NAFCU Services Blog

One of my favorite books about how the Internet and digital technologies have changed the way we do business is ‘Blur: The Speed of Change in the Connected Economy’.  Written way back in 1999, the book was remarkably prescient in talking about how ‘speed, connectivity and intangibles’ will combine to transform business processes throughout the enterprise –

Speed is the shrinkage of time through near-instantaneous communication and computation. Connectivity is the shrinkage of space with the advent of the Web, E-mail, beepers, and other media of communication. Intangibles are values without mass, most importantly knowledge and its mobility, made possible through Speed and Connectivity.

Most important, when it comes to creating value the traditional lines distinguishing products from services are "blurring."

There are many lessons to be derived from the book, but I want to focus on applying this insight to one credit union business process in particular – the onboarding of new members.  Specifically, not just the discrete process of signing up members (i.e., filling out applications), but the process of engaging them in order to transform your credit union into their primary financial institution.

A key success factor to harvest net new assets and economic activity (maximize total lifetime value of a member) and to help credit unions leverage membership gains from Bank Transfer Day is moving past the information-gathering phase (the application process) and into account activation, funding and other more engaged profitable member behaviors.

Credit unions have traditionally experienced very high attrition rates in the first 90 days after an account has been opened.  The cause is relatively easy to understand – existing accounts are often tied to a myriad of automatic bill-paying relationships, and changing all that requires time, effort and information.  So every time a new member walks out of your branch with their new account information, you’re leaving it up to them to figure out their own account transition strategy.

In order to move pre-authorized transactions from one financial institution to another, a consumer must keep both accounts active until all transfers are connected to the new account.  Other factors can make the move even slower. Some transactions, such as insurance premium or property tax escrow payments, occur less often than every month; and any error by a creditor, a payer or either financial institution can add more time to the process. Even for consumers who can maintain sufficient balances in both accounts, this creates a logistical problem.

Imagine yourself sitting at the kitchen table at night trying to figure all this out -- is it any wonder that we face such a high attrition rate?  It is all too easy to get fed up with high fees at a larger financial institution and open up a new account – it is much more difficult to work through all those impediments to actually craft a meaningful primary financial relationship.

We recently did a podcast with Deluxe (our Preferred Partner for a variety of credit union solutions focused on member engagement) on their SwitchAgent solution.  Their approach is innovative and embodies the basic principles noted above to blur the lines between a product and a service, resulting in an uncommonly effective solution to this problem.  So apologies for the modest commercial here, but this approach was so innovative and has been so effective that I wanted to highlight it as a great way to cement the gains from Bank Transfer Day.

Deluxe has combined an extensive database of relationships with payers and creditors (product) with their global call center capabilities (service) to create a proactive ‘concierge’ approach to helping new members through the process.

With SwitchAgent, the account holder signs a form and authorizes the credit union to make changes. Deluxe then proactively manages the process by having their call center representatives:

• Contact the new member to collect account information
• Schedule and send notifications to payers and creditors to move pre-authorized transactions to your credit union
• Provide a schedule and updates to account holders throughout the switch process

So as opposed to taking a passive approach and leaving it all up to the member, Deluxe provides a “servicized” product (or is that a productized service?) that yields immediate benefits and results.  With their clients, they have seen attrition reduced from an average of 37% to less than 4%, with concomitant benefits to the credit union from increased economic activity.

Best of all, this is done on an outsourced basis with economies of scale – leaving aside the call center staffing issues, it would be impractical for any one credit union to develop the global database of relationships with payers and creditors just for their members.

See what it’s all about in our recently recorded podcast, or go to the Deluxe NAFCU Services page at www.nafcu.org/deluxe.

Post written by Dave Frankil, President, NAFCU Services Corp.

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