Credit Union Times - Centennial Edition - (Page I38) CeLeBrAtiNg 100 YeArS , SPeCiAL CeNteNNiAL editioN technology in the Second Century: Leaders See innovation, Collaboration as Key $8.5 billion BECU in Seattle. and potential members, Karnes and Leonardson said. By Marc rappOrt “Information technology has provided the opportuni“The average consumer walks with their feet,” Karnes CU Times Technology Correspondent said. “If you’re not learning faster than GRAND RAPIDS, Mich. — A lot of credit unions have ty to scale at increasingly reduced marginal them, they’re walking away. If we don’t done a great job of taking advantage of the new ways costs, and the cost of transactions drop as create mechanisms where we can meet technology can help them serve their members, but you grow because systems can scale in very their expectations and be as fast as there’s still one big thing Randy Karnes can’t get his small increments,” Leonardson said. But he also sees an adoption lag in the them, we’re going to have serious probhead around. lems.” “While technology has played a huge role in the credit union market. “We will be market followers and not The CU*Answers CEO said he still is development of credit unions, I have yet to dynamically waiting for that shift to occur in the figure out how to promote our industry through the market makers, especially in applications credit union space, however. Internet and through technology today to make us look for member products,” Leonardson said, “I think we really haven’t focused on bigger than we are,” said the CEO of CU*Answers, a “and we will continue to underutilize busihow technology is going to re-create how Grand Rapids-based CUSO that provides core process- ness intelligence and the strategic power we build our businesses, not simply auging and a growing list of other services to more than 130 that BI can have in the right hands.” Areas he cited in particular are payment the old model,” Karnes said. credit unions. ments and remote delivery. On “When we start to use it that way, we Why should that matter? Because the latter, he said, “We will will see great expansion and great exciteperceptions do, Karnes said, and putting need to excel in remote deliv- Randy Karnes ment about it.” credit unions on equal footing in the ery, especially the mobile appliAnd those who don’t? minds of consumers could be pivotal as cations, as these help reduce “Advancing IT will not be equally the credit union industry moves forward the weakness we have with applied across all credit unions, so it will into its second century. small branch networks.” affect credit unions in different ways,” said Leonardson “We see S&Ls and banks and those And as for payments, “this is where the at BECU. guys continue to not even do real-time credit union industry needs to wake up. “Simply, credit unions with strong leadership will processing. They’re doing back-office Our lead suppliers like CO-OP and PSCU prevail and those with too much of a victim lens will fall processing in batches. They’re doing are essentially aggregators of CU custom- behind.” memo-post processing and are even ers for First Data and Fidelity, which themA victim lens? behind credit unions overall in total sysselves are also bank processors for VISA “That’s one who lets reality come to them and theretem integration, but still they’re doing and MasterCard.” fore acts as a victim,” Leonardson said. He gave these very well,” he said. The problem with that, Leonardson said, examples of, “I can’t grow because of my SEGs;” “I can’t “So the issue is that credit unions can is that “we are vulnerable to a disinterme- hire good people because of my small size;” and “I can’t probably say they’ve done a great job of Butch Leonardson diation event, such as Google teaming up do what BECU does because we are smaller.” showing how smaller operations can with Verizon to implement mobile retail “A good leader is able to see a future that doesn’t yet take advantage of efficiencies in technolpayments and bypassing the interchange exist, communicate that new reality and move the organiogy and get more done with less than revenue model we all currently have.” zation purposefully in that direction,” Leonardson said. their counterparts, but we haven’t used Those who respond best to that new reality will be “The credit union industry needs more of the latter.” technology to its fullest yet, not enough to be top-ofthe winners of the hearts and wallets of future members —mrapport@cutimes.com mind to consumers,” he said. “We’ve allowed nontechnology solutions to build that top-of-mind recognition for banks, whether it’s through branches on the street corner or the sheer weight of institutions. (continued from page 37) advertising, all things dominated by traditional investHarkins said that even today though, 90% of credit At the time, credit unions had trouble understanding ment and not really by technology,” Karnes said. unions see very little loss from fraud and other security the problem as well. Harkins said they didn’t under“But I think in the future, technology utilization by issues. But, when they do, they lose a lot of money stand how people in Malaysia and other countries could credit unions can change the perception of credit unions because they’re not prepared for it, and by the time they be using the members’ cards. and then we can get that top-of-mind value–through the figure it out, it’s too late. “It was a painful experience for years to educate use of the Internet and telephones and all those things Earlier in his career, Harkins worked as vice presi- people. I would speak at seminars and explain it and that help us carry our financial institution with us dent of security and risk for MasterCard International then the financial institutions began to say, ‘Oh, so everywhere,” he said. and witnessed first-hand how fraud and identity theft that’s what’s happening.’” A key to that, Karnes said, will be to leverage credit evolved. Harkins said that identity theft is a recent pheFighting fraud today, Geister said, is a whole differunions’ inherent willingness to interact with each other. nomenon but that fraud really evolved when credit ent challenge than 10 to 15 years ago. While online “We think of our credit unions as peer-to-peer organizacards came onto the scene. banking makes it easier for members, it also places all tions for members, but I think we’re still too much into During this time, financial institutions were getting members’ information out on the Web for criminals to designing credit unions with a standalone, single mindhit with card counterfeit fraud and weren’t realizing it access. set,” he said. until customers reviewed their statements. Harkins “We’re seeing prepaid card issues and lots of probThat’s beginning to change, however, with the web of said when the customers would call, the customer ser- lems that arise out of mobile and online banking with solutions and services offered up by shared branching vice department didn’t recognize it was fraud and Eastern European fraud rings. These issues are a lot networks such as FSCC, indirect lending networks such thought it must have been wrong account information. harder to solve than the fraud issues of the past,” the as CUDL’s, and of course, the big forerunners, ATM netIt would take a month or two to recognize the action as LexisNexis manager said. works. fraud and by that time the financial institution had Ten years ago, when Geister was just starting out CUSOs, including Karnes’, are a natural avenue for already lost a great deal of money. she said she attended a postmaster general conference the expansion of that, as credit unions and companies “Credit unions didn’t have any way to look at the that said that ID thieves then were making an average like his develop solutions and then sell them to other information and most of what was being done was hand of $10,000 a day. credit unions. monitoring,” Harkins said. “I’m sure that number has grown and will continue to “More and more, technology is going to make us say, In the early 1990s, he worked with MasterCard to cre- grow. These people are extremely motivated and will con‘Dynamically partner with me with these consumers ate a monitoring system that was a network of profiles of tinue to find new ways to make a living in fraud. We have and at the point of transaction, everyone gets paid, but customers used to establish normal patterns of behavior to find new patterns and continually put in all the filtraif there’s no transaction, no one gets paid.’ That’s why I and detect card behavior that didn’t fit the pattern. tion and protection programs we can,” Geister said. don’t worry about the bank competition, because we’re “This was really one of the first ways technology was She said the new Red Flag regulations will help all trying to figure out how to make the transaction used to combat fraud and it helped reduce fraud dra- credit unions and other smaller institutions ensure they faster, more trustworthy and more dynamic,” Karnes matically. It enabled financial institutions to fight fraud are constantly assessing how they open accounts and said. and be proactive,” he said. sign up members. Another well-known name in credit union innovation In the early days of credit card fraud Harkins said “It’s more work, but in the long term it will be a huge also sees that diversity and dynamism across channels that customers were confused and irate when they were benefit. Credit unions should be making lemonade out helping his industry compete. told they were victims. People didn’t understand how of lemons and take the Red Flag regulations and market “The relative cost of solutions for our various chanthat could happen if their card was in their wallet and them to their member base to show ‘here’s what we’re nels is low, enabling us to compete on products and not stolen. He said that people thought the fraud had to doing to protect you,’” she said. remote services with larger banks,” said Butch Leonardbe http://www.cutimes.com
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