are in the information business. All the "transactions"
completed for members essentially involve the movement of digitized
information over networks. Whether the service is a credit card
purchase overseas or a mortgage loan payment via payroll deduction,
the credit union receives and sends data between the member's account
and other institutions.
is more than transactions. Most credit union business strategy today
relies on some enhanced use of data. Pricing services on relationship
criteria, segmenting members for promotions, or providing counsel
about investment alternatives are all information-based efforts.
Increasingly, the use of technology focuses on information "at
the point of contact." From data warehousing to MCIF programs,
to service representative support systems and consolidated statements
on the Internet, credit unions are trying to integrate all the information
about a member whenever and wherever needed.
Inevitable Outcome: An Infomediary
aggregation includes more than data generated by the credit union's
activities. Increasingly there is a need to bring in other information
to more effectively serve the member. This can include demographic
and lifestyle facts, data about other financial relationships, and
even notes about the member's inquiries or response to surveys.
More effective member information management is at the core of business
strategy. As the Internet helps increase the circulation of essential
business information, the importance and feasibility of this strategy
is multiplied many times. The cost of moving data over the Internet
is essentially zero, the expense of maintaining digitized information
is close to zero and the potential for using information more effectively
is limited only by the creative imaginations of the users.
This inevitable evolution to data management as the core competency
in credit unions is captured in the term "infomediary."
The concept signifies the transition of a credit union from being
a financial intermediary taking in savings and converting those
to loans and investments to becoming a collector and manager of
information for the member's benefit.
New Business Logic
is not a new skill. Every time a loan is made, the decision is based
on data collected and evaluated manually or using data-based decision
models. However, becoming an infomediary is about more than making
transaction decisions. It includes five underlying assumptions:
- Member data
- The member
owns the data;
- The member
requires help in collecting, viewing and using all the data available;
- The credit
union is a trusted agent that can act on behalf of the member
to manage this data for the members' benefit; and
- As a cooperative
linked into other networks, the credit union can leverage the
member's data in numerous economic and retail transactions and
share the economic benefits first with the member.
There are several
key areas where this model differs from the current use of information.
First, the data aggregation on behalf of the member includes external
information, not just credit-union-related data. Second, as a trusted
agent the credit union is committed to using the data for the benefit
of the member, not the institution. The benefits of working together
to meet mutual needs and sharing that group "leverage"
with the members first is the primary distinction that a cooperative
brings to this activity. This value priority is what justifies the
Most, if not all privately owned infomediaries, must share the benefits
of information strategies first with their owners/shareholders.
In the Internet startups, many of the new business models that serve
consumers use information to facilitate shopping, compare prices,
or search multiple suppliers easily. These Internet businesses "empower"
the consumer to make more effective decisions; however the benefit
of the model first goes to the shareholder and secondly to the user.
Although sometimes appearing to "give away" the product
below market cost, these new Web-based businesses are essentially
engaged in a "land grab," trying to acquire new customers
faster than competitors. With a large enough customer base, this
positions the site as the preferred solution for a specific area
of Web business. Examples of this approach are everywhere from e-loan,
to petsmart.com to the Internet gorilla, Amazon.com. Ultimately,
however, the expectation is that this volume of Web page visitors
will be used to provide a superior return to the company's shareholders,
not the site's users.
Information Becomes Personalization
With this new customer base and information, the Web enables "personalization"
strategies based on 1:1 marketing proposals. By registering at a
site and building a user profile, the Web-based firm can present
individual offers that are consistent with a consumer's interests
each time the shopper returns to the Web. This approach brings a
"high touch" experience into the technology channel.
These same technologies , which are at the core of new Internet
businesses, are available to credit unions, which already have an
established customer base--their members. Instead of spending investment
dollars on the "customer acquisition" phase required in
all new startups, credit unions can focus on deploying this new
technology to members. Most importantly, credit unions can do this
while enhancing the members' opportunity to improve their well being,
not merely struggling with Internet-only alternatives.
The Steps to Implementation
Becoming an infomediary requires partners. Sometimes these will
be other credit unions that can provide the scale or expertise to
support first-mover projects. Sharing the risks and lessons from
new strategies is one advantage credit unions have historically
enjoyed over their competitors.
The technology solutions will also involve partnerships. Often this
will include the host data processor to support the integration
of information from transactions and external sources. However,
many of the new technology applications will be from Internet-focused
startups looking for partners to provide proof of concept. Identifying
the key technology areas and potential firms is an ongoing process.
Each area of the country has numerous incubators supporting Internet
concepts. Becoming involved in this entrepreneurial network is essential
to gain entrance at an early stage of the business before the requirements
of an IPO-driven market capitalization model force the startup to
seek bigger firms.
Success will entail thinking and acting at a much faster pace than
the traditional credit union business practice. Because of the transparency
that the Internet gives new consumer-focused startups, firms that
are looking at retail solutions want to move fast once their business
is visible. This means the credit union must have personnel who
can grasp the opportunity and commit both the organization and its
resources in the deployment of what some in the credit union will
see as disruptive and unproven technology.
Finally, the credit union needs to see the effort as a continuing
process, not a one-time installation of a killer application. Technology
evolves so quickly, that second- and third-generation versions will
follow quickly. But by moving fast, the credit union not only learns
the process of innovation and partnering, but also preserves the
loyalty of its own member "early adopters."
Credit Unions' Advantage as Infomediaries
Credit unions provide ideal partners for new information-based business
strategy entities. Credit unions have the trust of their members,
an essential requirement when collecting and managing data for the
consumer. With Internet home banking widely deployed, credit unions
have an active member base to bring to new solutions. The financial
strength of the whole movement means that credit unions can take
risks and incur expenses that firms watching their quarterly earnings
per share reports are not as well positioned to consider.
Most importantly, however, is the cooperative advantage. The attraction
of the Internet is that it is an open system not owned by anyone.
Like other "public goods" such as air and water, the Internet's
promise is that its benefits can be shared by all -- both the rich
and the poor -- at a nominal cost. But there still needs to be a
cooperative point of entry where an individual's interests are protected
and the benefits of participation in new Internet solutions are
indeed shared with the user. Only the credit union can make this
promise unequivocally. That's what a cooperative means. That is
also the opportunity we must pursue.