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Credit unions go digital
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July 26, 2000: 10:45 a.m. ET
Traditional credit unions zoom into digital age, eager for new clients
By Jay MacDonald
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NEW YORK (Bankrate) - During a break from a sales meeting in downtown Manhattan, a high-tech marketing rep pulls out her Palm Pilot and casually pays her monthly bills via a coast-to-coast wireless network.
At a busy coffee bar in Madison, a University of Wisconsin professor sits by the fireplace sipping a cup of gourmet java and applies online for a home improvement loan.
Where do they bank, you ask? Perhaps some all-powerful behemoth created by the latest mega-merger, or some ubiquitous global powerhouse?
Nope.
Meet the new, improved, ever-so-cutting-edge ... credit union!
These days, credit unions bear little resemblance to your granddaddy's  bank. Gone are the WPA-era wooden tables and institutional fluorescent lighting, replaced in some locales by modern Internet kiosks serving their own signature blend of coffee.
While many smaller credit unions have yet to establish much more than a brochure presence online (although some are going full speed into the Net world), the larger ones are eagerly adding new Internet-enabled functions as their best bet to retain members - and attract new ones.
"Credit unions have a marvelous reputation, and one of the challenges they face is to bring that customer trust into cyberspace," says Mark Condon, spokesman for the Credit Union National Association, a trade organization.
Leveling the playing field
According to the Credit Union National Association, banks still control nearly eight out of every 10 asset dollars in the United States and nearly 95 percent of the market. Credit unions have feared bank consolidation might tip the scales even more toward the mega-banks, enabling them to lure away credit union loyalists with free checking, nationwide ATMs and high-powered Internet services.
But bank mergers have commonly created acrimony among bank customers. In every city where major banks have merged, interest in credit unions has spiked.
And today, credit unions are finding that the very technology they once feared most may actually be their saving grace, an affordable way to level the playing field with the big guys while providing the customer reach they need to retain and expand their membership.
C u online
Blake Allen is bullish on high tech credit unions.
In fact, as president and CEO of FIData.com, he's willing to bet his livelihood on it. FIData provides online, real-time automated loan underwriting to more than 110 credit unions.
"When people think of their credit union, they think of lower loan rates than they're going to get from a bank," says Allen. "The average cost to do a loan today is about $218. It also takes a significant amount of time; it's very labor intensive. We can cut that down to about 60 seconds, reducing the cost of the transaction from $218 to around $15."
The savings is significant. FIData charges a $2,500 implementation fee, a licensing fee ranging from $0 (under $50 million in assets) to $9,900 (over $1 billion), and a per-approval fee of $12 or less above each customer's limit.
Fast, inexpensive and available around the clock, online underwriting can do wonders for loan volume, the backbone of the credit union.
"We've had credit unions that went from processing 300 to 500 loan applications a month to 110 a day," says Allen.
Competing in cyberspace
Allen says expanding delivery channels is essential to the real challenge facing credit unions today: retaining and recruiting members, and that tapping into the Internet's highly affordable uses today can be the best hedge against customer flight tomorrow.
"They are looking at the Internet as a way to keep contact with their membership and even their kids, because without a good-sized membership base, they don't have the money to make loans, which is what they see themselves being there for," says Allen.
"They know Mr. Smith, they know his kids, and the thought of being able to keep his children as customers after they go off to college, to keep that relationship, is a strong part of what credit unions are out to do." 
- by Bankrate.com for CNNfn.com
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