The trends and demographics surrounding online account opening as a delivery channel pose a real dilemma for small credit unions.
1. a situation requiring a choice between equally undesirable alternatives.
2. any difficult or perplexing situation or problem.
Several weeks ago a couple of statistics crossed my radar screen. At the time I didn’t really put them together … but as we were working with a $60 million credit union at the time to see if our technology could work for them, I began to realize that smallish credit unions are facing a real dilemma over the next few short years.
Between the Rock …
The first piece of data was from a technology survey published by Callahan & Associates about the online delivery channels employed by credit unions. The report ran through a number of technologies from account aggregation to online loan applications and reported the portion of credit unions that currently employ these technologies.
The information was stratified by asset size. As you might guess, the “bigs” utilize nearly all of them at participation levels of 80% or 90%, while smaller institutions make use of these technologies on a lesser scale.
I am generally interested in what online technologies are being used … and really interested in a few of these for our business purposes. From this survey I learned that as of mid-2010 fewer than 50% of all credit unions under $250 million in assets offer online member enrollment – and even fewer offer members the ability to open a new share account online.
The numbers (no real surprise here) drop like a rock as the institutions get smaller.
… and The Hard Place
The second piece of data was from Javelin Strategy & Research. This industry analysis is predicting that 50% of all accounts will be opened online in 2015. Again, the underlying demographics are not so surprising: Baby Boomers are moderate tech users, Gen X use tech solutions a bit more often, and the Gen Y crowd is really pushing the envelope.
As we go through the next few years, my guess is that Baby Boomers are going to open fewer accounts and the Gen Y gang – along with the “Millennials” – will be driving the new account numbers.
No Man’s Land
Putting this information together, the ground currently occupied by the average $250-million-and-under credit union lies between these two opposing concepts. In the trench-warfare era of World War I this position was called “no man’s land”. Not a very good place to be, with very dire ramifications if you can’t find your way out.
Why then do you suppose that’s where most of them are? The biggest driver has to be economics. Technology solutions for member enrollment and account opening are pretty salty investments for the larger credit union and even more so for their smaller counterparts to spur productivity. I’d bet that many of these organizations would like to offer this capability – they just can’t find a way to swing it.
That said, the prospects on the other side are not very appealing either as these organizations must find a way to offer these delivery channels to compete for future business and survive.
The Path Forward
There is a way out – and that is to be creative and realistic about how to deploy a particular technology solution in a structure that feeds the consumer’s appetite while being economically feasible for the credit union.
We found a way to work through that discussion with the $60 million organization I mentioned earlier. It required both sides – our company and the credit union – to adjust their normal business patterns.
The result is that in the next few weeks another $250-million-and-under credit union will offer online member enrollment and account opening in their marketplace. Rather than being stuck between a rock and a hard place, that’s a good thing for the future of this institution and especially its members. Added value is very attractive.
Mike Winter is president of fiVISION in Indianapolis, Ind.