The trends and demographics surrounding Online Account Opening as a delivery channel pose a real dilemma for Small CUs
di·lem·ma [dih-lem–uh] –noun
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 in my own mind … but as we were working with a $60 million credit union at the time to see if our ACCOUNTworks solution could work for them I began to realize that smallish CUs are facing a real dilemma over the next few short years.
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 who 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 percent 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 like online member enrollment and online account opening because that’s what we do. From this survey I learned that as of mid-2010 fewer than 50% of all CUs 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.
The second piece of data was from Javelin Strategy & Research and published by BAI Bank Strategies. 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 will be driving the new account numbers.
Putting this information together, the ground currently occupied by the average $250-million-and-under CU lies between these two opposing concepts. In the trench-warfare era of World War I this 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 CU and even more so for their smaller counterparts. I’d bet that lots of these organizations would like to offer this capability – they just can’t find a way to swing it.
With 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 in order to compete for future business and survive.
There is a way out – and that is to be creative and realistic about how to deploy online account opening 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 – fiVISION and the credit union – to adjust their normal business patterns. The result is that in the next few weeks another $250-million-and-under CU will offer online member enrollment and account opening in their marketplace. And that’s a good thing.