Credit Unions Press Their Post-Crisis Advantage

Not everyone was a loser in the financial crisis. Two recent studies of credit unions conducted by Aite Group should strike fear in their financial competitors, especially large banks. Not only do credit unions appear to be winning market share from banks in the wake of the credit crisis, they already offer advanced online banking services to their members and are rapidly improving those online capabilities.

Credit unions benefitted greatly from the financial crisis, according to an Aite study conducted last year. The vast majority (88 percent) of credit union executives surveyed said they have seen deposit growth as a result of the crisis, and more than half of respondents said they have seen increased interest in the credit union model, Aite reports.

These findings prompted the Boston-based research and advisory firm to examine credit unions online channel priorities for 2010. The survey of 54 credit union executives reveals that credit unions are surging ahead of banks in the online channel. More than 80 percent of the credit unions that participated in the study already offer an expedited bill pay service online, more than half are increasing their online channel budgets this year by at least 5 percent, more than half have a Facebook page and nearly half have a Twitter presence through which they interact with members.

According to the AIte research, credit unions plan to do even more online next year, especially in the realm of social media. Seventy-seven percent of respondents said they are very likely or somewhat likely to develop a Facebook page in the next 12 to 18 months. Seventy-four percent reported that they are likely to add a member reviews feature to their web sites, and more than half (56 percent) said they are likely to add member services via Twitter.

Meanwhile, credit unions are rapidly building additional banking capabilities into their Web sites. According to the study, almost half (42 percent) already allow members apply for mortgages online, one in four let members open savings accounts online and 23 percent offer online checking account opening. Among those credit unions that don't offer these online functions, 83 percent said they are likely to develop an online savings account and/or an online checking account opening feature and 52 percent said they're likely to provide a means of applying for mortgages online.

The Aite research found a particularly wide divide between bank and credit union offerings in the payments arena. While 80 percent of credit unions offer expedited bill payment (payments to participating merchants can be scheduled and posted on the same day), only 25 percent of the top 100 U.S. banks offer this service. Credit unions also outstrip banks at offering debit card bill pay (34 percent versus 5 percent), credit card bill pay (23 percent versus 20 percent) and outbound ACH transfers. On the other hand, more banks than credit unions offer electronic bills and in-bound ACH transfers.

ROOM FOR IMPROVEMENT

One area of online banking where credit unions fall short -- suggesting an opportunity for banks -- is automated online customer service, according to the study. Although 83 percent of credit unions offer check ordering online and 68 percent offer account alerts via e-mail, only 40 percent offer the ability to change an address online. Less than one in four offer online chat (21 percent) or online fee dispute resolution (23 percent), and only 11 percent offer co-browsing capabilities.

But banks shouldn't get too excited, as credit unions are working to remedy some of these shortcomings: 88 percent said they are likely to implement account alerts via e-mail in the next 12 to 18 months, and 69 percent said they're likely to provide a change of address feature online in that same timeframe.

Aite analyst Ron Shevlin, author of the latest credit union report, says despite the fact that credit unions have set the overall online banking bar a bit higher than banks, many credit unions lack a coherent online channel strategy. "While many credit unions state that the focus on their online channel investments is improving the member experience or improving online service capabilities, not all have planned investments in line with these objectives," he relates, noting, for example, that "Few credit unions plan to implement service-related features like chat."