Whether a credit union's goal is attracting Generation Y and theMillennials, extending its presence beyond physical branchlocations or increasing efficiency without compromising memberservice, technology has become the investment that cannot beoverlooked. The new buzzwords and trends in the industry today areall focused around various forms of technology. From social mediaparticipation to online banking applications and mobile banking,credit unions are finding more ways in which technology can be thesolution to cutting the costs of required expenses and expandinginto new arenas of member service and convenience.
However, as the need for technology has grown exponentially, theeconomy entered a recession. Selecting where and when to invest intechnology is now, more than ever, a very critical decision.
In addition to shrinking deposits and the financial hardships oftheir members, credit unions are also affected by the cost ofheightened regulation. Changes to the Real Estate SettlementProcedures Act and Regulation Z (Truth in Lending) took affect in2009. Additionally, disaster planning, vendor management and datasecurity are issues that are always under scrutiny and increaseexpenses. Conversely, the economic storm that has brought a focuson regulation also created opportunities as players leave themarket.
More than 100 banks have failed this year, and there have beencalls for credit unions to take advantage of consumer apathy towardbanks. In particular, the troubles of the mega banks have createdstriking opportunities for credit unions, such as a tremendous jumpin membership at BECU following the sale of Washington Mutual toJPMorgan Chase Bank in late 2008. This trend is not only occurringin new members, but also in terms of existing members purchasingadditional products. NAFCU surveyed credit union executives in July2009 and almost 70% reported an increase in members switching loansfrom banks during the past 12 months.
Building a new physical branch location has been the traditionalapproach to reach out to more members. However, the cost of landcontinues to rise and when materials and labor are included, it isa venture that many credit unions cannot pursue. Additionally,eco-friendly branches have become a popular trend, but thesematerials can cost 25% to 30% more than other materials.Regardless, no credit union can match the number of physicallocations that a megabank or a large regional bank owns. Thesefinancial barriers are forcing credit unions to look to the Web asthe way to meet member needs and expose new audiences to thebenefits of the credit union experience.
Unfortunately, a new challenge was added in September when the NCUAdecided to assess a 0.15% premium to replenish the NCUSIF and payfor the Temporary Corporate Credit Union Stabilization Fund. TheNCUA also increased capital requirements for the corporate creditunions. Many credit unions delayed any spending on major projectsuntil the NCUA decision was announced. Now that credit unions havebeen able to plan for this new expense in their budgets, more ofthem are comfortable pursuing technology investments. However, itis an additional financial burden that weighs more heavily on somecredit unions.
In 2008 and 2009 the industry saw more credit unions beginleveraging technology as a way to capitalize on the consumers whowere searching for new financial institutions as banks becameincreasingly unstable. Online banking solutions, workflowautomation and remote deposit capture are technologies that are allreceiving new levels of interest from credit unions. In fact,according to Celent, in 2008 one third of U.S. financialinstitutions adopted branch image capture and the number ofinstitutions with remote deposit capture reached approximately7,200 by the end of the same year. According to Callahan'sTechnology Guide, 26% of credit unions surveyed said that theyanticipated adopting mobile browsing in 2009, and 43% anticipateadopting it in 2010.
Prior to the downturn, many credit unions were buying every popularsolution that entered the market, and there were many excitingtrends to consider. Everything from mobile banking and social mediato fraud technology and new green banking options have shownpotential benefits, but credit unions were focusing onparticipating in every trend rather than tracking the return oninvestment, assigning accountability and measuring success. Thecurrent economy has forced institutions to make strategicinvestments with the cost of delivery and the return on theinvestment as deciding factors.
If paper is required at any point in the process, a large portionof the benefits from automation are lost. For example, creditunions have at least one core processor as the focal point of datacollection, and they typically pair it with an imaging system onthe backend for document scanning and storage. To capitalize onthat space between the two systems, output management andelectronic signature capture solutions transform historicallypaper-based methods in to electronic processes. The result isstraight through processing which significantly improves efficiencythrough increased productivity and reduced operating costs.
In uncertain times, executives tend to be reactive. However, thekey to planning for a better future is to make good decisions basedon improving member service and convenience, increasingproductivity, reducing costs and a rapid ROI. As we enter 2010, thechallenges that the industry faces will not disappear, but it isstill the time for credit unions to make the strategic technologyinvestments that will allow them to gain market share now andemerge from the downturn as stronger institutions.

Chuck Klein is CEO of Integrated Media Management. He can bereached at 800-836-4750 or [email protected]