In the past, online banking was the exclusive domain of large financial
institutions. The costs associated with the development and installation
of this emerging technology at first limited the scope and penetration
to a handful of credit unions that could afford to make large investments
in unproven technology. Rapid adoption of Internet access by the
average consumer and year-end 2002 data indicates that this is no
longer the case.
From June 2002 to December 2002, 331 credit unions initiated new
online banking services. Credit unions over $25 million in assets
who added Internet home banking to their services had an average
of $101 million in assets. Of these 331 credit unions, over 100
were under $50 million in asset size. Compare this to the average
asset size for credit unions over $25 million--$175 million--and
it seems clear that the perceived importance of Internet account
servers as well as lower costs associated with online banking today
have resulted in a more level playing field, allowing smaller credit
unions to provide this convenient technology to their members.
Online banking allows credit unions to not only offer more services
and serve more members, but can also keep costs low. The computer
facilities needed to accommodate online banking are less expensive
than building and maintaining brick-and-mortar branches with employees.
And unlike branches that maintain business hours, online banking
provides members with 24-hour access to their accounts. Finally,
the convenience associated with online banking encourages members
to remain active in their credit union even if they move or live
in an area not served by the credit union.
Internet home banking has become a central service for many credit
unions. It is one type of technological advancement that has profited
both credit unions and their members while staying true to the industry's
dictum of providing more services at lower costs. More information
on the adoption rates of online banking and the future and impact
of different technology on member relationships is available in
Callahan's upcoming 2003 Technology Survey.