Switching customers from branches to internet: A credit union's journey

This research paper reports how a credit union applied knowledge from the literature to solve a marketing problem. A credit union serves a unique group of customers who may be in the same profession, have the same employer, or simply in the same regional location. The marketing problem is how to switch bank customers from branches to internet for the main reason of reducing transaction costs. The research model comprises the independent factors of customer, transaction, application, and bank; and the dependent variables the number of internet banking transaction, perceived usefulness of internet banking, and willingness to use internet banking measuring different aspects of internet banking. We carried out an on-site survey in different branches of our subject credit union to capture the opinion of customers who rely solely on branches for banking transactions. To our knowledge, this study provides a pioneer internet banking survey in the context of credit unions. The survey results reveal different internet banking facilitators for customers with and without internet bank accounts. For customers with internet bank accounts, application security is the most important facilitator variable for them to continue its use in the future; while promises for continuous improvement can be a prohibitive variable. In order to encourage customers without internet bank accounts to adopt internet banking, the management should focus on strengthening the variables of bank diversified service, bank responsiveness, bank image, and extra online instruction and feedback for complicate internet transactions; and reducing the negative effect of web fun/entertainment. We also found that the variables of proficiency in using computers, application security, and bank image have opposite effects on customers with and without internet bank accounts.     

Strategic online banking adoption

In this paper we study the determinants of banks’ decisions to adopt a transactional website for their customers. Using a panel of commercial banks in the United States for the period 2003–2006, we show that although bank-specific characteristics are important determinants of banks’ adoption decisions, competition also plays a prominent role. The extent of competition is related to the geographic overlap of banks in different markets and their relative market share in terms of deposits. In particular, banks adopt online banking services earlier in markets where their competitors have already adopted this technology. This paper is one of the first to construct local banking markets using the geographic market definitions delimited by the CASSIDI® Database compiled at the Federal Reserve Bank of St. Louis.     

Which Credit Unions are Acquired?

Recent years have witnessed a wave of consolidation amongst US credit unions. Through hazard function estimations, this paper identifies the determinants of acquisition for credit unions during the period 2001-06. The hazard of acquisition is inversely related to both asset size and profitability, and positively related to liquidity. Growth-constrained credit unions are less attractive acquisition targets. Institutions with low capitalization and those with small loans portfolios relative to total assets are susceptible to acquisition. The investigation presents unique empirical evidence of a link between technological capability and the hazard of acquisition. During the period 2001-06, when there was sustained growth in the use of internet technology, credit unions with no website were at the highest risk of acquisition.     

The effect of heterogeneous risk on the early adoption of Internet banking technologies

Financial service providers have increasingly offered customers new remote access to such services, with Internet banking being the latest example. While Internet banking has been available for years, the early adoption by customers of this technology was disappointing to most. This paper examines the demand for remote access to banking accounts by consumers and finds that when the technology is new, the traditional risk return models including variables allowing for heterogeneous risk add power in modeling the adoption decision. Perceived risks in Internet banking are seen to be responsible for some of the hesitation to adopt. Ironically, older consumers are found to be less likely to adopt Internet banking regardless of their risk tolerances. However, younger consumers are found to be early adopters only when they have relatively high levels of risk tolerance.     

Credit unions and earnings management to mitigate political scrutiny over tax-exempt status

In this paper, we examine whether credit unions manage earnings to mitigate political scrutiny. In particular, we study whether credit unions increased loan loss provisions to decrease earnings around a 2005 congressional hearing on the efficacy of credit unions’ tax-exempt status. On average, we find evidence consistent with credit unions managing earnings downward via the loan loss provision in the quarters leading up to and surrounding the congressional hearing. In addition, we find that credit unions with higher earnings before the loan loss provision engaged in more downward earnings management than credit unions with lower earnings before provision. Our findings contribute to the literature examining the use of downward earnings management to avoid political scrutiny and the banking literature. Likewise, our results inform the continued debate as to whether credit unions should be tax-exempt.     

Financial and economic performance of major Brazilian credit cooperatives

The credit union's main functions are the provision of individual financial loans based on collective savings, reaching up to provide full banking services, with expansion of its social function. Cooperatives are an alternative to supply a credit demand in the market, because a third of the municipalities have no bank branches. Although the participation of cooperatives in credit operations is still small compared to the Brazilian national banking system, its continued growth demonstrates the importance of this sector. In this sense, the analysis of the performance of these cooperatives becomes relevant to the extent that incentives to industry expansion differ from other financial institutions. In this context, this study aimed to analyze which the financial and economic performance of Brazil's largest credit unions. This performance analysis was performed using the indicators proposed by the CAMEL model, then the data envelopment analysis (DEA). It can be seen that there is a positive relationship between the use of variables in the model and the measurement of financial performance of credit unions. Moreover, according to the results, it can be observed that Uniprime Northern Paraná, Sicoob Cocred and Sicredi North RS/SC were cooperatives that stood out as efficient.     

How the Internet affects output and performance at community banks

Internet web sites have become an important alternative distribution channel for most banking institutions. However, we still know little about the impact of this delivery channel on bank performance. We observe 424 community banks among the first wave of US banks to adopt transactional banking web sites in the late-1990s, and compare the change in their 1999–2001 financial performance to that of 5175 branching-only community banks. Whereas today virtually all viable community banking franchises offer the Internet banking channel, studying this earlier time period allows us to make clean comparisons between subsamples of “brick-and-mortar” and “click-and-mortar” community banks. We find that Internet adoption improved community bank profitability, chiefly through increased revenues from deposit service charges. Internet adoption was also associated with movements of deposits from checking accounts to money market deposit accounts, increased use of brokered deposits, and higher average wage rates for bank employees. We find little evidence of changes in loan portfolio mix. Our findings suggest that these initial click-and-mortar banks (and their customers) used the Internet channel as a complement to, rather than a substitute for, physical branches.     

Mobile banking innovators and early adopters: How they differ from other online users?

The rapid pace of technological development has created opportunities for financial service providers to offer their services via multiple electronic channels. The mobile phone is one of the most promising but so far marginally adopted channel for using financial services by consumers. Earlier literature on innovation adoption argued that those among the first to adopt new innovations possess unique characteristics compared to the majority of consumers. This paper aims to study how mobile banking innovators and early adopters differ from other users of online banking services. An internet survey was conducted among customers of a large Scandinavian bank in Finland yielding 2,675 responses. Logistic regression was used to identify variables differentiating between users of mobile banking and other online banking services. Somewhat contradictory to earlier findings the results indicate that only age (p<0.0005) and gender (p=0.010) differentiate these two groups of customers, while education (p=0.957), income (p=0.624), occupation (p=0.596) and size of the household (p=0.151) were found to be insignificant in differentiating the groups. The results offer service providers better knowledge of the typical mobile banking user thus adding value to their marketing actions in the field of electronic banking.     

Generations X and Y's internet banking usage in Australia

This paper contributes to banking services literature by providing empirical research on internet banking behaviour and perceptions of Generations X and Y in Australia. More than 350 respondents aged 18 and above revealed that surprisingly, less than half of the mostly Generations X and Y respondents use internet banking. More Generation X are internet banking users compared to Generation Y, but Generation Y users use internet banking more frequently, use more virtual products, and have used internet banking for a longer time compared to Generation X users. Internet banking users perceive their banks as providing higher quality services compared to non-internet banking users. A large majority of non-internet banking users never tried internet banking at all. Security and privacy concerns were cited. Based on these findings, it can be recommended that banks still need to provide both internet- and non-internet-based means of banking to their younger consumer segments. The banking industry needs to address concerns about security, trust and ease of use to persuade more of Generations X and Y to use internet banking.     

Internet Banking

We use multivariate logistic regressions to identify factors affecting adoption of Internet banking. These factors include membership in a bank holding company, an urban location, and relatively higher premises and other fixed expenses to net operating revenue, higher noninterest income, and greater accounting cost efficiency than non-Internet banks. More profitable banks were more likely to adopt Internet banking after Quarter 2 1998, but more profitable institutions were less likely to be among the first movers in adopting Internet banking. Among banks with assets over $100 million, institutions with transactional Internet banking were generally more profitable and tended to rely less heavily on traditional banking activities. For banks with less than $100 million in assets, there was no statistical difference in profitability among mature Internet and non-Internet banks, but de novo Internet banks were significantly less profitable than non-Internet de novos.An erratum to this article can be found at     

The determinants of firm–bank relationships in Italy: bank ownership type,diversification and multiple banking relationships

This paper investigates the main features of the relationships between banks and non-financial firms in Italy. Based on detailed firm-level data, we analyse the role of firm-level characteristics, decision-making factors and local credit market indicators in shaping various aspects of corporate banking choices. Empirical results show that young and small firms have a higher probability of relationships with local banks, confirming the advantage of local credit institutions in dealing with informationally opaque firms. Large and internationally active firms tend to establish relationships with national and foreign banks, as they are able to provide more complex banking services that are crucial to access foreign markets. Moreover, firms that are more dependent on external financing are more likely to use multiple and differentiated banking relationships, as a way to diversify external financing sources and alleviate credit constraints.     

Adoption of electronic banking services in India: an extension of UTAUT2 model

Indian banks have paid sufficient attention to recent innovations in banking services delivery such as e-banking, mobile banking, mobile payment, e-wallet, and e-money services, still the acceptance of these services among consumers is sluggish. Therefore, the present study aims to identify the intention of consumers to adopt various e-banking services. The study adopted the UTAUT2 model (Unified Theory of Acceptance and Use of Technology) and extended it with constructs such as consumer innovativeness, perceived risk, and security information availability. The extended research model was tested using a questionnaire-based response collected from 721 consumers. CB-SEM (Covariance-based structural equation modeling) was used to examine the hypotheses. An empirical examination of the model helped explain the impact of the UTAUT2 model's constructs in predicting adoption intention toward e-banking services. The study also revealed the importance and impact of newly incorporated variables in explaining consumers' adoption intention toward e-banking services. The study has provided some useful insight into the factors influencing consumers' intention to adopt e-banking services to shed new light.

     

Credit Unions: A Theoretical and Empirical Overview

In 2009 there were over 49,330 credit unions across 98 countries with more than 184 million members and approximately $1,354 billion in assets. There is a great diversity within the credit union movement across these countries. This reflects the various economic, historic and cultural contexts within which credit unions operate. This paper traces the evolution of the credit union movement. It examines credit union objectives, and considers issues relating to efficiency, technology adoption, product diversification, merger, failure and demutualization. The regulatory environment within which credit unions operate is also explored under the themes of interest rate regulation, common bond requirements, taxation, deposit insurance and capital regulation. The overview also considers demutualization and the costs and benefits to credit unions of altering their organizational form.     

感知风险和感知利益与消费者对网银业务的使用

对于不同类型的网上银行业务,感知利益和感知风险对消费者使用意愿的影响不同.对于网上银行基本业务类型,感知风险中的时间风险对消费者使用意愿有大的影响,感知利益的影响也大;反之,对高级业务类型,感知风险中的社会风险对消费者使用意愿有大的影响,但感知利益的影响却小.基本风险包括网上银行服务器存在的风险和财务风险,对于未涉及金...     

Reducing the distance: financial services education in web-extended learning environments

It is estimated that financial services comprise around 15% of the global economy. From the supply side, one key to meeting this demand is being able to educate and certify the people who provide these services. With the advent of the internet and related technologies, the ability to deliver financial services education synchronously to both online and on-campus attendees has become a viable alternative to pure face-to-face or pure online asynchronous education. Nonetheless, one question remains: can virtual technology deliver comparable quality of financial services educational experience as face-to-face teaching? It is this question our paper addresses using the theory of transactional distance. The theory of transactional distance postulates that for optimal learning, the cognitive gap between instructor(s) and learner(s) needs to be minimized. We explore how transactional distance in financial services education varies by attendance modality (in-class, online and mixed) in a synchronous, web-extended classroom. The implications for managers and researchers are explored.     

Examining the disclosures on the websites of English credit unions

This paper examines the disclosures made on English credit unions’ websites. Credit unions without a website are presumed to be small. Community credit unions with websites tend to offer basic services with a limited range of products that may appeal to poorer members of society. Occupational credit unions appear more likely to have a greater range of products.     

The use of performance information in cutback budgeting

Not having access to mainstream financial services, such as a bank account or a credit card, can lead to a variety of social and economic exclusions. In a number of countries, particularly Ireland, Spain, Canada and the UK, credit unions— member-owned financial co-operatives—play a significant role in reaching under-served and excluded communities, as well as providing ‘safe’ avenues for savings and credit. Yet many credit unions are facing financial and operational problems. This article looks at the experience of Welsh credit unions. The research has implications for policy development and government–credit union relations in Wales and further research on credit unions and financial inclusion.     

Bank switching of US small businesses: new methods and evidence

Despite being informationally opaque, small firms often switch from their primary financial institution to transactional lenders, with the relationship banking theory invoking the holdup problem as a culprit explanation. Using US evidence and an estimation strategy that overcomes traditional shortcomings in small business research, our study captures the determinants and, for the first time, the ex post effects of the switching decision. We find that switching is less likely when the primary financial institution is a nearby bank associated with quality services and connected to the firm via other business or social relationships. Small firms become more loyal as they grow in size and pursue nonmortgage credit. Outside the primary relationship, both loan approval and borrowing cost are adversely impacted, however loan maturities are longer. Moreover, the likelihood of pledging collateral remains unaffected, provided that the type of collateral is least sensitive to the borrower’s information environment. Jointly, our findings describe a trade-off inconsistent with the holdup problem, and an opportunity for banks to enhance customer loyalty by improving aspects of the relationship unrelated to the terms of credit.

     

Online conversion rates among Australian financial institutions: A qualitative exploration

This study examines factors affecting online conversion success of financial institutions in Australia. Twenty financial institutions (nine banks and 11 credit unions) were divided into four clusters based on the size of their client base. A cross-case comparison of the financial institutions in each group was then qualitatively analysed with respect to the joint effects of six variables on online conversion rate: banking practice, cost-efficiency, online banking experience, online product and service portfolio, response time to online queries, and branch network. Results of the comparative analysis show that the recipe for online success lies in getting the right combination of variables. To achieve an online conversion rate of no less than 25 per cent, financial institutions with a client base exceeding 100,000 need to have attained a cost-to-income ratio of no greater than 0.55, have three or more years of online banking experience coupled with a branch-to-client ratio between 1 and 2 per 10,000 customers. For credit unions with a client base of less than 100,000, the corresponding criteria are having a cost-to-income ratio of no more than 0.67, a response time to online queries of 3?h or less, and no less than four years of online banking experience.     

A credit scoring model for Vietnam's retail banking market

As banking markets in developing countries are maturing, banks face competition not only from other domestic banks but also from sophisticated foreign banks. Given the substantial growth of consumer credit and increased regulatory attention to risk management, the development of a well-functioning credit assessment framework is essential. As part of such a framework, we propose a credit scoring model for Vietnamese retail loans. First, we show how to identify those borrower characteristics that should be part of a credit scoring model. Second, we illustrate how such a model can be calibrated to achieve the strategic objectives of the bank. Finally, we assess the use of credit scoring models in the context of transactional versus relationship lending.