Online Money Movement to Extend Your Member Service Strategy

Every credit union would like to become their members' primary financial institution but credit unions have an uphill battle when competing with larger commercial banks. A new tool for leveling the playing field comes from the Online Money Movement solutions offered by CashEdge, a New York-based financial technology firm. CashEdge's private label solutions allow credit unions to leverage online payment innovations, such as next day inter-institution transfer and person-to person (P2P) payments, to increase their value to members and reduce processing costs. These tools provide credit unions with a means for offering better online service than even their competitors. For members, this one-step payment solution completely eliminates the need for check writing, empowering them to manage their finances with greater efficiency and control.

 

By My Credit Union

 

Every credit union would like to become their members' primary financial institution but credit unions have an uphill battle when competing with larger commercial banks. A new tool for leveling the playing field comes from the Online Money Movement solutions offered by CashEdge, a New York-based financial technology firm. CashEdge's private label solutions allow credit unions to leverage online payment innovations, such as next day inter-institution transfer and person-to person (P2P) payments, to increase their value to members and reduce processing costs. These tools provide credit unions with a means for offering better online service than even their competitors. For members, this one-step payment solution completely eliminates the need for check writing, empowering them to manage their finances with greater efficiency and control.

The Market for Online Payments
The success of PayPal, an online payment service, has focused attention on the demand for online payments. Last year, consumers made over 100 million online person-to-person payments worth $5 billion. Market research firms confirm the demand going forward. A recent study by Dove Consulting/NYCE found that that nearly 21% of customers expect to decrease their use of paper checks in favor of online methods, and 57% of customers think that it is important for financial institutions to offer P2P payment services. The trend is moving quickly, with the adoption of these services expected to take place faster than adoption of the ATM.

Credit Unions at the Forefront
One of the early adopters of the CashEdge solution was $525 million, Dallas-based Advancial FCU. ''The addition of secure, online money movement services creates a win-win for members and for Advancial. Members gain added flexibility with a speedy and convenient online payment option while we are lowering processing costs for the credit union. We anticipate that other credit unions will be quick to follow Advancial's lead,'' said Brent Sheffield, COO of Advancial.

What is Online Money Movement?
Online money movement encompasses a variety of services, including electronic bill payment and presentment. For credit unions, the innovation comes from inter-institution transfer-the ability to let members move money between accounts at various institutions- and P2P payments, where members send email-based payments to anyone with an email address. In both cases, the transaction, which is initiated through a user-friendly web page on the credit union's site, is based on an ACH transaction. CashEdge offers a variety of service levels, notes CEO Sanjeev Dheer, ''Much like choosing the delivery option on a FedEx package, users choose from Next Day and Standard delivery of funds depending on their needs.'' The CashEdge solution provides the end user interface, risk management tools and transaction processing, making the offering truly turnkey.

The application for the technology goes beyond basic transaction capabilities. The CashEdge solution is also geared to help the credit union market its services by linking the inter-institution transfer technology to automatic savings plans and account opening and funding applications, providing a powerful mechanism for increasing closure rates and capturing deposits.

As online money movement becomes a requisite, mainstay service offering, the CashEdge solution is positioned to evolve quickly. CashEdge recently formed an alliance with NYCE and will soon offer online, real-time debit transactions through their Online Money Movement Solutions, further increasing the value that credit unions can offer to their customers through the service.

What About Risk?
The most common question that credit unions have about the new payment medium is ''What is our risk?'' CashEdge's CEO Sanjeev Dheer notes that risk is not a roadblock. ''CashEdge has developed proprietary real-time account authentication technologies that mitigate the risk of operating in an online environment. Thanks to these unique tools, our risk experience over the last 18 months has shown to be much lower than traditional paper check processing.''

The Case for Online Money Movement
The business case for online money movement is a compelling one, notes Sanjeev Dheer. ''Lower write-off and processing costs for e-payments means that for every paper check transaction our clients can displace using online alternatives, they stand to save money. At the same time they are increasing their ability to attract and service members. Payback is short and upfront costs nominal.''

CashEdge's experience in offering the service over the last 18 months shows that the average inter-institution transfer user makes upwards of nine transactions per year, with an average value of $750.00. Each transaction can translate into $1.25 to $3.50 in new, high margin fees, boosting fee revenue per account substantially. With adoption rates averaging 10 percent of online users in the first year, this service can translate into a substantial new revenue stream for the credit union. In addition, the new service will attract new online users to the lowest cost online service channel.

A Need-to-Have Service
''We believe strongly that this will be a need-to-have service very shortly,'' says Aydrian Drewery, of Digital Insight, which is offering CashEdge's services to its bank and credit union clients. ''It is an ideal service for credit unions in that it does not require a big investment in technology or people-the turnkey CashEdge solutions provides value to credit union members immediately while improving the credit union's cost structure.''

Contact
Roy Messing
Senior Vice President, Business Development
Tel: 212-656-9000 x17
rmessing@cashedge.com

 

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Oct. 28, 2002


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