A2A Discussion Highlights the Strategic Opportunity of Online Services

Beyond delivering convenience at a low cost, services like Internet home banking and online bill payment encourage loyalty because they create reasons for members to keep coming back to their credit union's website. More recently, new technologies like Account-to-Account transfer (A2A) have emerged that integrate with home banking to give members visibility and access to all of their financial relationships - even those from outside the credit union.

 
 

Beyond delivering convenience at a low cost, services like Internet home banking and online bill payment encourage loyalty because they create reasons for members to keep coming back to their credit union's website. More recently, new technologies like Account-to-Account transfer (A2A) have emerged that integrate with home banking to give members visibility and access to all of their financial relationships - even those from outside the credit union.

A2A is an electronic transfer that allows members to move money freely from one financial institution to another via the Internet. Credit unions are increasingly interested in how it can be used to enhance the level of service provided to online members. Members are using it to transfer funds to and from their own financial accounts, as well as to send and receive funds from other individuals - all via the credit union home banking interface.

Account to account transfers can enhance the value of a credit union's home banking service, especially when combined with account aggregation, and it can lower overall check processing costs. However, the most significant benefit of A2A may be the loyalty that results when the service becomes central to members' routine financial needs. A recent Callahan & Associates survey indicates a strong preference among online members for transferring funds via the web, as opposed to over the phone or at a branch. Eight-two percent of members responding to the survey said that they would prefer to transfer money online.

Last week, Callahan & Associates hosted an online discussion of A2A technology that was attended by over 50 credit unions from around the country. Three credit unions at different stages of introducing A2A to their membership - Digital FCU, State Employees CU (MI), and Wescom CU - discussed the significance of the technology, their experiences to date, and what they expect to achieve with A2A.

Digital Federal Credit Union is currently in the planning stages of launching their Funds Transfer service, with about 100 beta users right now. Craig Roy, Digital's VP of Support Services, described several reasons why the credit union thought A2A would complement their business goals. First of all, Digital has a relatively high penetration of Internet home banking and online bill payment, with about half of the credit union's 180,000 members being active home banking users, and another 23,000 members using bill payment. ''Based on the level of participation, it was a natural progression to roll out funds transfer services.''

Digital also realized that A2A could help the credit union maintain relationships with members who had moved out of the local area. Roy explained, ''We are committed to providing the most effective delivery channels and access points. Offering funds transfer service allows members to use a local financial institution while utilizing DCU as their primary financial institution.''

Thirdly, A2A was perceived as a ''sticky'' technology that would increase the number of home banking transactions performed. Finally, DCU recognized that many of their members were already using A2A to transfer funds to the credit union from other vendors.

Roy next demonstrated screen shots of their Funds Transfer service. There is no charge to receive incoming funds over a standard payment schedule, but outgoing payments are charged $2 or $5, depending on payment speed (1 - 3 days). DCU has also set up a Pay People program similar to PayPal that will transfer funds to vendors. The credit union is assuming transactional risk.

The beta users have provided valuable feedback that the credit union is using to improve the overall experience. For example, users have found the service to be convenient, but transfers are slower than expected. They also found some of the initial messages regarding the status of transfers to be confusing, so DCU is working on improving those communications.

Craig Roy also had a few words of advice to credit unions considering A2A, based on their launch experiences. First, make sure a risk assessment is conducted, and price according to risk. Next, ensure the user interface is easy to use, and that explanations are clear. Finally, create an effective demo site, and ensure credit union support staff is sufficiently trained and familiar with the service.

Going forward, DCU will roll out the service with minimal marketing, and closely monitor the number of active users over time. Their primary SEG is comfortable with technology services, so they expect to get lots of member feedback. Two future product enhancements are being considered: the ability to schedule recurring A2A transfers, and the ability to use it to open (fund) an initial account. DCU is also interested in including the service in their relationship-based pricing program, offering it at no charge with direct deposit, for example.


If you missed the original broadcast of this seminar, now's your chance to hear what three leading credit unions think about this issue--from the comfort of your office!

 

 

 

April 7, 2003


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