DUBLIN, Ohio – Member business services aren't necessarily a product every credit union should offer, but those CUs that decide the services are a good fit for their business strategy should consider business checking accounts a good place to start. "To some degree, every business is different and each business' needs are different, but for the small office/home office (SOHO) market typically the major product they're looking for is a business checking account relationship," said Dave Shoup, director of research & information, Ohio Credit Union League. In September, the OCUL Service Corp.'s Member Business Services Task Force published the "Ohio Credit Union Business Checking Account Guide" to provide credit unions with information and the tools necessary for them to get involved in business services. The guide, said Shoup, is intended to help credit unions get started and determine if offering business services is right for them. "The business checking account relationship is very transaction based. This type of account is the base account for small businesses, for everything from electronic funds transfers, to paying suppliers and employees, and depositing money. Even SOHO types of businesses can hold substantial sums of money," Shoup said. He added that 50% of small businesses at some time in the future, will be looking for loans. "So once a credit union has a SOHO's business checking account, that business will likely look to the credit union for a loan and other ancillary services it may need at some point later on," he said. "If a credit union wants to attract the SOHO market, offering business checking accounts is a good place to start," Shoup said. The key to attracting and keeping business checking accounts is keeping the pricing simple and not tag on a lot of fees, Shoup advised. "Each market can be different, but credit unions have to find out what their local market and competition are doing. You don't want to give the service away, but you don't want to underprice it either," he said. Shoup said many credit unions mistakenly price their business checking accounts close to their personal share draft accounts because they haven't fully researched the cost of processing and servicing the business account. "Credit unions shouldn't put themselves in the position of losing money as a result of trying to undercut their competition," said Shoup. CUs should be aware, though, that unlike banks, they can pay dividends on business checking accounts. This gives them a distinct advantage over their competitors. CUs should also leverage the relationship they have with their members to cross-sell other business products and services and implement relationship pricing. Offering business checking accounts is not the same as offering personal share draft services and the regulatory requirements of the two differ as well, but one thing they both have in common is the potential for fraud. While most credit unions are familiar with the forms used to open individual member share draft accounts, the required documentation for business checking accounts is more complicated. Shoup emphasized that "verification is highly recommended" to make sure that the person opening the business checking account is authorized by the business to do so. Credit unions should also verify that the business is licensed, he added. Business checking accounts can be fraudulently opened for several reasons: as a way to pass stolen checks made payable to a legitimate business; to defraud the public by establishing a bogus business and collecting money for services or goods; to pass counterfeit checks made payable to a bogus company. Shoup stressed that there are currently no laws stipulating which documents have to be collected by a financial to open a business checking account, and he advises credit unions to check with their regulator. "It is a financial institution's fiduciary and safety and soundness responsibility to verify the validity of a business," he wrote in the guide. "The amount of documentation received is a matter of risk management, credit union policies and the desires of local regulators. Generally when key documentation is omitted, the credit union should have sound business reasons for their exclusion," Shoup stated. The Business Checking Account Guide encourages credit unions "to supplement signature cards with `Account Agreements,' reviewing credit union regulatory and policy issues affecting all membership accounts. "When you're dealing with large volumes of checks for larger amounts of money, the potential for loss is greater," said Shoup. -

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