Jan 15 2013

Online and Mobile Channels: Strategies of High-Performing Credit Unions

Report  
Number  
291

Online banking is not just a fad; it has become the primary way of banking for an increasing number of members. While credit unions perform surprisingly well compared to big retail banks, they still need to focus on mobile and personal financial management.

Ron Shevlin
Senior Analyst
Aite Group
Report Number 291

Executive Summary

Consider this: If today’s banking consumer could get all her services online, why wouldn’t she? This is not just about Ally Bank or Capital One 360. It’s about new American Express products like Bluebird and Serve. It’s not just about solid online services from Chase or Regions. It’s about useful (and strangely named) non-bank startups like Simple and Piggymojo. Credit unions have to consider the fringe and mainstream products alike as they map a course toward good member-centric digital channels.

What is the research about?

This research is divided into two parts. First, we ask about credit union members’ online behavior and how it compares with that of bank customers. Second, using data from nearly 500 credit unions, we explore credit unions’ online and mobile strategies by segmenting credit unions into three types. Green Belts are risk averse, have the least management commitment to digital channels, and fail to successfully coordinate IT with the credit union's other initiatives. Blue Belts score better on all three measures. Black Belts are the best of all, with high scores on risk tolerance, management buy-in, and enterprise-wide integration.

What are the credit union implications?

  • Black Belt is a team achievement. An individual, even a passionate one, cannot build superior digital channels alone. To reach that highest level (and hopefully the business results that go with it), credit union teams must unite risk tolerance, management commitment to IT as a differentiator, and deep integration between IT and business processes.
  • Cost should not trump other factors. Blue and Green Belts alike consider the initial cost first when selecting vendors, but for Black Belts, it’s fourth on the list. Best-in-class technology, breadth of technology, and ongoing costs all come before it.
  • There’s still time for mobile (but not much). Big banks are leading the charge in consumer acceptance of mobile as a banking platform. When it comes to mobile adoption, Black Belt credit unions are tied with their Blue Belt peers—both are at 9%—but even Green Belts have a 5% adoption rate. So even though Green Belts are behind, the game is not over.
  • Be clear about your digital channel priorities. Respondents were excited about digital channels, but they didn’t always know why. Case in point: 76% of respondents said that maintaining competitive parity was a major objective of their online banking, but 50% said that achieving competitive differentiation was a major objective. The overlap indicates that many credit unions may leave their core digital objectives undefined.
  • Follow the leaders? Imitation may not always lead to good strategy, but it helps to pay attention. All three types of credit unions spend on online and mobile banking, online lending, and bill payment. But note the differences: Only 36% of Black Belt credit unions did not invest in remote deposit capture in 2011 and 2012, compared with 54% of Green Belts, and 33% of Black Belts did not invest in person-to-person payments compared with, again, 54% of Green Belts.
  • Measure the impact of online and mobile channels. Nearly half of the credit unions surveyed said they haven’t quantified the impact that online and mobile channels have had on business objectives like achieving competitive differentiation, new member acquisition, and cross-selling existing members.

This report is sponsored by Fiserv.