Wireless technology's impact on the credit union industry

We are witnessing the tremendous potential for a dramatic shift in the way financial services offered by credit unions are delivered to their members. The first leg of this journey began a decade or so ago when walk-in or drive-up members started banking by telephone and then later over the wired Internet. But today, with wireless technology advances, improved security and broader bandwidths, financial services delivery has moved from the telephone to the desktop and now, quite literally, into the palm of a consumer’s hand. Now, members of credit unions that offer wireless banking services can have personal and immediate access to a variety of financial information through a Web-enabled cell phone or a personal digital assistant (PDA) such as the Palm Pilot. Using Web site-based applications that are then deployed to wireless devices, customers can check account balances and history, pay bills and credit cards, order stop payments, make stock transactions and transfer funds simply by pressing a few buttons on their wireless phone. In just a few short years, wireless technology has drastically changed the way financial institutions traditionally conducted their business and it’s largely because customers are demanding better and faster access to their financial information. Wireless technology provides the instant access that allows them to manage their finances with greater ease and efficiency and helps them make important, real-time financial decisions quickly. It’s a valuable customer convenience that is definitely catching on, particularly with younger and high net-worth individuals who are comfortable using the technology and who make the most of the financial information this technology provides. International Data Corporation (IDC) estimates that by 2003, 34% of the U.S. population, or 73 million people, will have wireless Internet access, a statistic that banks and credit unions simply shouldn’t ignore. By the end of 2002, there will be more wireless subscribers than wired Internet subscribers, setting the stage for increased market penetration for wireless technology. TowerGroup’s latest research projects close to 3.5 million mobile payment users by the year 2005. With expanded bandwidth and enhanced user experience, wireless technology will eventually become more popular and available than wired technology. And a primary reason for its eventual popularity lies in the fact that the price point for wireless technology is significantly lower than that for wired Internet services. Rather than invest in personal computer hardware and software, and an Internet service provider, consumers using wireless technology need only have a cell phone and a subscription to a wireless carrier to access the wireless Internet to conduct their transactions. Cost always being a major consideration, this is yet another advantage to offering this technology. It is in the credit union’s best interests to seize this golden opportunity to ride the next wave of e-commerce – m, or mobile, commerce – of which wireless technology is the cornerstone. Buying and selling stocks over the wireless Internet is just one example of how wireless technology is already paving the way for this brand new method of business. Because credit unions are historically more nimble than banks in terms of their ability to make strategic business decisions more quickly, employing wireless technology to provide the latest in products and services can help propel them to the forefront of the competitive financial services market. It is yet another opportunity to capture entrenched banking customers now versus later and gain an outsized share of the market place with those who have demonstrated a preference for using wireless devices. For a fairly low initial cost, credit unions can position themselves as being in the technology forefront and can grow their member base while this already proven technology develops even further. Wireless technology also offers credit unions a degree of operational efficiency by allowing members to handle many of their own transactions, freeing up human and technological resources to address more pressing issues for other members. This means that as transactions move progressively toward wireless technology, certain costs, including labor and operations, can be contained in other product delivery channels, which is an ongoing challenge in the industry. And speaking of challenges, there has been a consumer perception, valid or not, that security for transactions over the wireless Internet is not entirely fail safe. Credit unions that have incorporated wireless technology into their product and service mix are discovering that security around wireless technology is actually more robust than that associated with touch tone phone banking or ATM transactions. The encryption level is higher and is the most technologically advanced of any e-commerce product or service found in today’s markets. Credit union members should be assured that the transactions they conduct over the wireless Internet are highly secure. Generally speaking, members place their trust in a financial institution and believe their transactions and funds are safe and secure. Wireless technology is merely an extension of that trust. Wireless carriers will need new sources of revenue for continued research and development and will be driving members to the wireless Internet through expensive TV and print advertising campaigns. The end result is that credit union members will expect these types of services from their institution and credit unions should prepare themselves for what almost certainly will be a precipitous spike in demand. Members’ preferences are shifting toward remote delivery channels like wireless technology and away from the traditional brick and mortar branches and the restrictions of regular business hours. Wireless technology also represents an excellent opportunity for credit unions to broaden their demographic appeal by attracting new and younger members earlier in their financial life cycles and retaining them as members longer. Credit unions can easily brand themselves as financial institutions that provide an appealing delivery channel for financial services that members are comfortable with, making the institution more palatable to members who are younger and financially savvy. Offering the technology is a constructive strategic planning decision that will pay off significantly in the long term.