James Hanisch, an executive vice president at Co-op Financial Services. To use Co-op Mobile, "you don't have to license software from an online banking or core system provider."

Financial companies that use Co-op's shared branching system now have more than 3,000 sites and account for 20% of the nation's credit unions.

Hanisch said Co-op's members pay a "modest" setup fee (compared to the $100,000 some experts say community banks typically must pay to build out a mobile service on their own), as well as per-transaction fees.

Analysts say the Co-op Mobile model is unique in the financial services industry and could be seen as a blueprint for banks, particularly community banks, that want to reduce the financial risk of offering mobile banking.

The appeal of the cooperative model is that it replaces an up-front capital expenditure with an expense that is based on transactions. "It's hard right now to get funding for an IT capital outlay," said Marc DeCastro, a research manager at Financial Insights.

Banks have collaborated in the past on such services as surcharge-free automated teller machine networks. "It's not unprecedented for small institutions to say, 'We have to do this; we have to be in defensive mode,' " DeCastro said. "But from a branding standpoint, how much flexibility do you have? With shared services, you do lose a bit."

Another hurdle is the culture of banks versus credit unions. "Co-op is attractive in the credit union space because of the nature of credit unions in general. They're nonprofit and work closely together," said Christine Barry, a research director at Aite Group. "If the co-op model were to happen in the banking industry, it would be in the community bank segment. There's a lot of pressure on small institutions to deploy [mobile technology]. Smaller financial institutions and credit unions are competing head-to-head with larger" banks.

Cary Whaley, the director of payments and technology policy at the Independent Community Bankers of America, said the co-op model could be a way to increase smaller banks' adoption of mobile banking. (An ICBA survey in 2008 said about 11% of community banks were active in the mobile channel and another 32% were budgeting to tap the channel.)

But Whaley also saw challenges. "The inhibiting factor would be strong vendor relationships that community banks already had, whether it's with the online banking vendor or the core systems vendor," he said.

And a co-op's transaction fees would not necessarily address uncertain future revenue from end users, another concern that has hampered mobile banking.

"In North America the model is to copy the functionality of online banking and migrate existing online banking users to mobile devices," said Stessa Cohen, a research analyst at Gartner Inc. "If I'm not paying for online banking, how are you going to convince me to pay for it on a mobile device?"