Small banks tap tech to take on giants

Mutual banks and credit unions are embracing technology initiatives to stay competitive with Australia’s largest financial institutions.

The Esso Employees Credit Union, which has 6000 members and an asset base of $300 million, sees the big banks “as our major competitors, not the other credit unions,” said Ron Cox, senior manager of member relations for the EECU, an industrial credit union that looks after ExxonMobil staff and family.

The EECU has been expanding its website and has recently released mobile apps for its members.

Bankmecu, which has 125,000 customers and assets of about $3 billion, does not believe its customers’ needs are different from the customers of the big banks, said Chris Newey, the bank’s general manager of corporate services.

However, the bank has a particular focus on giving customers greater control and convenience, and providing financial services online and over mobile devices is a key to that strategy, he said. “If we’re not offering digital services, we’re not competitive.”

One of bankmecu’s most recent tech initiatives is a mobile payments pilot using NFC stickers.

“You just have to be in [the digital] space ... because there’s an expectation across all of our customer base that they want convenience. If the bank down the road is offering convenience and we’re not, then we’re not being competitive.”

While EECU and similar financial institutions may not have the scale of Commonwealth Bank, National Australia Bank and other big companies, their executives believe that their smallness may give them an advantage.

The relatively small size of credit unions makes it easier for them to move quickly on new types of technology, said Cox.

Newey said bankmecu’s small size compared to the major banks is both an advantage and a disadvantage.

“We can be nimble because we are smaller,” he said. “The other side of the coin is we certainly don’t have the type of investment budget that a major bank would have.”

“It’s a balancing act,” he said. “Investing in technology is critical to the success of our budget, but we must invest in the right technology.”

Newey said bankmecu pays close attention to technology trends.

“We’re always constantly monitoring what’s happening out in the marketplace. In some cases, you have to be a fast follower and in other cases you can be a leader.”

Defence Bank CEO Jon Linehan has said he believes that mutual banks are in a position to move faster than the commercial giants in embracing technology, especially because they are less tied to the traditional branch system.

“What mutual banks can do is move quickly to offer the availability of options for the consumer, varying from the branch, online video ... and social media, and by doing so be cost competitive with the major banks,” he said.

Going online

The small financial institutions said Internet and mobile banking has become essential to their businesses.

“The vast majority of [bankmecu] payments are done online,” said Newey. The bank, which has just 24 physical service centres across Australia, receives 400,000 visits to its transactional website each month and 65,000 of its 125,000 customers are registered for online banking.

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The EECU has offered Internet banking services for the last 10 years, and Cox estimated that 85 to 90 per cent of its transactions today are electronic.

Cox said EECU’s members are unique from other banks because many are far away from home—either Australians working overseas or people from other countries living in Australia.

For that reason, Internet banking services that are open 24 hours a day and accessible from anywhere in the world are a must. Customers “just couldn’t deal with us if we didn’t provide them,” he said.

Newey said bankmecu eventually wants to offer all of its services through its website. While many types of transactions can be done online, there are areas including some loans that may require contact with a physical service centre.

“At this stage, you cannot do everything online that you can do in a service centre,” said Newey. “So, in terms of expanding our services, that’s where we’ll be spending our energy.”

For mobile devices, bankmecu has an iPhone app and an Android version is due for release this year, he said.

The bank currently is running a pilot program with 100 customers for pay tags, NFC stickers that can be attached to mobile phones to convert the devices into payment mechanisms, said Newey. In the future, bankmecu would like to enable mobile payments without the tags, using NFC chips embedded in certain smartphones, he said.

EECU plans to expand its Internet banking services “as much as we can,” including increasing the number of currencies supported online. In addition, the credit union has recently released a mobile smartphone app for iPhone and Android.

“It has most of the functionality, but there is some development that needs to be done for that to provide the full breadth of services.”

EECU and bankmecu are customers of Western Union Business Solutions and use the vendor’s online banking platform for international payments.

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