Vendors, Credit Unions Prepare for Growing New Market

COLUMBIA, S.C. – How to serve the banking needs of small businesses is becoming an issue among credit unions, and technology vendors are actively working to provide the infrastructure to support the growing demand from their clients. It’s a new area for most, and the credit union industry as a whole is feeling its way. “The credit union industry is still very much in the exploratory mode at the moment, with much conversation and planning under way,” says Sara Brooks, senior vice president of strategy, marketing and offering development at IntegraSys, the former EDS subsidiary that now is a Fiserv unit serving more than 1,500 credit unions. “Talent is being recruited out of commercial banking to help build competitive strategies,” she adds, an observation shared by Suzanne Wright of The Wright Consultants. “Most of my credit union clients are in the formative stages of providing business services,” says Wright. “Some of my clients have hired people from banks who have the experience and knowledge to service business accounts.” Others are taking on the learning curve themselves. “Several of our clients have had their senior management attend commercial banking classes so that there is a broad-based understanding of the operational requirements,” says Santo Cannone, president of Aurum Technology’s credit union services group. The interest extends across credit unions of all sizes, fueled in part by the expanding role of small business in the national economy and by credit unions themselves, as they attempt to attract new members through community charters and find members in traditional SEGs out forging their own way after corporate downsizings. While much of the focus initially is on lending and basic transaction services, the range of products a credit union needs to offer business people is often broader and more demanding than for serving the typical consumer. “A credit union’s portfolio of loan and deposit products may need to be enhanced to support different fee and payment structures,” says Brooks at IntegraSys. “Some entirely new services such as cash management and merchant services will be needed if the credit union desires to actively market to the business sector.” Wright, the Texas-based consultant, can attest to that personally, and notes that meeting those needs can pose a technology challenge to credit unions. “There are a number of issues that need to be considered depending on the types of businesses that the credit union wants to service,” she says. “One example is for a small professional services business like mine,” Wright says. “If I have a personal deposit and business deposit to make at the same time and the credit union uses a third-party software application for business checking and the core system for personal checking, either the teller needs to learn two different software applications or the credit union needs a dedicated teller for business accounts.” Besides people skills, there’s also the integration issue. Can that third-party software be integrated with the core application to allow, for instance, consolidated statements and joint ATM capabilities? Vendors Adapt, CUs Decide Vendors are working on that issue. Cannone at Texas-based Aurum, for instance, notes that his firm’s core MISER system already integrates the ability to serve business accounts, and “we expect to take the same approach with Mercury,” the core system serving the 600 or so small credit unions that Aurum acquired as clients when it bought Computer Consultants Corp. last year. How much a small, or big, credit union needs to do to enter the business services arena is a question that Derrick Smith also thinks about a lot. “It depends on how deep the plunge,” says the president of FedComp Inc., the Virginia-based core technology provider to about 1,500 generally small credit unions. “It could range from very little to significant acquisition of hardware, infrastructure, consumable supplies and staff, and adoption of new controls and processes,” says Smith, who says he is seeing “moderate interest” in business services among his company’s client base. “The good news is that it can be implemented in stages.” So, is business banking right for every credit union? “The makeup and demographics of the membership, as well as the needs of the current membership and target membership for business services, will determine whether the credit union should offer business services,” says Wright. “Failing to provide those business services may increase the risk of losing the owners and employees of that business to another primary financial institution.” Fairwinds Credit Union is taking no chances. “We’re working to attract clients to our business services, and we’re requiring them to bring their personal business as well,” says Larry Tobin, CEO of the $900 million CU in Orlando, Fla. Fairwinds is using the services of Aurum and Baker Hill to help handle the complexities of serving its 2,600 member business accounts, and is sharing its experience with other credit unions. Tobin says Fairwinds was the host of a weeklong business lending training session that attracted about a dozen credit unions from around the country. South Carolina Federal Credit Union is another $900 million CU focusing on business banking as a way to hang on to members, and attract more. The North Charleston, S.C., credit union now offers simply a business checking account but has been holding focus groups with members and potential members as it moves toward expanding into such areas as cash management, ATM accessibility and CRM. “We can offer similar products and services, and at a better price, than the big bank down the street,” says its CIO, Bonnie Kendrick. Indeed, the difference credit unions make for individual consumers also serves for business owners and can provide a similar competitive edge. “In most markets there is a large difference between advertised interest and actual service to small business owners by larger banks,” says Cannone at Aurum. “Credit unions’ service philosophy provides small business owners with a clear alternative. We are seeing credit unions wrapping business services and wealth management services to provide a total package of services to business owners,” he says. “This type of service focus and creative packaging will serve credit unions well.” -