How can a small credit union develop leading-edge technology that captures the attention of the entire banking sector? Why has IWA + CCU in New Westminster, B.C. spent the money to introduce Canada's first fully-functional Internet banking (IB) service? Where's the advantage? What's the business case?
Remember that an organization's small size does not limit its ability to gain expertise in information technology. IWA + CCU has been a leader for years. As a Microsoft Beta site, it has better high-tech assistance and research support than many large corporations. With a strategic partner such as Microsoft, IWA + CCU staff are motivated to perform beyond expectations.
"It's a challenge to work with what we sometimes call 'bleeding edge' technology," says IWA + CCU marketing manager Dana Dekker. "But we have a corporate culture that thrives on new technology. Our IB system was developed by four people in four months, which is a real achievement, but not our first success in working with the Net. In 1995, we established our presence on the World Wide Web. We had one of the first websites in B.C.," says Dekker. "We have determined that the Internet user is a prime consumer target. We believe that the access to the Internet in Canada is increasing every year. Most importantly for IWA + CCU, nearly two-thirds of our members have access to computers. Obviously they'll be interested in our IB services at some point in future."
An even more compelling reason for IWA + CCU to offer IB was its position in the financial market of B.C.'s Lower Mainland, in which dozens of banks, trust companies and credit unions compete.
"It was clear that higher operating costs, poor economies of scale, and a dependence on eroding margins meant that traditional forms of growth were not forthcoming without considerable risk," says Dekker. "Moreover, our branches are concentrated in one region of a large province, so we were limited in our ability to attract province-wide deposits and membership."
Having determined that it needed to find fresh ways to offer services in an increasingly sophisticated market, IWA + CCU began to investigate new technology. Management and technical staff quickly eliminated Direct Dial Up options such as PC DIRECT and CT CONNECT owing to high costs and application restrictions . IB was the most attractive option from the beginning, for several reasons.
First, IB saves space. It doesn't involve additional space-consuming software, just an existing browser. It is truly cross-platform, functioning with IBM-compatible PCs, Mac, and Unix, whereas most Direct Dial ups can't. IB is quicker and much cheaper to implement and maintain: there's no need to develop and distribute inflexible proprietary software to customers, and then recover costs through service fees. Browser software is currently free. Marketing staff will appreciate the flexibility of IB pages, which can be revised easily to meet customer needs as they arise. And with IB, customers can access their accounts from anywhere in the world without incurring a Direct Dial Up's long-distance charges. Finally, with on-going advances in encryption, passwords, authentication, and firewalls, IWA + CCU believes that IB is just as secure as Direct Dial Up.
Having identified IB as its preferred solution, IWA + CCU turned to Prologic Corporation of Richmond, B.C. for advice and assistance. Over the past decade, Prologic has become one of the most respected suppliers of credit union technology in North America. Richmond Savings Credit Union, Prologic's first customer, won the Microbanker's Best in Microbanking Award in 1988. IWA + CCU was Prologic's second customer, and won the 1995 Microsoft Windows World Open Award in the banking/securities category and another award from Creditor Resources Inc for "Most innovative use of a PC LAN/WAN system." Prologic's roster of credit union clients also includes Capital City Credit Union in Alberta, Cambrian Credit Union in Manitoba, and Ontario's Civil Service Credit Union and Metro Credit Union. Since 1984, Prologic has installed systems in 18 countries, and is working hard to expand its client base.
"We evaluate all business opportunities carefully," says Prologic marketing specialist Marlene Yip. "Currently we're working with credit unions smaller than IWA + CCU. Generally, we find that credit unions with $100M or more in assets are the most likely to have the resources to get the most value from our systems. But that's not a hard-and-fast standard, and we're certainly prepared to consider every prospect."
Yip notes that Prologic's successful relationship with IWA + CCU depends on support and encouragement from the senior managers in both companies.
"Robert Parkinson, IWA + CCU's chief executive officer, and Dana Dekker have a clear vision of how leading edge technology can be used as a strategic advantage to respond quickly to changes in the marketplace," she says. "Their enthusiasm flows through to all areas of the company. And they have a good, long-standing working relationship with Prologic president Robert Wilband and v-p of sales Jack Allison."
Aside from formal business connections, it's obvious to anyone familiar with Prologic and IWA + CCU that their senior managers get along well with each other on a personal level, and are able to speak frankly to each other about any problem or issue arising from a high-tech development project.
From the beginning, IWA + CCU made its objectives clear to Prologic. First, if the implementation of IB is to succeed, it must assist in retaining current members and in attracting new business. IB must be ultimately convenient and accessible literally at all times worldwide.
"Our trademark IB slogans are sincere," says Dekker. "We refer to 'Anytime, Anywhere, Anyplace' banking. Members can bank with us 'whether they're around the corner or around the world', and with IB we mean it. We consider IB a great equalizer. It levels the competitive playing field and takes away the facade and the advantages of having a huge branch and the ATM network enjoyed by the big banks for so long."
Another objective is to reduce operating costs, particularly for transaction processing. A traditional over-the-counter transaction costs IWA + CCU approximately $3.50. With IB, transaction costs are often reduced by 90% . These lower costs result in higher margins and increased profitability.
And so that IWA + CCU can enhance existing relationships with members, the IB system must be able to recognize and reward them by tying pricing to patronage. Members will quickly understand that their loyalty to IWA + CCU will be acknowledged, and in time they will see a definite advantage in doing all of their banking business through the credit union's IB system.
IWA + CCU and Prologic announced the introduction of their IB system in September, 1996. Since the first press release, the popularity of the system has grown past even the most optimistic expectations. Hits have jumped from an average of 300 a day to a sustained average of 3,000 overnight. Over 80% of IWA + CCU members are using IB to pay their bills, while about 20% are transferring funds on-line. The business media have devoted much ink to IB, and IWA + CCU has developed an image as 'The Little Credit Union That Could', a hard-working and dedicated company that outperforms massive corporations that can't. Dekker, however, is modest about IWA + CCU's accomplishments.
"While we may be the first to offer fully functional IB in Canada, we certainly aren't alone on the Web," he says. "Today the Web features over 800 financial institutions, and my sources indicate that the number is increasing by over 90% every quarter. Online Banking Report predicts that by the year 2000, 7500 financial institutions will have set up websites. In the next few months we expect that a number of other credit unions will offer IB services. The growth of the technology is astonishing."
It's likely that those most astonished by the potential of IB are currently occupying comfortable bank offices in Toronto, New York and other large financial centres. Perhaps those offices won't be comfortable for too much longer. After all, if you can do your business with IWA + CCU from a terminal in Kenora, Kansas City or Katmandu, why should you rely on "Old Humungous"?
Senior planner at DataStor Corporation,
Vancouver, B.C., Canada
(604) 687-7800 or (604) 224-3243]
Copyright © 1996 Credit Union Way and Guy Robertson
Published with permission from Credit Union Way Magazine, Canada
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