Net Worth The value of the Internet to your credit union Bob Rehm
Who’s on the Internet? • 154 million people accessed the Internet in November 2000. 56% of U.S. • Average user is 39 years of age • 38% have a college degree • Fastest growing group is 55 years + with working class incomes • 76% of affluent households use Internet CUNA Environmental Scan
What’s it worth to your credit union? • Internet use will reach 75% to 85% of U.S. population over the next decade • That’s pretty much everyone! • Our competition will use the Internet as one means to create and maintain relationships CUNA Environmental Scan
The value of the Internet The Internet has revolutionized how financial services organizations market their products and maintain relationships with their customers
The value of the Internet • Web sites • Internet banking • EBPP • Account aggregation • Web portals
The value of the Internet • Transaction costs • By PC = .01 • Cell phone = .08 • ATM = .27 • Telephone = .54 • Full service teller = 1.07 CUNA Environmental Scan
Is there a killer app? • There is no single killer Internet application. • It’s another means of access to your credit union. • Branches • ATMs • Voice response/telephone • Internet
Where are credit unions today? • 4,143 CUs have web sites • 2,659 offer Internet-based services • Internet banking • EBPP • Portals • Aggregation • So, let’s talk about Internet banking...
Internet banking • 24% of credit unions offer Internet banking • About 60% of banks and credit unions combined offer online services NCUA & International Data Corp
Internet Banking • Internet banking growing faster than any other retail banking delivery channel • Delivering the “wired” member a priority for credit unions CUNA & NFO WorldGroup Financial Services
Internet Banking • Credit union members more likely to be wired than non-members • Two-thirds of credit union members have PC access and seven in ten members have Internet access CUNA & NFO WorldGroup Financial Services
Internet Banking • By comparison half of U. S. households have PC access and six in ten have Internet access • Credit union members are more aware of online services CUNA & NFO WorldGroup Financial Services
Internet Banking • In 2000 an estimated 6.6 million Americans used online banking • By the end of 2002 that number will increase to 24 million CUNA Environmental Scan
Internet Banking • By the end of 2003 48 million plus Americans will use online banking • The number of financial institutions offering online banking will increase from 1,150 in 1998 to 15,800 by 2003 CUNA Environmental Scan/Tower Group
Internet Banking • Okay, enough numbers! • What’s a credit union to do
The value of offering Internet banking • You have the right delivery mix to appeal to your members • ATMs • Voice response • Branching • Tellerless • Store-front • Free-standing • SEG • Shared service center
The value of offering Internet banking • Your members are moving in the direction of doing more of their banking online • Bricks and clicks appeals to more consumers than the Internet-only banks
After Internet banking • Typical activities • Account balance look up • Transfer between accounts • Review transactions • Content • View check copies • Can’t it do more?
How about paying bills online? • Does that sound like fun?
Electronic Bill Payment & Presentment Several years ago, industry experts predicted that electronic bill presentment and payment would be a common practice in American households by 2001.
Electronic Bill Payment & Presentment EBPP initially was typically offered in a biller-direct model. Consumers could go straight to a biller’s Website, such as a local gas company, and pay their bills.
Electronic Bill Payment & Presentment Consumers want to receive and pay all their bills from a single site. FIs believe that, because of their extensive contacts with billers and/or payers, and their reputation for integrity and their transactional capabilities, they should be the consolidators.
Electronic Bill Payment & Presentment Yet, of the 15.9 billion bills that will be delivered to consumers in 2001, less than 1% will be paid electronically. Tower Group
But it’s not all bad news! • People are actually using EBPP
Who is using electronic bill payment/presentment? • Of 100 million banking households • 13 million households bank online • 6 million households use EBP • 260,000 households use EBPP • Consumer comfort with online transactions is increasing CUNA and Affiliates
Who is using electronic bill payment/presentment? • The number of bills delivered online will increase from 130 million in 1999 to 2 billion by 2003 • 25 million households will pay bills online 2003 CUNA Environmental Scan
What are big banks doing with EBPP? • Of the 50 largest banks • 32/64% offer EBP • 16/32% offer EBPP CUNA and Affiliates
What about U.S. credit unions? • Of credit unions with web sites (4,143) • 1,077/26% offer EBP • 207/5% offer EBPP CUNA and Affiliates
And what about credit unions in this region? • In Southwest Corporate’s annual member survey, 17% indicated they offer EBP
The future of EBPP • Spectrum will provide a "switch" service to connect FIs with other EBPP participants. • Spectrum is creating the network and signing up participants but is not fully functional at present.
So what’s the value of EBPP to credit unions? Most consumers are aware of electronic bill payment and an increasing number are now interacting with businesses electronically Netroscope
So what’s the value of EBPP to credit unions? Although 96% of consumers surveyed have heard about electronic bill presentment and payment, only 18% are currently paying some of their bills electronically. Netroscope
So what’s the value of EBPP to credit unions? Twenty-seven percent of surveyed consumers said they plan to pay bills electronically within the next 12 months and 34% said they do not plan to pay bills electronically in the foreseeable future Netroscope
So what’s the value of EBPP to credit unions? • As consumers, your members are evolving Internet users • Convenience, ease of access, billing information management and retrieval, reduction in late/delinquency rate, and money and time savings are perceived advantages of electronic bill presentment and payment by consumers. Netroscope
The short history of aggregation Just a few months ago, financial institutions were filing lawsuits against companies selling one-stop online banking products. Now they're dropping the lawsuits and rushing to buy their services.
What is aggregation? Account aggregation allows members to log in and check out their accounts, 401Ks, accounts at other FIs, and even read their e-mail. Customers load passwords and other identifiers onto a browser that searches for the financial data they want.
What aggregation does: • Access all accounts with one password • Read all email accounts at one place • Net worth • Track credit card purchases, bank accts • Calendar/reminders
What consumer pubs are saying about aggregation: Online Account Aggregation Gains Steam, but Should You Try It? Financial institutions are beginning to offer this Web-based service, which consolidate your online account balances onto a single page, hoping that they can use the information about your finances to cross-sell and "upsell" you their own products. TheStreet.com - FundWatch 1
What consumer pubs are saying about aggregation: Now, financial account aggregation — the next "killer app"—is catching on. A whole new wave of major banks, brokerages and independent web portals have launched aggregation functionality in the past year, with many more set to do likewise in the months to come. And they’re acting none too soon. Several recent studies estimate that within five years, some 20 million to 30 million banking consumers will actively use an aggregation service. TheStreet.com - FundWatch 1
And what does the consumer think? Interest in account aggregation services CUNA and Affiliates
What the industry experts say about aggregation Effective aggregation strategies give companies new data mining capabilities and a ready-made stepping off point for new CRM initiatives. This translates into ripe marketing leads and significant opportunities to increase assets under management.
Consumer use of aggregation • According to Gomez Advisors about 1 million people are using aggregation
Consumer use of aggregation But it will have a compound annual growth rate of 57.8% Tower Group
What’s the value of aggregation? Convenience is a reason an estimated 1 million consumers are currently aggregating their accounts. Also, because it gives people an overview of their finances, account aggregation enables them to budget and plan better. Gomez Advisors
What’s the value? Will account aggregation pose a serious threat to credit unions’ relationships with their most profitable members? Or, will it end up being just another example of technology looking for a solution?
Your members trust you According to Celent Communications, which estimates that as many as 19 million Americans will use aggregation services by 2003, financial institutions are "well positioned to become aggregators" because they are trusted by the public with extremely sensitive information.
Your members trust you A Star Systems, Inc., poll found that 70 percent of consumers surveyed would trust their financial institution's security more than a third-party Internet company for aggregation services, and nine out of 10 said it was important for the service to be provided or supported by their current financial institution.
Serving Consumers through the Internet Wells Fargo customers can gain single sign on online access to banking, bill pay, mortgage, student, personal, home equity and auto loans, full-service and discount brokerage and credit card accounts. BAI news/Business Wire
The value proposition Forrester found that only 7 percent of U.S. online households are interested in aggregation and are unconcerned about giving someone access to their financial information.