Targeting a Broader Member Base

When it comes to online account management, the next step for credit unions is really the first step for members: using the online channel to open new accounts.


Targeting a Broader Member Base
When it comes to online account management, the next step for credit unions is really the first step for members: using the online channel to open new accounts.

I had just begun college, and I was sitting in a small office with my parents and a banking representative, setting up my first bank account. Of course I use the term "my" liberally; it was really my parents' bank account. When I graduated four years later, I had grown tired of the bank's customer service and decided to abandon it in favor of a local credit union. I also wanted to deposit my first paycheck into an account that was truly mine. Being your typical Generation Y'er, I preferred using the internet whenever possible. This, combined with my new 7 a.m. to 7 p.m. work day, meant that my fate with this credit union would boil down to one question: could I open my account online? Luckily for me, and them, I could.

My story is far from unique. At least 40% of college students are like me; they will abandon their existing financial relationship after graduating [1]. They are tech savvy, so when they open a new account, they are going to do it online. In fact, 73% of the population at-large claim that they either have opened an account online or would prefer to do so for their next account [2].
Offering online banking is becoming necessary, but not sufficient, in attracting new business. However, only 2% of financial institutions in the United States offer completely automated online account opening, and credit unions are no exception [1]. Consumers are using online account opening (OAO) as a litmus test for your credit union, asking the question, "Can this institution fulfill my online needs?"

It's Just Good Business
Of course, we're not just talking about allowing members to open accounts online, you also want them to fund it and start using it right away. By updating your online account opening process, or by creating one, you are responding to the shifting needs and demographics in your potential member base. Within the first year, your online channel will be processing about 10% of your new account volume [3]. By 2011, expect OAO to fuel a 55% growth in online banking to 76% of online households [4].

Once you get a prospective or current member interested with your online account opening services, you much more likely to end the process with an open and funded account. Customers who typically experience abandonment rates of 80% or above will now be seeing rates as low as 10% through updated online avenues [5].

These accounts tend to be more valuable for your credit union. Moving this application process online will save you about ten to twenty minutes per application. Additionally, online members hold 50% more accounts. The result? Accounts opened online are going to generate up to 40% more profit than offline [6].

Finally, if a member is opening an account with you, this is prime time to cross sell. They are already interested in your credit union. They are at a time in their life when they are making important financial decisions. Now is when you want to hit them with information about what else you can offer.

Getting Started
Whoa, not yet! You must consider some critical questions before you add this service to your website: How does my application process work now? Through how many hands, departments, offices does each application pass? How do I currently ensure that my application system is Patriot Act Compliant? Is my core processing system prepared to accept information gathered from OAO?

You also need to look at your business plan. Does online account opening fit into my long-term strategy? (It should.) What is my risk tolerance? Am I comfortable with letting members open accounts without providing a signature?

After you work through these questions and decide that you do want to provide OAO to your members, you have two options: build it in-house or find a vendor. If you want to build in-house, make sure your staff has the necessary expertise, and be prepared to commit 2 to 4 FTE to this process. If you'd rather go with a vendor, refer to page 56 for a list of companies that can get you moving forward.

Since its inception in 1997, ING Direct has been growing at a blistering rate. This is mostly due to the availability; all deposit accounts are managed online, allowing ING to serve customers in over 50 countries.

ING Direct Financial Highlights [7]:
- Asset size: Up 12.7% to $310.1 billion ($491.0 billion), $80 billion in US
- Customer Base: Up 15.7 % to $20.3 million, $6.5 million in US
- Operating Expenses/Income: 72.8%
- Customer Satisfaction: 94%

By streamlining their fully automated OAO into their online banking, they are the model of using online services to reduce overhead. By doing so, they can increase rates on checking and saving accounts and appeal to a broader customer base. Take a look at the new Orange Savings Account, their next major promotional campaign.

Orange Savings Account
- 3.00% APY
- No fees and no minimums
- Sign up bonus of $25
- Open and start using your online account in 5 minutes

[1] Celent, LLC [2] CashEdge Consumer Survey 2007 [3] uMonitor [4] Forrester Research Executive Summary of March 19, 2007 [5] Andera, Inc. [6] The Tower Group, Inc. [7] Information compiled from ING Annual Report 2007, FDIC Institution Directory, and




July 28, 2008



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