It may be hard for some to fathom that in today'sworld there are people who still use a dial-up service to accessthe web, drive for 20 minutes to get cash from the nearest ATM ordon't have any financial institution branches in theircommunities.

|

That's the daily reality for people who live in underservedrural or semi-rural areas, and consumers who are unbanked orunderbanked in many communities across the nation also facefinancial challenges.

|

What all of these consumers have in common, however, is thatmost of them own a mobile phone, and credit unions are leveragingmobile banking to not only meet their financial needs, but toimprove their financial lives.

|

“It is pretty interesting, the mobile app is one of our fastestgrowing services,” Ed Sivak, executive vice president of policy andcommunications for the $181 million Hope Federal Credit Union inJackson, Miss., said. “Each month you see growth in both in thenumber of people who sign up and register and in the number ofpeople who are actively using it.”

|

He added, “Far and away, the No. 1 thing that people use mobilebanking for is for checking their balance, which is if you thinkabout it, an important feature when it comes to making soundfinancial decisions. We know that members are looking at theirbalance before making transactions. And the second most frequentlyused mobile app feature is internal transfer. These are good thingsbecause members are actually using the mobile app to make goodfinancial decisions. We see this as a service to empower ourmembers to better manage their finances.”

|

More than half of Hope's 30,000 members live in households thatearn less than $35,000 a year.

|

About 30% of Hope's members have used high-cost alternativefinancial services such as money orders, check cashing,remittances, payday loans, refund anticipations loans, rent-to-ownservices, pawn shop loans or auto title loans. However, 72% ofthose members also say they used those alternative financialservices less after they joined Hope, according to Sivak.

|

|

mobile banking trends of the futureMobilebanking appears to be a growing channel with which creditunions can attract and retain underserved consumers.

|

According to the FDIC's National Survey of Unbanked andUnderbanked Households, about 20% of American households wereunderbanked in 2013, meaning they had a bank account but also usedalternative financial services.

|

More than 7% of U.S. households are unbanked, meaning they haveno banking relationship.

|

The FDIC report also noted 82.7% of underbanked households hadaccess to a mobile phone, and nearly 65% of those underbankedhouseholds said they had access to a smartphone, compared to 59% offully banked consumers. (Click on chart to enlargen image.)

|

What's more, nearly 30% of underbanked consumers used mobilebanking while nearly 22% of the fully banked households accessedmobile banking. In contrast, nearly 55% of fully banked mobilebanking consumers were more likely to use online banking comparedto 38% of the underbanked who used online banking.

|

Amy Goratowski, director of organizational development for the$110 million Prime Financial Credit Union in Cudahy, Wis., foundthat for about 72% of the credit union's 18,000 members who live inlow-income designated areas, many don't have a desktop computer intheir homes.

|

“Our community does have access to a mobile device,” she said.“Therefore, offering mobile banking to our membership became a highpriority.”

|

In addition to offering the basic mobile banking features ofchecking balances, making transfers and remote check deposit, PrimeFinancial's app also allows members to apply for loans. In fact,more than 30% of electronic loan applications are completed via amobile device, Goratowski said.

|

mobile banking helps serve more consumers“Newfeatures will be introduced in 2016 that allow even more servicesto be performed via Prime mobile,” Goratowski said. “Bill pay andcredit card integration will allow members to pay bills, block acredit card transaction and provide travel alerts.”

|

Hope also plans to expand its mobile app service this year toinclude a personal financial management tool that can help memberswith budgeting, expense tracking and other money managementfeatures.

|

“One of the lessons we've learned over the years is that themobile app is a complement to our outreach strategies and enhancesour member experience,” Sivak explained. “The way we reach peopleis by meeting them where they are in churches, community actionprograms and non-profit organizations. Our team members go out,meet people, and sign them up to become members. Once our membersare comfortable with us, they'll sign up and use the mobileapp.”

|

Nevertheless, the Federal Trade Commission reported mobilebanking offerings are not always implemented in ways thatfacilitate economic inclusion for the unbanked or underbanked.

|

For example, mobile banking is often designed to work togetherwith online banking. To access mobile banking, users often musthave an online enabled bank account and use online banking.

|

According to the federal agency, sometimes certain mobilebanking features, such as mobile banking alerts, need to be set upor changed via an online banking platform. Although underbanked andfully banked households have regular access to the Internet atsimilar rates, the use of online banking as the main banking methodis considerably less prevalent among the underbanked.

|

This suggests that mobile banking's interdependence with onlinebanking could constrain underbanked households' ability to takeadvantage of the full array of mobile banking functionalities.

|

Interestingly, the FTC's research also found the majority offully banked and underbanked households that use mobile banking astheir primary channel also use a bank branch.

|

For credit union members who live in rural or semi-rural areas,however, the nearest branch or ATM may be a 20-minute drive away orlonger.

|

|

About three years ago, the $107 million GEMC Federal CreditUnion in Tucker, Ga., began offering mobile banking to its 13,000members throughout the Peach State. About half of its members workfor 42 electric coops in Georgia and Tennessee that deliverelectrical power to rural residents.

|

mobile banking makes a difference in banking trends future mark nofi GEMC federal credit union“I can tell you that we've had a very rapid adoptionof mobile technology, especially in this rural market,” Mark Nofi,vice president of marketing for GEMC, said. “We look at those ruralmarkets as being areas where people are underserved. In many ofthese rural markets that we serve it could be many, many miles forour members to get to a surcharge-free ATM or any other branchesbecause we do not have brick and mortar branches. We only havethree and they're all concentrated in certain areas.”

|

Although rural members also tap online banking, the Internetservice may be spotty because, believe it or not, some rural areasonly have dial-up service to access the Internet. Other membersaccess the web via satellite, but that too is not alwaysreliable.

|

Though checking balances and remote deposit are a couple of themost commonly used features on GEMC's mobile app, another popularfeature used by members is the surcharge-free ATM finder. Thecredit union is adding more surcharge-free ATMs to its network tomake accessing cash more convenient for their members.

|

Nofi also found the mobile technology helps the credit unionattract new members, including millennials.

|

“We do presentations about our products and services at electriccoops and we are often asked, 'Your corporate office is 200 milesfrom where I live, why should I do business with you?'” Nofiexplained. “That's when we focus on making them aware of our mobilebanking services and that we're only a phone call away when theyneed us.”

|

GEMC is also finding that many millennials are underbankedbecause they have mismanaged their finances.

|

“Younger people who are coming into the workforce have screwedup their credit primarily because they broke away from previousmobile phone contracts,” he said. “We're also seeing unpaid medicalbills and some college debt. After we open an account, we also workwith them to elevate their credit scores by setting realisticexpectations on what they need to do to make their financesbetter.”

|

The new members appreciate that service, Nofi said, and as youngmembers, they certainly appreciate and expect the mobile bankingservice as well.

|

While the credit union plans to enhance its mobile technologyservices, Nofi noted one challenge is a lot of compliance issuesslow down the development and adoption of mobile banking appfeatures.

Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.

  • Critical CUTimes.com information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
  • Exclusive discounts on ALM and CU Times events.
  • Access to other award-winning ALM websites including Law.com and GlobeSt.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.