Ahead of the Curve: Technology Fosters Growth for Smaller Credit Unions

Small credit unions are taking action and seeing real returns from technology investments.

 
 

Small credit unions are often forgotten in today’s environment of multi-billion dollar institutions, yet those with assets below $50 million make up 77% of all US credit unions. Perceptions of the industry hinge in part on their success and ability to adapt to an ever-changing environment, especially when it comes to technology available to members.

Credit unions have historically lagged when it comes to advances in technology, but times are changing. Whether it’s internet home banking, automated call centers, or something as common as ATMs, credit unions have recently become more aggressive in adopting new technologies. Member demands are increasing the rate at which credit unions are improving technologies available to their field of membership.

What Members are Demanding
Many financial services customers find online services much more convenient than going to a branch to conduct financial transactions. According to Callahan’s Internet Strategy Consortium, 77% of the members surveyed used online banking at least once a week, while only 33% used ATMs that frequently, and 11% actually did their banking at a credit union’s branch at least on a weekly basis.

In another example of how members are relying more and more on electronic forms of banking, 84% of members now have their paychecks directly deposited into their accounts, precluding a trip to a branch. Because of this fact alone, credit unions must adapt their member interaction strategies using technology, since they have fewer opportunities to interact with members in a branch.

How the Small Guys Have Reacted
More than 96% of credit unions with assets greater than $50 million have ATMs, audio response call centers, and home banking via the internet. This percentage significantly decreases once below $50 million. But the smaller cohort is making big strides with adopting more member-focused technology.

Focusing on home banking via the internet, credit unions in the $5 million to $50 million asset range have been making great strides in the past five years. In June of 2001, the percentage of credit unions in this range offering internet-based home banking rose from 27.4% to 63.7%. This jump shows that smaller credit unions are making strides to offer the most advanced services to their members in order to retain them and gain more of their business.

Returns on the Investment
Looking at some financials, credit unions in the previously mentioned asset range that offer internet banking perform much better than those without. Those offering internet banking as of June 2006 had share growth of 0.28%, while those who did not saw shares decline –3.63%.

These types of technology must also be viewed as long-term investments that pay off over time. For example, credit unions that had internet banking as of June 2005 had overall share growth of 1.21%, showing how greater returns are achieved a year or more out.

Technology’s contribution to growth is even more evident in share draft growth data. Credit unions that had internet banking as of June 2005 had share draft growth of 10.71%, while those who did not offer the service stood at 7.30%. This is another indication of how investments in technology can generate returns to any size credit union.

All credit unions must take action when it comes to technology innovations. Banks are offering more services all the time, and historically credit unions have been behind the curve. In order to remain relevant and improve growth in the future, technology must be a central part of your credit union’s strategy.

Credit unions continue to face issues involving technology investment. To see how credit unions in your asset range are performing with various technical services offered, request a demo of Callahan & Associates’ Peer-to-Peer software

 

 

 

Oct. 30, 2006


Comments

 
 
 
  • how do we get big to help small &still not have small distrust large - large can help small if allowed or wanting
    Anonymous
     
     
     
  • It's good to be reminded that the credit union world isn't just those with $50 million or more in assets. These smaller credit unions represent harken back to our roots and our foundation, and they continue to offer services to the underserved. They need to keep succeeding in order for the spirit behind the movement to remain strong.
    Anonymous