NextCU.com

I just read an interesting article in the December BTN magazine (Hold the Phones: Mobile Commerce is here) that I believe could represent an important collective credit union opportunity. The article takes the position that mobile banking (cell phone, PDA, etc) is finally about to take off as devices are increasingly capable and consumers more comfortable with mobile commerce. Probably not a very bold statement to say that it is only a matter of time before the adoption in this area really takes off...even *potentially* surpassing Home Banking access.

Still, from my perspective, progress on the solution side in rolling-out truly rich mobile banking products, as well as low adoption demand among individual credit unions, has been very slow. This could be a wait-and-see approach given prior expensive experiments in 'mobile banking' in the dot-com glory days. However, Firethorn (a vendor I'm not currently familiar with) is referenced in the article as being a leading downloadable mobile application solution that has captured recent attention from some banks. What is also interesting is that Firethorn has partnered with Cingular Wireless and Checkfree to enable financial institutions to leverage the nation's largest mobile network and bill pay platform for enhanced transactions.

So what is the "Credit Union Opportunity"?

I contiune to be very enthusiastic with the opportunities available through...

...networked business models (see Chip Filson's 2001 article: The Fosbury Flop: A Model for Credit Unions? Part 1 & Part 2). Organizations that are willing to cooperate to leverage combined scale can more easily deliver enhanced capability & benefit direct to the consumer/member at a significantly reduced (shared) cost. This is a natural strength of the credit union cooperative model that I believe makes our financial system uniquely positioned for the future. In fact, in just the past few years, networked technology has opened up a world of possibilities for credit unions by pulling off some amazing collaborative initiatives that directly benefit the member -- Just look at the recent networked developments in the shared branching/atm space, PSCU for credit cards, Prime Alliance capability for mortgage solutions, and CUDL for indirect auto lending. And that is likely just the start.

So, why not mobile banking? Will we see a collective credit union solution developed to make the necessary national partnerships, deliver a best-of-breed product to members, and position credit unions as the leaders in the mobile finance space ahead of the coming adoption wave? If so, I'd argue that it needs to happen within credit unions and not necessarily though those that cater to all types of financial institutions.

One idea: Any reason why this capability cannot come through the shared branching/atm networks? I imagine if these networks existed in the early-mid 1990's we might have seen some important leading credit union home banking connectivity solutions from these camps. The reason:

* Connectivity to the data isn't an issue if you are already on the platform;
* Pricing point can be low if the networked users share the costs;
* Easy implementation on the part of the CU;
* Negotiated national partnerships with major providers possible through combined scale;

Imagine the possibilities in forming a credit union system partnership with the leading mobile phone providers. What if a credit union designed mobile application were pre-installed on all new cell phones and other mobile devices. What if we also subsidized wireless data access through the application with the aim of helping consumers find a credit union they can instantly join and conduct mobile credit union account transactions?

Could be a major opportunity to reach out to Gen-Y in the short-term and share the credit union difference.

Why not?

Posted by Scott at 03:24 PM | Permalink | Comments (4) | TrackBacks (0)

Recently I received ING's e-mail announcement about their new e-checking account service - "Electric Orange." The market has been waiting for this for some time now so it doesn't come as any particular surprise. It is worth noting that this represents a slight departure from their prior strategy focus on low-volume transaction product offerings -- the [debated] idea being that low-volume electronic transaction accounts reduce relative service needs and result in further reduced operational costs.

However, to me, it is most interesting to look at how ING designed Electric Orange to meet the basic checking account service needs of online banking consumers -- a group that is already approximately a third of all U.S. households and growing steadily.

If I read the announcement correctly this account offers:

1) a debit/ATM card (free ATM withdrawals)
2) Peer-to-Peer (P2P) payments over the web billed as "electric checks" (like Paypal)
3) Free Online Bill Pay
4) A very high rate (3%/5%/5.3%)
5) No paper checks

This is fascinating because it raises a key question: If you were starting a credit union today from scratch, how might you design (or re-design) a core traditional product service offering like the checking account? ING seems to think because the physical check processing days are numbered (at least in the long-run) that a significant base of consumers are finally ready to forgo the paper check entirely in exchange for purely electronic transactions and a higher rate of return. Is the market ready for this or is ING a bit too far ahead of the curve on this one (remember Wingspan Bank)? We'll see.

For me this wouldn't quite foot the bill. It is true that I turn to the checkbook much less often than I did five or ten years ago. However, I still use paper checks and their flexibility in lieu of cash-on-hand in many circumstances where electronic payment is not ideal. For example, Electric Orange seems to fall short when I need to pay someone immediately who is not a web transaction adopter (eg. paying the nanny, home repair service calls, attending charity donation events, etc). I could use online bill pay to pay in these circumstances but the lag in issuance and time it takes to receive the paper check from the bill payment vendor is not ideal for many situations. Perhaps I'm behind the curve on this one…or perhaps ING's success goals with this service aren't what I think they are.

Still, it is interesting how they put this account together and I'm especially interested in seeing the P2P details of this model.

* note: ING still does not reference the product on their website. This e-mail appears to have been sent just to existing ING customers for now.

Posted by Scott at 01:12 PM | Permalink | Comments (4) | TrackBacks (1)