BIRMINGHAM, Ala.—The definition of member service is changing in an increasingly digital environment, and a new NCUA proposal that changes the definition of “service facilities” is long overdue, according to one former NCUA chairman.
As CUToday.info reported, during its Dec. 17 NCUA board meeting, the agency voted 2-1 to put out for 30-day comment proposed changes to the NCUA Chartering Manual that would allow CUs to include any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for a multiple common-bond federal credit union that participates in a shared branching network. The federal credit union would not need to be an owner of the shared branch network for the shared branch or shared ATM to be a service facility. These changes would apply to the definition of a service facility for additions of select groups to the fields of membership of multiple common-bond federal credit unions and for expansions into underserved areas, under the NCUA proposal.
NCUA is also seeking comments about whether it should further amend the definition of “service facility” to include a federal credit union’s interactive website or mobile banking application.
“I am supportive of this proposed rule to consider shared branching and ATMs as service facilities,” stated Dennis Dollar, principal at Dollar Associates. “It is long overdue and probably should have been done 20 years ago when I was at NCUA. I wish we had made this move during my NCUA tenure.”
A Step Forward, But…
Calling it a decision a “couple of decades late,” Dollar said he hopes the proposed rule is only the beginning of a “true modernization” of the agency’s view of today’s financial service delivery system.
“Even though this proposal seems probably 20 years past its prime since ATMs matured in the financial marketplace during the 1970s and shared branching matured in the 1990s, it is undoubtedly a step forward,” said Dollar. “Nonetheless, I think we must be realistic and consider that—even these changes—still require the member to physically go to an ATM or a shared branch to be considered using a service facility of his or her credit union. In an era in which the majority of Americans access their financial institution through a smartphone in their pocket, a tablet under their arm or a laptop on their knees, I feel that we still have a ways to go with credit union regulators coming of age when it comes to defining today’s service facility and the consumer access question.”
The Biggest Change
Dollar pointed to an issue repeatedly raised in CUToday.info reporting, that in 2019 and again in 2020 credit unions fell below banks in customer satisfaction rankings from the American Consumer Satisfaction Index.
“For the previous 11 years, credit unions had surpassed banks in this customer satisfaction study,” noted Dollar. “What has changed? Are credit unions larger? Sure, some are. But so are banks. Are there fewer credit unions? Yes. But there are also fewer banks than in 2008.”
Dollar said the biggest change in the customer satisfaction numbers appears to be consumers are judging their satisfaction with their financial institution much less on how friendly the staff is at the branch.
“It’s not so much anymore whether they know my name and how they treat me when I go in to do a transaction or apply for a loan,” said Dollar. “Those are historical credit union strengths. But consumers are instead judging their satisfaction on how easy it is to access their financial institution without having to go into the branch.”
Dennis Dollar
Questions to Ask
Dollar emphasized that means decisions on service are being made more on how user-friendly are the CU’s website or mobile banking app.
“Is it versatile enough to meet my needs from where I am now, working from home? Is the technology robust enough to save me the trip to the branch or the ATM while I am quarantined and hesitant to go out?” asked Dollar.
With banks having larger assets, scale and technology budgets, credit unions already face a competitive challenge keeping abreast of changing consumer satisfaction needs, noted Dollar.
“They do not need to face a regulatory challenge as well, in this regard,” he said.
The effective delivery of financial services and the question of more convenient access through digital means is a challenge that banks and credit unions are facing strategically every day, emphasized Dollar.
Regulators must also be strategically looking for ways to help credit unions address this crucial issue, and not throw stumbling blocks in front of them, he said.
“NCUA’s proposal is a step in the right direction,” Dollar said. “But this is a journey that requires many steps. I hope that this proposal that essentially brings us into the 1990s in technological access recognition, is the beginning of serious examination at NCUA—as well as in consultation with sister regulators of federally insured credit unions at the state level—of ways to make it easier, not harder, for credit unions to safely and soundly expand their service access options now that we are moving beyond the bricks and mortar age and into the clicks and apps era.”
‘Not New or Novel’
In comments last week related to the proposal, NCUA Chairman Rodney Hood appeared to agree. He called the current proposal a “good start,” and said he wishes other “technological advances” were also being considered.
“This is not new or novel, the reality is consumers are moving more and more to digital applications, more and more consumers consider their digital apps to be their credit union, more and more younger members never stepped into their credit union,” said Hood.