Patelco Credit Union with a big first for credit union e-commerce

SAN FRANCISCO - Score one for Patelco CU here for becoming what is believed to be the first credit union in the country to allow its members to engage in online shopping without the use of a credit card. Patelco CU has had this capability on a smaller scale for the last year with a handful of products, but is now planning to roll out an online shopping experience that will give members access to close to a million products-all of which can be purchased without a plastic card. "The basic strategic idea is to provide an online shopping experience without the use of a credit card. This has been the vision of our CEO Ed Callahan. He's been nagging me to get this done for a while now-we've done it," said Scott Waite, senior vice president and CFO of Patelco CU and CEO of its CUSO, Patelcorp. But why eliminate the credit card? Waite said one reason is to eliminate the interchange expenses of a credit card transaction (about 1 to 2% of purchase price). By not using a credit card, interchange fees don't have to be paid by the merchant, or by the credit card issuer (Patelco). The other reason for eliminating plastic is security. "We do believe our members will think this will be more secure. There's no credit card number at all, so it cuts down on fraud potential," said Waite. Here's how the online shopping, sans a credit card, will work at Patelco. A member logs into Patelco's Net banking system, PC 24, and is given an online shopping option which lets them browse photos and descriptions of different products. If a member makes a purchase, they are offered a list of their existing accounts they can debit to make the purchase. Another plus for the merchant is that the credit union is verifying for the merchant that the funds are there, and if they are, initiates the purchase. Pulling money directly out of a financial's accounts has been a pie in the sky dream of many e-commerce firms as well as Net banking firms that serve CUs. Patelco is doing it by actually setting up a member account for portal provider uMember.com as a SEG, and transferring money from the account of the member who is making a purchase, to uMember.com's account. Patelco will be offering the shopping via uMember.com's portal. For the last year Patelco has been doing this on a smaller scale with two of its SEGs. It first debuted the service with a greeting card company SEG, and then later with its Natural Wonders SEG. (The CEO of Natural Wonders sits on the Patelco board). Waite said it's worked out great and is excited about the potential of having a million or so products from uMember.com available to members. Patelco has the audience for it. Approximately 43,000 of Patelco's 180,000 members are Net banking users. "We're not doing this to become an e-commerce firm-we're helping members with a financial service and making our site more attractive." uMember.com also returns 1% of the revenue from member purchases back to the credit union, but Waite said, in one form or another, all of that money will go right back to the members. If members do want to make a purchase with the credit union's credit card, they can do so, and they can also take out another loan, such as a home equity line of credit, to make the purchase. "We're going to present that option. They can be making a purchase with something (HELOC) that's tax deductible as mortgage interest. That's an attractive option," said Waite. -pgentile@cutimes.com