LAKE BUENA VISTA, Fla. - A good percentage of your members use audio response. Your home banking has many members tapping their computer keys to check balances or transfer money. You even allow members to fill out loan applications on-line. Why, you're a credit union ready for the 21st Century, right? Actually, comments by Tim Lerew, senior director of corporate marketing for Edify Corp., suggest you'll soon be as high-tech as a bicycle with training wheels. Speaking at a recent Credit Union Executives Society (CUES) Marketing, Operations & Technology Pre-Conference Workshop, Lerew sketched new developments that will continue to affect how credit unions and their members conduct business. Lerew is an unabashed enthusiast about the impact of technology rapidly moving from R&D labs into the marketplace. "I'm a firm believer that, with judicious use of technology, small and medium-sized credit unions can remain competitive," he declared. For starters, in the next two or three years Lerew sees a major increase in highspeed broad-band connections reaching into people's homes. He figures consumers will want that option. After all, he pointed out, most people do their on-line banking between 10 and 11 a.m., generally from work where they have access to more sophisticated computer lines. Actually, Lerew indicated, ready member access to the Internet is both good and bad news. It's good news because the Internet can provide members convenient access to their credit union. It's bad news because members can also use the Internet to easily comparison shop "hot" CD rates and other offerings from financial rivals. Lerew also suggested CUs need to realize "your Internet strategy is not just a PC strategy." Members will be able to use Web TV and Palm Pilots to access their credit union accounts - or competitors' home pages. Cellular phones will play a big role, he added. In fact, he stated, "You're going to see the cellular phone as a handheld branch, thanks to WAP, or Wireless Access Protocol." WAP is enabling cellphones to display on a screen much of the same information such as e-mail that might appear on a member's computer monitor. "When this will really take off is when you have speech recognition and you can tell it what you want," Lerew said. Speech recognition will also play a role in audio response. Instead of listening to a menu message, "If you would like to check an account balance, press 1," then pressing a phone key, a member will simply say "Account balance." Security will be enhanced when the system confirms the member's identity by matching their voice patterns against ones already stored in the system by the member. "Right now a good credit union gets 50% of its members to use audio response. Speech recognition could add 15 to 30% of the rest," Lerew said. What about the cost of all this emerging technology? "The best investment you can make in technology is people, who can apply that technology to the benefit of your membership," Lerew stated. He cited data from A.T. Kearney indicating that for every dollar invested in non-information capital costs such as desks, a financial institution actually loses $4.84 in potential loan and deposit activity. That same dollar put into IT capital costs yields $2.56 in increased loans and deposits. The return jumps to $36.10 when money is used for non-IT labor. But the greatest payback is for IT labor, with an ROI of $449.75 for every dollar. The relationships hold true when the measure is impact on net income. A dollar spent on IT labor adds $5.74 to net income compared to 54 cents added to net income when the money is used for non-IT labor. Lerew predicted the year 2000 will see on-line revenue from lending increase substantially, and he advised credit unions to integrate their on-line banking and lending systems. On-line approvals in seconds are becoming increasingly prevalent, he said. "What if you could take the (automated) lending system you already have and link it with your on-line banking program? Instead of filling out a long and tedious form, my credit union is filling out the form for me." A final tip from Lerew. "Never decline a member electronically. Give them a message indicating a loan representative will contact them. Perhaps the member can qualify for another product," he said. In addition to technology, credit unions need to pay attention to some other issues, according to Peter Simonsen of RSM McGladrey. Given the robust economy and strong consumer confidence, "If you didn't have a good year in 1999, and 1998 for that matter, you're going to have problems," Simonsen warned. "The way you've done things for the past 10 or 15 years is not going to get you ahead. It's a waste of effort to become the local (Internet) portal for your members. You can't compete against Amazon.com and others. "The future is going to be very expensive and require investments in technology and people." He reinforced the constant drumbeat credit unions are hearing about new competition, citing State Farm Insurance's thrift charter, Wal-Mart's efforts to obtain a thrift charter, and the presence on the Internet of financial rivals such as wingspanbank.com and E*Trade. "You're starting to see loan volume for cars going down. This is part of the reason," Simonsen said. "If Disney, Coca-Cola and JC Penney expanded into financial services, over 25% of consumers would bank with those customers. They trust them. They know the brand," he added. So how can a credit union compete? "Bill presentment is where you could really shine. (But) don't wait until your members have already signed up with someone else. You will have to give it away in the beginning," he advised. Trust is another credit union advantage, Simonsen said. Combine bill presentment with trust, and "there's a bright future for credit unions. The big billers would love to pay you for bill presentment. It costs AT&T about $2 to prepare and mail a bill. If you can save them that $2 and split the savings with them, the credit union gets $1." Move quickly, he added. If you don't have bill presentment in place by January, 2002, your members may have signed up with your competitors. Simonsen indicated the average U.S. household has 10 financial relationships. What, he asked, if they transferred all that to your credit union? Savvy credit unions, he advised, look at themselves from the outside in and hold focus groups to learn what members want. "Technology is shifting the balance of power from the banking provider to the buyer of financial services," Simonsen said. -
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