Credit unions lead the way in high-tech banking
By Laura Bruce • Bankrate.com

The road to online and self-serve banking is being upgraded by credit unions.

Remote tellers, Web chat, click to call and other technologies that directly affect depositors seemingly are being deployed more by credit unions than by banks.

"The larger ones, those that have $20 million, $50 million or more in assets, are usually ahead of banks," according to Andrew Mallon, publisher of Credit Union Technology magazine.

"Because they're nonprofit, they can't afford the big staffs and they look to technology for efficiency. The really major point is the credit union's sole purpose is to serve the members, not to make a profit."

There are about 11,000 credit unions in the United States. Half of them, says Mallon, are so small that you'd probably get an answering machine if you called them.

Many of those credit unions don't have a Web site and may never need one. They serve a narrow group of members who might be very happy with the status quo.

High-tech tools trim costs
But for other credit unions, technology is the key to success, says Craig Savelle, senior vice president of operations at Arkansas Federal Credit Union in Jacksonville, Ark.

"We have 6 million to 10 million transactions per year and only 5 percent are done with personnel. The rest are done electronically by the members or by other electronic means. It's allowed us to become a model of efficiency.

"We've nudged them toward home banking, bill payment, debit card, ATM. Our ATMs are state-of-the-art. They cash checks, take deposits, and they talk to you," says Savelle.

"Machines don't call in sick. They work 24 hours a day. We use people to make loans and open accounts -- profitable areas. You don't make any money taking deposits or making withdrawals."

Arkansas Federal started using Web chat a month ago. Members who have questions about their accounts or the credit union's Web site can write a text message that will be answered in real-time by a representative.

"One feature of it is PC Anywhere," Savelle says. "It allows us to take over their browser and guide them through.

"Suppose they're looking for a list of our repos (repossessed vehicles) but they can't find it. We can take over their browser and show them how to click here so they can see where their browser is going.

"If they're stuck on a loan form it allows instantaneous communication. We can assist them rather than them stopping and calling."

Innovation line starts here
Stanford Federal Credit Union in Palo Alto, Calif., has 40,000 members. About half of them use the Web site to do home banking, according to chief technology officer Sam Tuohey.

"Our Web site had home banking in 1994. We beat Wells Fargo by a year and a half. They say they were the first bank on the Web, which technically is true, but not if you include credit unions."

Experts say credit unions that serve universities and high-tech companies are often the first to bring the latest technologies on board.

"Some, like First Tech Credit Union, are equivalent to E*Trade," according to Thomas Wright, publisher and editor of Credit Union Tech Talk.

"Pennsylvania State Employees Credit Union is huge, but it doesn't have any branches. They leverage technology and the Internet.

"Then you have credit unions that are very conservative. They don't buy into technology. They want member service face-to-face, no interactive voice response -- too cold, not member oriented. That to me is very backward, but the theory behind it is good: the personal touch.

"But when you don't offer all channels to your members you disenfranchise younger members and members that are more high-tech," says Wright.

A technology that Tuohey likes is account notification. It's part of the credit union's account aggregation feature that allows members to see on one screen all their accounts with any financial institution that has online banking.

"It e-mails you when certain things happen on any of those accounts. You can be notified when a deposit is made or when a balance achieves a certain level, for instance, when you have enough money to buy another CD."

Another online technology some credit unions are employing is click-to-call. If a member is perusing the site and has a question, they can leave a message or enter their phone number to have a representative call them.

Arkansas Federal, which has seven branches, is installing remote tellers at its new facilities and planning to retrofit current ones. Pull up to the drive-thru, and you'll see and hear a teller on a video screen. The teller might be in an office in another town.

"You'll have plasma screens and a phone receiver. You deposit your money through a pneumatic tube. It does two things for us," says Savelle. "A teller can handle two lines, and it provides safety. Where a robber can't get money, they won't come in to rob."

Service anytime, anywhere?
One high-tech option that hasn't taken off for credit unions or banks is wireless, the ability to use a cell phone or personal digital assistant to access an account.

"Wireless bombed," opined Savelle. "I think it has a lot to do with people saying, 'How much do I have to spend on communication? I have DSL, wired phones, wireless phones. Now I need a feature on my wireless phone to access the Internet. Do I really need this? Enough is enough.'"

Sam Tuohey says his credit union installed wireless, but it's hardly ever used.

"We talked with a company that said it would cost $400,000 to install wireless. We're not Bank of America. That's our marketing budget for the entire year. To spend that on something no one has ever asked for is not good business."

But one of the advantages of being the credit union at Stanford University is they have a lot of smart people hanging around. The credit union's chief programmer and a former Stanford student installed wireless banking in one weekend for $5,000.

Tuohey is really glad they went the $5,000 route instead of spending $400,000.

"I think we've had 730 people use it in a little over a year. Only 53 have used it more than once. It's a technology that really hasn't arrived. But when it does, we're there."

Arkansas Federal is one of many credit unions that list new or used cars for sale on their Web sites. While some banks have joined in the practice, it's a service that seems much more popular with credit unions.

Stanford Federal posts pictures of some of the cars and lists the rest. If a vehicle catches a member's eye, they simply write to the seller's e-mail address that's listed with the vehicle's description.

Tuohey says the goal is to have a service that drives people to the site and promotes the credit union's new- and used-vehicle loan program.

"We don't get a commission for selling a car. We don't want to be the middleman on the transaction."

While many credit unions have tech-savvy members who want the latest and the greatest, others have to find ways to gently push members into using technology that will lower operating costs. Maybe credit union members are more willing to adopt new technologies because they know they'll reap the benefits in the form of higher interest on savings and lower loan costs.

Craig Sevelle thinks all financial institutions are in for a lasting change.

"We'll see them go like service stations. They'll become completely self-service. You'll be able to see a teller but it will cost a little something extra. It's like pumping your own gas. Once we learned how to do it, we're all fine about doing it. We don't have to wait for someone to walk out."

-- Posted: Aug. 7, 2002