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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

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net worth

Net Worth

The value of the Internet to your credit union

Bob Rehm

who s on the internet
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
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 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 internet5
The value of the Internet
  • Web sites
  • Internet banking
  • EBPP
  • Account aggregation
  • Web portals
the value of the internet6
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
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
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
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 banking10
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 banking11
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 banking12
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 banking13
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 banking14
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 banking15
Internet Banking
  • Okay, enough numbers!
  • What’s a credit union to do
the value of offering internet banking
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 banking17
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
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
How about paying bills online?
  • Does that sound like fun?
electronic bill payment presentment
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 presentment21
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 presentment22
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 presentment23
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
But it’s not all bad news!
  • People are actually using EBPP
who is using electronic bill payment presentment
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 presentment26
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
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
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
And what about credit unions in this region?
  • In Southwest Corporate’s annual member survey, 17% indicated they offer EBP
the future of ebpp
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
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 unions32
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 unions33
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 unions34
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
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
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
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
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 aggregation40
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
And what does the consumer think?

Interest in account aggregation services

CUNA and Affiliates

what the industry experts say about aggregation
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
Consumer use of aggregation
  • According to Gomez Advisors about 1 million people are using aggregation
consumer use of aggregation44
Consumer use of aggregation

But it will have a compound annual growth rate of 57.8%

Tower Group

what s the value of aggregation
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
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
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 you48
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
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
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.

the value proposition51
The value proposition

Forrester interviewed senior executives at 45 financial services firms. More than one-third of the firms already offer aggregation, while another 38 percent plan to offer it by the end of 2003. Fifty-one percent of the respondents believe that an increase in customer retention will justify the investment.

the value proposition52
The value proposition

Datamonitor found that 49 percent of online banking customers will be managing their affairs using an account aggregation service by 2005,

the value proposition53
The value proposition

More than 25 percent of consumers are likely to embrace aggregation when it is sponsored by their primary FI and integrated into the FI's overall offering, Gomez found. Further, 28 percent of high net worth investors are likely to switch institutions if their firm does not offer aggregation services.

Gomez Advisors

what s next for aggregation
What’s next for aggregation?

Aggregators have to grant access to multiple financial institutions from one Web page, allowing you to pay bills, transfer money between accounts at different banks, roll over certificates of deposit, draw from equity lines of credit and apply for loans.

aggregation concerns
Aggregation concerns:
  • How can FIs guard against misuse of customer data?
  • What safeguards protect against misuse of customers' user names and passwords by the aggregator's employees?
aggregation concerns56
Aggregation concerns:
  • What protection do aggregators have to prevent customers' log-in information from theft?
  • Who is liable if log-in information falls into the wrong hands and customer data are accessed by an unauthorized person?
where else could aggregation occur
Where else could aggregation occur?
  • At a portal
  • At a bank
  • At a brokerage
what about portals
What about portals?
  • Portals like AOL and Yahoo could be the masters of account aggregation
  • But do people trust them?
what is a web portal
What is a web portal?

Portals are often the first page your web browser loads when you start up your web browser, Netscape Navigator, Microsoft Internet Explorer, etc.

what is a web portal60
What is a web portal?

The term "web portal" began to be used to describe mega-sites such as Yahoo, Excite, MSN, Netscape Netcenter and AOL because many users used them as a "starting point" or "entry point" for their web surfing. The term "search engine" had become inadequate to describe the breadth of the offerings of these leading Internet destinations, although search and navigation are still pivotal to most people's online experience.

what is a web portal61
What is a web portal?

The major consumer web portals are still the most heavily-visited sites on the Internet. Yahoo, AOL and MSN are the giants but the next seven or eight after that are significant as well.

how did web portals get started
How did web portals get started?

Graduate students Jerry Yang and David Filo, working in a small trailer office, began to experiment with a searchable directory of web sites, categorized by topic. The web directory was born! In late 1993, this was simply known as "Jerry Yang's Guide to WWW." Housed on Stanford University servers, it proved popular with the first web users. Later it named Yahoo!

what features do consumer web portals have
What features do consumer web portals have?

Portals offer a wide range of customization options and functionality including: Internet search and navigation; email; customized news, weather, sports, and horoscopes; planners, calendars, and contact managers; bookmark managers to save favorite web sites; real-time chat; message boards; original content on every imaginable topic; shopping; free home pages; "clubs" which function as makeshift intranets; small business services; and much more. Increasingly, major portals are seeing to it that vital content such as news, stock prices, and messages can be accessed with wireless devices and phones.

a portal by any other name a vortal
A portal by any other name--a vortal
  • Vertical or niche portals could have been called web sites in the past. Today, however, certain category-leading web sites in a given topical category, or catering to a given demographic, are such significant players that many call them portals.
a portal by any other name a vortal65
A portal by any other name--a vortal
  • Affinity portals - Demographically-focused portals focused to cater to specific ethnic groups, specific age groups, alternative lifestyles, religions, and other groups which are perceived to form a community or market
what s the value of a credit union web site becoming a vortal
What’s the value of a credit union web site becoming a vortal?
  • Keep ‘em coming back. Offer content that brings your members to your web site every time they sign on
  • But can they go places that you don’t want them to?
  • Can you control the quality of their transactions?
so what s the bottom line
So what’s the bottom line?
  • Internet banking
  • EBPP
  • Aggregation
  • Portal
multiple points of access
Multiple points of access

Number of delivery channels used for financial services:

multiple points of access69
Multiple points of access

Media Metrix traffic data reveal that the number of unique visitors to multichannel banks (those with offline branches and online services) climbed from 6.4 million in July 2000 to 13.4 million in July 2001 -- a 110.5 percent increase.

what s the internet worth to your credit union
What’s the Internet worth to your credit union?
  • You can create deeper service relationships with your members
  • The Internet gives your member multiple points of access to your credit union