To portal or not to portal?

Henry Ford once said, "You can have any color car that you want-as long as it's black."

Is it a good strategy for credit unions to offer members access to an Internet portal? Or should credit unions follow Ford's old strategy and restrict members' choices?

Certainly, credit unions are tempted to avoid Internet links that would cause members to be datamined and then sold to by Amazon.com, eToys, 1-800-Flowers, and other Internet e-tailers. But remember, the reason these sites are so popular is that consumers, including your members, want to shop there.

GIVE MEMBERS WHAT THEY WANT

Obviously, credit unions are in the financial services business, not the retail shoping industry. But perhaps the dramatic impact of the Internet should cause even credit unions to reconsider the possibilities associated with this new service delivery channel. Traditional business models and entire industries are being transformed literally overnight. Which Internet models are surviving and prospering? Those that give consumers what they want!

Companies like Schwab, Fidelity, and eTrade have transformed the brokerage industry. People want a wealth of information, low commissions, and fast online trading functionality. Give people what they want and the business model succeeds.

Amazon.com, eToys, eBay, Cheaptickets.com, and others have changed the way consumers think about buying. Search engines like Yahoo, Excite, Go, and Lycos give us access to any conceivable type of information we might want. Internet Service Providers (ISPs) link us to the World Wide Web and simultaneously direct us to their content portals. And with the recent proposed megamerger ofAmerica Online and Time Warner, traditional and new-age entertainment providers are converging.

A SUCCESSFUL FORMULA

The Internet age suggests a brutally simple formula for success: Identify what people want. Develop a good solution. Be early (preferably first) to the market. Provide good service and pricing. Don't try to tell consumers what's best for them. Give them what they want. People want cars, computers, gameboys, and telephones notjust in black but in teal, tangerine, and periwinkle!

In "Net Future," author Chuck Martin points out that before the Internet age, the paradigm was "knowledge is power." But in the Internet age, the new paradigm is "the dissemination of knowledge is power."

In the world of financial services, this suggests there's an opportunity for all financial institutions, including credit unions, to make themselves more valuable by empowering consumers with a wealth of information in addition to traditional products and services.

It's a given that credit unions need to focus on being good financial service providers. Once that's established, the Internet age dictates that credit unions use the Internet to expand their relationships with members. This important new delivery channel can be used to provide financial services, financial tools, and consumer information. At the same time, it can serve as a bridge to online shopping and resources that add value to credit union membership.

THE CU VILLAGE MODEL

Hundreds of credit unions have subscribed to a credit union-branded portal called Credit Union Village. Credit unions can customize and brand a link to this credit-union-friendly information and shopping portal, which is supported by 47 state credit union leagues and CUNA.

The Credit Union Village enables credit unions to cost-effectively give members what they want from the Internet: information and shopping resources that are integrated with credit unions' own financial service offerings. The Village obviously steers away from links and services that compete with credit unions' core services, while adding thousands of links for shopping and other resources.

The value proposition for the credit union is that members see the extra value of membership that comes from this credit union-branded Internet portal.

The vision for Credit Union Village is to provide participating credit unions with other features such as datamining, digital wallet capability, local sites, and credit-union-friendly ISP solutions for members.

The Credit Union Village builds on the premise that in the Internet age, the dissemination of knowledge and resources empowers the credit union in members' eyes. To validate this concept, look at what some of the largest U.S. banks are doing with their Web sites.

BANKS UNAFRAID TO PORTAL

On July 14, 1999, Chase Manhattan Bank (www.chase. com) announced an alliance with ShopNow.com. At Chase's site, customers now have access to a shopping portal that provides up to 40,000 stores. This co-branded shopping site is totally integrated with the bank's own financial services.

Chase uses a concept called"viral marketing"to enable customers to e-mail their friends a link to their site. Chase appears unconcerned about the "risk" of allowing its 30 million customers to be datamined and sold to by Amazon.com and others. In fact, customer retention was probably the reason behind the portal strategy.

Citibank uses its branded shopping portal, (www.citibank.com) to offer coupons and special promotions when customers use their Citibank credit or debit card.

Bank of America (www.bankofamerica. com) is one of many banks using a shopping portal provided by Visa. The bank offers discounted shopping when customers use their Bank of America Visa cards. This seems to be a move to ease into shopping as well.

Clearly, the bank recognizes that offering deals on Internet shopping is one more way to add value for customers.

Key Bank (www.keybank.com) offers access to its Key Marketplace, but first Key datamines customers by collecting personal shopping preferences, e-mail addresses, and other contact information. This customer registration precedes access to the shopping site that is totally integrated with Key Bank's Web site. Comparison shopping and discounts at selected sites are also a part of the strategy.

In the Internet age, members will increasingly control what the credit union offers, just as consumers will dictate the business environment in other industries, including banking.

DEVELOP AN INTERNET DELIVERY PLAN

As credit unions approach their important Internet delivery issues, many important service opportunities will arise. These issues range in complexity from simple to more complex:

* Development of a Web site that offers frequently updated, basic information about the credit union and its services.

* Member access to a credit-union-friendly portal that provides a wealth of shopping and information resources. A good example is www.cuvillage.com.

* Addition of Internet home banking functionality, along with electronic bill payment services.

* Links to credit-union-friendly member investment services similar to CUNA Mutual's Member Financial Network.

* Links to good auto-buying resources.

* Providing members with discounted or free ISP services that don't advertise competitors' products and that link members to the credit union Web site.

A WINNING STRATEGY

As credit unions size up the exciting and dynamic Internet landscape, those that offer good service, fair pricing, and a wealth of financial and nonfinancial content will survive and prosper. Those who overly restrict members' choices will not be as successful. Ask yourself. "Which approach would I prefer as a member?"

Remember, in the Internet age dissemination of knowledge empowers the credit union. A well-balanced portal strategy may be just the ticket for helping to retain and attract Internet-savvy members. These members want more than a beautiful black Ford. They want access to a full range of information and resources the Internet offers. By giving it to them, credit unions can build member relationships that will thrive in the Internet age.

Copyright Credit Union National Association, Inc. Mar 2000
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