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.''
Senior Vice President, Business Development
Tel: 212-656-9000 x17