Throughout the past year, there’s been an increased focus on switch kits as financial
institutions strive to lower the barriers to opening new accounts. But what exactly
is a switch kit and how can it help your membership? Within the industry, the
term “switch kit” can encompass a range of processes, ranging from paper-based
forms to complete online account opening and funding systems. Online switch kits
typically refer to a process using the Internet to open and fund new accounts
online, through an automated system. Some online switch kits also include the
capability to generate requests to close accounts at other financial institutions,
although a signature is usually needed.
Most vendors offering online account funding systems are reporting a significant
increase in their credit union client base over the next year. By the end of
2005, more credit unions of all asset sizes will have implemented this important
online tool. While credit unions who have taken the leap into online switch
kits are typically not involved in the actual account closing process at other
financial institutions, they are making it easier for members to switch their
primary account relationship by easily opening and funding their new accounts.
How can you decide if this technology is right for your credit union? While
there can be numerous benefits depending on your membership and current process,
benefits typically fall into the following categories:
Extend Your Reach
For credit unions with a field of membership that is distributed widely across
the US and/or overseas, it’s easier for new members to sign up online. Some
members and prospective members may have no little or no access to the branch
network. Reaching members at new SEGs can be automated, reducing travel and
postage expense. Kiosks and laptops can be used for new account openings at
events or through other indirect channels.
The Internet and online banking services have enabled credit unions to meet
the needs of consumers who find it inconvenient to conduct transactions during
traditional banking hours, extending the reach well beyond the traditional branch
network. Potential members who are researching online can easily open accounts
at the time of their research, enabling the credit union to reach people who
may have opened accounts elsewhere if they had to go directly to a branch.
Greater Likelihood that The Account Will Be Used
A key component of online switch kits is the capability for instant funding,
therefore increasing the likelihood that the account will become an active account.
No longer is the funding process reliant upon the mail or potential for the
member to procrastinate or forget about it. This results in less staff time
needed for follow-up. Additionally, once the member has provided their email
address as part of the process, email reminders can be sent for any further
steps or communications.
Enhance Opportunity for Increasing Account Relationships
During the sign-up process, some systems can recommend products or loans based
on the member’s information and credit history. Other products such as debit
cards, credit cards and checking can be included at the time the initial account
Online account opening systems incorporate an interface with identity and credit
verification databases to enable the credit union to meet both Patriot Act requirements
as well as potential fraud. This is done on a fairly automated basis, enabling
a faster turnaround and tighter control compared to traditional paper based
systems. Credit unions can streamline their new account processes by opening
all new accounts – whether by branch, phone, or online - through the internet-based
system. This ensures that all applications go through the same checks, reduces
the potential for error, and saves time compared to paper-based systems.