I receive volumes of printed and e-mail publications about the credit union and payment processing industry. All of these publications have been predicting, or citing evidence of, paper initiated payment transactions migrating to electronic payment methods for years. I haven’t ignored these articles and studies. In fact, I agree with them. However, the scope of this migration to electronic payment methods did not strike me until last week when I was waiting in line at the grocery store. I have three children ranging from 8 to under one, so the checkout line is a bit of a challenge. I’ve become quite good at unloading enough food and supplies to feed a small army while using my peripheral vision to count the number of candy bars being plucked from the stand by the checkout and slipped under the frozen peas on the conveyor belt. Usually, I just suggest peanut butter cups for myself and make sure all the candy is consumed prior to arriving back at the house, but don’t tell my wife. Anyway, this particular Saturday, the gentleman in front of me paid by check. I was shocked mostly because this would add an additional 30 seconds to a minute to our wait, which is just enough time for one of my kids to cause serious damage to something that I do not own and will end up paying for. Later, while consuming our candy on the way home it occurred to me that I do not remember the last time I wrote a check for a retail purchase. In fact, I rarely even carry cash. If I can not swipe, I don’t buy. If I have to actually go inside at the gas station to pay, I go somewhere else. I have become part of the statistics. I’ve been in the credit union industry my whole life. As a child and through my teens, I worked as a volunteer and part-time worker for my dad’s credit union, Susquehanna Valley FCU. For the last 14 years, I’ve worked at Mid-Atlantic. Through this time, it was always assumed that if your member had a share draft account, you were their primary financial institution. However, I believe this is no longer true. My wife would tell you not to trust my grocery store example because I do not necessarily represent the average cross-sampling of Americans. This is her diplomatic and polite way of saying that I am a bit of a technology geek. However, if we examine some industry statistics, I can show that, for this at least, I am in-line with mainstream America on the use of electronic forms of payments. The 2004 Federal Reserve Payments Study states that between 2000 and 2003 the number of checks processed dropped 5.2 billion or about 4.3% annually. At the same time, the study finds that for purchases offline debit increased 24.9% and online debit increased 21%. NACHA reports total ACH volume increased 21.34% in 2004. Specially, ARC, which is lockbox check conversion to ACH, increased 333.85%. In addition, TEL, telephone initiated ACH transactions, increased 25.73% and WEB, Internet initiated ACH transactions increased 36.34%. At Mid-Atlantic, we too have seen an increased rate at which payment transactions are migrating to electronic mechanisms. As a corporate credit union, we not only offer our member credit unions share draft processing services, but ACH, ATM, Debit, and electronic bill payment (EBP). The internal year over year statistics for these services is further evidence of the migration. Two good examples are ACH and EBP. Our average daily volume for ACH receipt transactions increased 25% between December 2003 and December 2004. The average daily ACH origination volume increased 76%. In EBP average daily payment volumes increased 68%. While some of this increase is attributable to new business, we have seen consistent year over year increases for each member credit union as well. On the opposite side, even though new business has masked the decline in average daily processing volumes for share drafts, individual credit union year over year averages have dropped. I believe these statistics reinforce my premise that the measure of a primary financial institution is no longer holding a member’s share draft account. A credit union now needs to offer ACH, debit cards, ATM cards and even EBP to their members. While there are exceptions to the rule, the time has come that in order to be the primary financial institution for your members, you need to offer the above services in addition to share drafts. Moreover, credit unions not offering these options could find themselves in real trouble in the not so distant future. Don’t get me wrong, share drafts are still very important. The ACH statistics mentioned earlier concerning ARC, are paper initiated transactions that have been converted to electronic forms of collection. The whole point of the Check 21 regulation is to encourage financial institutions to migrate to electronic methods of processing checks. It does not do anything to discourage your member from using a share draft to initiate the transaction. This in itself brings up another issue with accounting for exception items across multiple systems as the line blurs between electronic and paper transactions, but that’s a different article. The point of this one is to encourage you to look at the payment options your credit union is offering to your members. If it’s only share drafts or a few of the services mentioned here, consider if your credit union is or will continue to be the primary financial institution to your members into the future. With that, it’s Saturday morning again and I’m hungry for a peanut butter cup.

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