Online Odyssey

CUs take up trinkets to move members online.

When traffic at Community Credit Union's branch offices got out of hand, management knew it had to do something to improve service. But in this high-tech age, the Piano, Texas, credit union took a decidedly low-tech approach: It sent staff armed with trinkets into the lines to teach members about online options.

The credit union's "Get Out of Line" program took a creative approach to solving traffic problems by moving users online, and it made use of its greatest resource-its front-line staff.

Judy Parsons, vice president/chief marketing officer for the $1.2 billion asset credit union, reports that since its start in 2002, "Get Out of Line" not only reduced traffic at peak business hours, it contributed to a 15% increase in online banking use last year. Of Community's 250,000 members, about 75,000 are active home banking users.

Wendi Costlow, Community's vice president of marketing, says the concept is simple. "There's nothing worse than going in at noon wanting to make a deposit and having to wait 10 minutes. One viable way to alleviate that is to move members to an electronic alternative."

Employees use a fun gimmick based on changing seasonal themes-such as toy hula dolls-to approach members in line. Many of the transactions members performed at branches could be done electronically. She says the tokens make it easy for staff to approach members by saying, for example, "If you'll let me show you how to deposit that check in the automated teller machine [ATM], I'll not only give you this fabulous hula doll, but your name will go into a drawing for $25 toChili's [Grill & Bar].

"It's hard to approach people and say, 'Get out of line and do this with me,'" Costlow continues. "This just gave staff a little more confidence, and members had a blast with it."

Nationwide, credit unions are turning to staff to steer business online with a variety of measures, from offering salary incentives to holding drawings and contests.

Parsons says staff are the face of the credit union, and for that reason, they're the best resource to promote online services. "Your staff are the key. They're the connection to someone opening a checking account and taking the time to talk about all the other services that go with it.

"There's so much available electronically, it can be overwhelming," she adds. But with staff working one on one with members, "you can get very specific to what that member might want and be able to use."

Why move members online?

Member retention and cost savings are the two primary benefits credit unions realize from increased use of online services, says Kevin Doohan, director of marketing for Digital Insight, a Calabasas, Calif., provider of Internet-based financial services.

"Credit unions increasingly are realizing that when they move people to the online channel, there are great retention benefits," he says. "The more members use online services, the greater the likelihood they'll make the credit union their primary financial institution, which is a challenge. If you can get folks using bill pay at your financial institution, they'll naturally migrate toward you as their primary one."

Last year, Digital Insight worked with a credit union in New Jersey that conducted a study comparing two similar groups of members, one that used bill pay and another that didn't. Over time, Doohan explains, "the folks who had bill pay ended up with higher loan balances and a greater number of deposit accounts than the control group."

Some credit unions tell Doohan it's obvious that members using bill pay are the most profitable because they also have loans and deposit accounts.

But bill pay comes first, he says. "When you get someone using that application frequently, they become more profitable. It's not that your best members are using it."

Doohan warns credit unions to get their members online sooner rather than later because the retention rates are so high. "There's a sense of urgency right now because institutions such as Bank of America and its competitors aggressively are marketing online services. If you believe the retention argument, every customer that Bank of America wins today and gets on bill pay is going to stay there. It will be devastating later on if credit unions of all sizes don't try to move their members to online services and make sure they're able to retain them."

In addition to retaining members, Doohan says credit unions save money by moving members online. The cost savings come in several forms. First, online services reduce staff expenses by decreasing branch visits. second, electronic transactions save paper, printing, and postage expenses. Online statements and check imaging, he says, offer an immediate payoff, which Digital Insight estimates to be $2 to $3 a month per user. "There's an immediate payoff if you switch folks off paper. Online statements are a really big cost saver."

Last fall, Rivermark Community Credit Union in Portland, Ore. (formerly Safeway Northwest Central Credit Union), participated in "Live Free for 60 Days," a sweepstakes promotion offered through Digital Insight's Growth and Retention Program, says Lesley Carrell, vice president of marketing for the $296 million asset institution. Digital Insight clients' members and customers who signed up for online bill pay automatically were entered into a drawing for two months' paid living expenses up to $6,000. A Rivermark Community member won the prize.

Carrell says more members using online services means higher returns for the credit union. She recently researched the impact bill pay users have on the institution and found:

* 51% more services per household;

* 77% higher average loan balances;

* 24% higher average deposit balances; and

* 365% higher average profit per household.

Rivermark Community has offered online banking since 1998 and bill pay since 2000. Last year, Carrell says use of home banking services grew 33%, while bill pay use soared 130%.

Involve staff

Doohan says staff are credit unions' best resource for promoting online banking adoption. "All of the marketing programs we put together aren't nearly as effective as a personal referral from a trusted representative at the credit union."

Staff incentive programs are a popular way to mobilize employees in this mission. Deb McLean, vice president of marketing at Charlotte (N.C.) Metro Credit Union, recently completed a staff incentive program to increase subscribers to electronic statements. Staff tracked the number of member e-mail addresses they obtained through member interactions. The person who obtained the most addresses received $100; second place, $75.

McLean says her staff gathered more than 500 addresses. The person who won collected almost three times as many addresses as anyone else. "She made a point to ask every single member, even if she was walking through the lobby."

Charlotte Metro has 30,000 members, 61 staff, three branches, and assets of $128 million. In addition to staff incentives to collect e-mail addresses, the credit union recently bundled e-statements with online bill pay. Normally, members are charged $6 a month to use bill pay. But if members sign up for e-statements, bill pay is free. "We've seen a marked increase," says McLean. "We're getting 100 new sign-ups a day for bill pay, e-statements, or both."

Another successful program aimed at generating business online: a "Steal the Car Loan" program. Members who financed cars at other institutions can bring the loans to Charlotte Metro and receive a one-percentage-point interest-rate discount, McLean says. If members visit a branch to switch the loan, they'll receive $25 at the loan closing. If they switch the loan online, they receive $50.

Doohan says one of the most successful staff incentive programs Digital Insight has offered was "Vegas on Your Mind." Employees from hundreds of branches were entered into a drawing for an all-expense-paid weekend in Las Vegas when they signed up people for bill pay. Other prizes included DVD players, digital cameras, and Palm Pilots. "There was a high level of financial institution participation, and a lot of end-users signed up, so apparently these reps really wanted to go to Vegas," says Doohan.

The best time to reach members, says Doohan, is when they're opening accounts. "Make sure you collect their e-mail addresses because otherwise it's hard to get in touch with these folks in a cost-effective way."

Have staff use online services

Before you can expect front-line staff to effectively promote online products, they must understand and use the services. Community's employees get free online services, including bill pay, to encourage use. "We want staff to see and do what our members see and do," Costlow says. This improves employees' familiarity with online options and helps them sell the services to members.

"Once employees use it, they like it. And then it's natural for them to tell members how great it is and how much time it saves," Doohan adds. "A member might come in with a problem, such as running out of checks, and need to pay bills. If tellers used bill pay, they would immediately suggest doing that. If they didn't, that solution might not come to mind as quickly."

Training staff also is important. Community holds technology "boot camps" to train its employees, Costlow notes.

Ease of use is important, too, Carrell says. "Make it user friendly and easy to set up. Have a system in place to answer members' questions. You need to have everyone on staff trained and familiar with the service. If you don't, they won't talk to members about it."

Key challenges

In 1993, Stanford Federal Credit Union, Palo Alto, Calif., was the nation's first financial institution to offer online banking. To this day, it offers leading online solutions, says Sam Tuohey, vice president of information systems. In addition to bill pay, online banking, and estatements, the $540 million asset credit union offers account aggregation and wireless access through personal digital assistants.

Tuohey reports more than half of Stanford Federal's 41,000 members use online banking, and 75% of checking accountholders used it within the past 60 days. He says members fill out 60% of mortgage applications and 85% of consumer loan applications online. And 5% of members use account aggregation, a higher rate of adoption than at most financial institutions.

Yet in this success lies the greatest challenge, he says: the law of diminishing returns. "The first campaign you do, you do really well," Tuohey explains. "Just like if you're introducing a Visa card or anything else for the first time, you're going to get substantial return. And then, because you eat such large pieces of the pie as you go 10 years into it, there are fewer and fewer people who are incented to move over because the pie's so much smaller. Many of the people who will not go online have very good reasons for not going online."

When institutions have reached as high of a percentage of users as Stanford Federal, says Tuohey, they hit a point where it's difficult to get people's attention. "I've seen a serious decline in the acceptance of our preapproved automobile offers. Some of that's the market, but part of the reason is that people are familiar with [die online channel]. They know it's there, and they kind of just don't see it anymore. That's one of our challenges."

Doohan hasn't seen that problem affecting most credit unions yet. "On average, across our base we see adoption rates of Internet banking of around 13%," he says. "So there's still tons of opportunity. Those who market aggressively, such as Bank of America, have much higher adoption rates. If every credit union marketed online services as aggressively as Bank of America and some of their other competitors, their adoption rates would go up."

People who don't use online services frequently cite security concerns. Doohan thinks this is a misconception that front-line staff can address. "I'd say security is a concern. It's just an education issue for the staff to be able to respond to members about that issue. Online banking is safer than an ATM. You use it from your house." When banking from home, people don't have to worry about physical safety or, for example, the risk of leaving a receipt behind, he says.

Some credit unions struggle with the issue of whether to charge fees for online services. Carrell advocates free service: "When you give away the services for free, penetration levels increase."

Depending on the account members have at Rivermark Community, online services either are free or cost $2.95 a month. She says experts in online banking discourage fees. Still, Carrell says some credit unions charge fees because it costs them to offer online services. "But you can offer them for free because you'll recoup the costs through more profitable member relationships."

Advice

Parsons and Costlow say one of the good things about the ever-changing Internet environment is the chance to try new things-and change your mind if they don't work out. Based on experience, they advise credit unions not to stray too far from what they do best. "Learn from your mistakes," Costlow suggests. "We can get caught up in a technology whirlwind where everything sounds good. But you can lose your core competencies if you overextend yourself."

Costlow says Community learned a valuable lesson when it began offering electronic services such as discount travel and shopping. "It didn't work for us. But that's what's great about the Internet: You can make changes relatively quickly. You have to find out if something is working for members and if you're getting the response you wanted. If you're not, discontinue it. Spend the dollars someplace else."

Parsons and Costlow say the best advice comes from members. So ask for it. "Some members are core users of electronic services," Costlow says. "They know what they want and how they want it. Their feedback is unsurpassed in giving you what you need for future development."

And, Parsons adds, before launching any new program, make sure you have the staff resources to support it. "If you don't have adequate staff to cover your online applications, you can hurt yourself. Members' expectations are higher for quick and efficient service delivery [with the online channel]. Your procedures and processes have to match the idea and the image of what the Internet is to begin with."

RESOURCES

* Digital Insight, Calabasas, Calif.; 888-344-4674 or digitalinsight.com.

* Technology & E-Commerce Survey Report from the Credit Union National Association. Call 800-356-8010 and ask for Stock No. 24845-CUM, or visit advice.cuna.org and select "Reports."

Copyright Credit Union National Association, Inc. Jun 2004
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