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Online and Mobile Banking Help Credit Unions Grow Membership

Technology management style predicts online channel success

MADISON, WI – Online banking is a widely adopted, mainstream technology in the credit union space, but some segments of the credit union market have been slower than others to drive  consumer adoption and usage of mobile banking. A new Filene Research Institute report, “Online and Mobile Channels: Strategies of High‑Performing Credit Unions,” is Filene’s latest examination of the state of credit unions’ online and mobile banking implementation strategies. This report identifies a segment of credit unions that were able to more successfully drive consumer adoption of both online and mobile banking offerings and ultimately increase membership growth.

The report was written by Ron Shevlin of Aite Group, with a foreword from Dennis Campbell of Harvard Business School and supported by a grant from Fiserv, Inc. (NASDAQ: FISV), a leading global provider of financial services technology solutions. Using data from nearly 500 credit unions in the third quarter of 2012, it explores credit unions’ online and mobile strategies by segmenting them into three categories based on the credit unions’ technology management style – Green Belts, Blue Belts and Black Belts. The categories are defined by the following criteria:

  • Green Belts – 30 percent of survey respondents:
    • Risk averse
    • Moderate commitment to digital channels
    • Inconsistent coordination of IT with the credit unions’ other initiatives
  • Blue Belts – 35 percent of survey respondents:
    • Risk neutral
    • Strong executive commitment to digital channels
    • Moderate coordination between IT and the business
  • Black Belts – 36 percent of survey respondents:
    • Risk tolerant
    • Strong executive commitment to digital channels
    • Excellent coordination between IT and the business

The different styles are relevant to how credit unions within each category vary in their results in key measures of growth through digital channels. Credit unions that successfully integrate digital channels are correlated with better membership growth, and credit unions within a category tend to demonstrate similar strategies. For example, Black Belt credit unions are 31 percent more likely than Blue Belts and 75 percent more likely than Green Belts to grow membership more than ten percent. Black Belt credit unions are also much better at driving auto and personal loans through their electronic tools.  The report outlines other implications for credit unions, including:

  • Black Belt is a team achievement.  To reach the highest levels of success and the business results that go with it. requires more than one individual focused on digital channels.
  • Cost should not trump other factors. Blue and Green Belts consider the initial cost first when selecting vendors, but for Black Belts, it’s fourth on the list. Best-in-class technology, breadth of technology and ongoing costs all come before it.
  • There is still time for mobile — but not much. When it comes to member acceptance of mobile as a banking platform, Black Belt credit unions are tied with their Blue Belt peers with a nine percent member adoption rate. Green Belts have a five percent member adoption rate so while they are behind, there is still time to act on a strategy.
  • Be clear about your top digital priorities. Respondents were excited about digital channels, but they didn’t always specify a single reason. Case in point: 76 percent of respondents said that maintaining competitive parity was a major objective of their online banking, but 50 percent said that achieving competitive differentiation was a major objective. The overlap indicates that many credit unions may leave their core digital objectives undefined.
  • Follow the leaders. Fully 64% of Black Belt credit unions invested in remote deposit capture in 2011 and 2012, compared with 46% of Green Belts.

The report also finds that nearly half of the credit unions surveyed said they haven’t quantified the impact that online and mobile channels have had on business objectives like achieving competitive differentiation, new member acquisition and cross-selling existing members.

“This research provides insights to assist credit unions in applying their digital channel strategy for years to come,” said Barb Lowman, vice president, Credit Union Solutions, Fiserv. “Credit unions can and should begin looking at online banking and mobile banking as an opportunity for engagement and interaction similar to those offered in a physical location to enhance member experience and increase their own potential for growth.”

To download the full report, visit http://filene.org/research/report/OnlineMobile

About Filene:
The non-profit Filene Research Institute is a consumer finance think tank serving the North American credit union system of $1.3 trillion in assets and more than 100 million members. Filene publishes objective research and fosters consumer-focused financial innovation. The Institute collaborates with leading researchers and academic institutions worldwide.

About Fiserv:
Fiserv, Inc. (NASDAQ: FISV) is a leading global technology provider serving the financial services industry, driving innovation in payments, processing services, risk and compliance, customer and channel management, and business insights and optimization. For more information, visit www.fiserv.com.

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