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CUNA Technology Council dispenses CU strategic directions and technologies.

The tables have turned for financial services technology. Business strategies drive technology trends today, but not long ago the situation was reversed. The advent of the Internet during the 1990s drove credit unions to create Web sites, and further developments led to home banking.

But now functional areas, such as marketing and operations, assume a greater role in the direction of technology. They've changed the focus for credit unions from technology as a business strategy itself to a facilitator of business strategies. The CUNA Technology Council-with input from a focus group of council members-has identified seven technology-enabled strategies, which fall into three main categories:

* Member. How can credit unions make it convenient and easy for members to manage their financial matters?

* Sales. How can credit unions manage their member relationships to make them more profitable?

* Infrastructure. How does technology support the previous two categories while protecting members' critical and confidential information?

Some business strategies, their associated technologies, and their implications for credit unions fit into one of these categories, and some straddle two or more. Credit unions-regardless of asset size or business goals-must tend to each of these areas (Figure I). What follows is a discussion of the seven strategies in relationship to the three categories.

Member

1 Member convenience. Despite efficiency gains due to technology, members are more time-deprived and have more financial worries than ever. U.S. workers put in an average of 1,825 hours in 2002, compared with 1,300 to 1,800 in European nations, reports the International Labor Organization, Geneva.

Money management tools, cards, and consumer access devices such as cell phones and personal digital assistants (PDAs) enable members to manage their financial matters quickly and intelligently.

Money management technologies allow members to move money among accounts, to other individuals, or to utilities and other providers. When a credit union brings together account aggregation, account-to-account, person-to-person, and electronic bill presentment and payment, members get the convenience they seek. Text-messaging alerts enable the credit union to communicate instantly with members on their cell phones about information they preselect, such as low account balances.

Cards provide members immediate access to their money or credit. Smart card capabilities, added to credit and/or debit cards, enable storing value on the card-for example, small withdrawals from a checking account. A 2004 Federal Reserve Board study says 73% of U.S. households use prepaid cards, and 6% use smart cards. Today, most of these stored-value cards are commercial gift certificates and prepaid phone cards.

Radio frequency identification technology (RKID) cards and devices are the future. Consumers merely wave the card or device near a reader to make payments vs. surrendering their cards. RPID could supersede smart cards because the infrastructure is less expensive.

RFID also facilitates micropayments. In Japan, you can buy a soda at a machine using your contactless RFID card. One successful implementation of RFID technology in the U.S. is Mobil's Speedpass. Consumers wave the small "wand" in front of the gas pump or at a point-of-sale device to pay for a purchase.

Consumer access devices are increasingly popular-especially the ubiquitous cell phone, although PDAs also have gained popularity. These devices allow members to interact with the credit union and their accounts. Increasingly, their capabilities are merging-cell phones are PDAs and PDAs are cell phones.

Automated telephone banking systems have been around for years, enabling members to move money around or inquire about cleared checks at all hours. Some more recent interactive voice response (IVR) units are bilingual, extending credit union convenience to a broader population. Also, the popularity of cell phones makes IVR more relevant than when it first came out. Members simply can speak commands into the phone rather than taking the device away from their car to punch numbers.

Few credit unions employ speech recognition now, but it's likely to become more prevalent. However, two-thirds of U.S. consumers (68%) say they use IVR less since adopting online banking, says a March 2004 survey by Synergistics Research Corp., Atlanta.

Sales

2 Sales management. To sell products to members, you must understand what they need. The starting point is knowing where they are in their life cycle and what products/services they already have. After you've made your pitch, you need a way to track results to shape future marketing efforts and inform incentive-based compensation systems.

Customer relationship management (CRM) has overtaken marketing customer information file systems as a key tool for sales management.

CRM systems provide a comprehensive picture of the member's relationship with the credit union-by both individual and household. Potentially, they could provide a global picture of all financial relationships (credit union, other financial institutions, investment companies, and insurance companies).

Seventy-one percent of U.S. information technology (IT) executives say CRM could increase customer satisfaction, reports a 2004 survey by CIO Insight, New York. They also predict it could provide a 360-degree-view of customers (69%) and increase revenue per customer (59%).

The other critical piece to sales management is tracking member interactions in all channels. A branch teller or contact center representative should be able to tell the member was online checking mortgage rates the night before.

Channel usage profiles from CRM systems also enable better pricing decisions. If a member uses electronic channels 99% of the time, you could offer a package or level of membership giving value based on using the less-expensive, electronic services. This might or might not work depending on your membership.

Infrastructure

3 Network infrastructure management. Local area networks (LANs) now are considered mission critical in most financial institutions for many applications-e-mail to imaging, Web access to document storage. Some financial service providers store telephone calls digitally on their networks. Credit unions must manage two critical areas of their LAN-storage and systems.

Storage management. Credit unions are handling and storing more data electronically. And because some regulatory mandates regarding records retention and storage extend to the electronic world, there's a growing need for electronic storage devices and back-up strategies.

The National Credit Union Administration's (NCUA) Part 749, Appendix A (requiring a record retention program to identify, store, and reconstruct vital records that are damaged or destroyed) encompasses electronic records storage at federal credit unions.

Many other regulatory agencies also have record retention requirements that credit unions' policies must cover. And certain provisions of the Sarbanes-Oxley Act apply to both for-profit and not-for-profit organizations. One provision contains penalties for destroying or falsifying records with the intent to obstruct a federal investigation.

Storage of e-mail is of particular concern because of its criticality and volume. An estimated 12 billion spam messages, 13 billion person-toperson e-mails, and six billion e-mail alerts and notifications will be sent daily next year in North America alone, predicts International Data Corp., Framingham, Mass. It's critical that credit unions manage e-mails that have real business value and ignore those that don't.

Another storage necessity is providing online statements and check images for both member and staff access. About half (46.1%) of credit unions offer the ability to view account history electronically, according to June 2004 NCUA call reports. But just 9% of credit unions offer check images with monthly statements, says the Credit Union Services Profile from the Credit Union National Association (CUNA). As imaging and archiving systems become more affordable, smaller credit unions are implementing the technology to support online records storage.

System management. Every vendor, it seems, wants a server. While financial institutions used to get by with four or five servers to handle applications such as e-mail, home banking, and Web access, it now takes server farms of up to 75 servers to manage all the applications in a typical environment.

One remedy: Server virtualization makes one server work like multiple servers to handle several applications on one server. Still, servers mean operating systems, which mean patches.