Credit unions have a tax-free status, a willingness to adopt shared services models in technology and an unblinking readiness to improve the customer value proposition. With these advantages, the credit union world is poised to have a significant impact on pricing and service levels in check processing under Check 21, which will permit financial institutions to present imaged copies for collection instead of original checks.
A shared service model permits credit unions to adopt technology that might be out of reach were they to approach solutions one-by-one. For example, Corporate One Federal Credit Union (COFCU; Columbus, Ohio; $4.2 billion in assets under management) has adopted a "back-counter" check processing solution from Alogent (Alpharetta, Ga.). COFCU is a wholesale financial services provider to over 760 credit unions in Ohio, Indiana and Kentucky.
Using the Alogent system, branch tellers at COFCU's member credit unions will be able to hand off checks to someone else in the branch for imaging and exchange. "As [checks] are handed off from the tellers to the back counter, they'll be scanned -- which will take the place of a microfilm -- and they'll be virtually encoded," says Marcus Wanamaker, vice president of product and business operations, COFCU.
The solution combines the advantages of distributed capture with the ability to keep the teller facing the customer. "For the most part, the teller's focused on servicing the customer at the teller line," adds Wanamaker.
For COFCU's membership, the ability to draw upon a common technology solution can lead to lower infrastructure costs, in line with what the larger commercial banks are expected to achieve.
Also, credit unions have an advantage over commercial banks in terms of consumer acceptance. "Ninety percent of credit union members never get their canceled checks back in their statements," says Wanamaker. "There's not that problem of having to wean them off from having to receive their original items back."
Finally, it's credit unions that may prove most willing to pass the benefits of Check 21 back to the customer. "If we're able to clear items faster, and if they're being honored and returned faster, some of the credit unions may change their policies to shorten the hold periods," says Wanamaker.
Were that to happen, the rest of the industry would be pressured to follow, observers say.