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Whether a credit union’s goal is attracting Generation Y and the Millennials, extending its presence beyond physical branch locations or increasing efficiency without compromising member service, technology has become the investment that cannot be overlooked. The new buzzwords and trends in the industry today are all focused around various forms of technology. From social media participation to online banking applications and mobile banking, credit unions are finding more ways in which technology can be the solution to cutting the costs of required expenses and expanding into new arenas of member service and convenience. However, as the need for technology has grown exponentially, the economy entered a recession. Selecting where and when to invest in technology is now, more than ever, a very critical decision. In addition to shrinking deposits and the financial hardships of their members, credit unions are also affected by the cost of heightened regulation. Changes to the Real Estate Settlement Procedures Act and Regulation Z (Truth in Lending) took affect in 2009. Additionally, disaster planning, vendor management and data security are issues that are always under scrutiny and increase expenses. Conversely, the economic storm that has brought a focus on regulation also created opportunities as players leave the market. More than 100 banks have failed this year, and there have been calls for credit unions to take advantage of consumer apathy toward banks. In particular, the troubles of the mega banks have created striking opportunities for credit unions, such as a tremendous jump in membership at BECU following the sale of Washington Mutual to JPMorgan Chase Bank in late 2008. This trend is not only occurring in new members, but also in terms of existing members purchasing additional products. NAFCU surveyed credit union executives in July 2009 and almost 70% reported an increase in members switching loans from banks during the past 12 months. Building a new physical branch location has been the traditional approach to reach out to more members. However, the cost of land continues to rise and when materials and labor are included, it is a venture that many credit unions cannot pursue. Additionally, eco-friendly branches have become a popular trend, but these materials can cost 25% to 30% more than other materials. Regardless, no credit union can match the number of physical locations that a megabank or a large regional bank owns. These financial barriers are forcing credit unions to look to the Web as the way to meet member needs and expose new audiences to the benefits of the credit union experience. Unfortunately, a new challenge was added in September when the NCUA decided to assess a 0.15% premium to replenish the NCUSIF and pay for the Temporary Corporate Credit Union Stabilization Fund. The NCUA also increased capital requirements for the corporate credit unions. Many credit unions delayed any spending on major projects until the NCUA decision was announced. Now that credit unions have been able to plan for this new expense in their budgets, more of them are comfortable pursuing technology investments. However, it is an additional financial burden that weighs more heavily on some credit unions. In 2008 and 2009 the industry saw more credit unions begin leveraging technology as a way to capitalize on the consumers who were searching for new financial institutions as banks became increasingly unstable. Online banking solutions, workflow automation and remote deposit capture are technologies that are all receiving new levels of interest from credit unions. In fact, according to Celent, in 2008 one third of U.S. financial institutions adopted branch image capture and the number of institutions with remote deposit capture reached approximately 7,200 by the end of the same year. According to Callahan’s Technology Guide, 26% of credit unions surveyed said that they anticipated adopting mobile browsing in 2009, and 43% anticipate adopting it in 2010. Prior to the downturn, many credit unions were buying every popular solution that entered the market, and there were many exciting trends to consider. Everything from mobile banking and social media to fraud technology and new green banking options have shown potential benefits, but credit unions were focusing on participating in every trend rather than tracking the return on investment, assigning accountability and measuring success. The current economy has forced institutions to make strategic investments with the cost of delivery and the return on the investment as deciding factors. If paper is required at any point in the process, a large portion of the benefits from automation are lost. For example, credit unions have at least one core processor as the focal point of data collection, and they typically pair it with an imaging system on the backend for document scanning and storage. To capitalize on that space between the two systems, output management and electronic signature capture solutions transform historically paper-based methods in to electronic processes. The result is straight through processing which significantly improves efficiency through increased productivity and reduced operating costs. In uncertain times, executives tend to be reactive. However, the key to planning for a better future is to make good decisions based on improving member service and convenience, increasing productivity, reducing costs and a rapid ROI. As we enter 2010, the challenges that the industry faces will not disappear, but it is still the time for credit unions to make the strategic technology investments that will allow them to gain market share now and emerge from the downturn as stronger institutions.

Peter Westerman

Credit Union Times

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