DALLAS-The "ugly duckling" of the nation's credit unions is also the most dependent on technology, running exclusively from a virtual branch that offers Internet banking, lending and more to its 1100 members.
"We're the ugly duckling of credit unions," explained Michael McCray, associate board member and CDFI administrator for the $1-million KAPFCU here. "We don't look like every other credit union. We're a low-income, CDFI credit union with no building and no salaries and a virtual presence only - not the typical credit union that has brick and mortar and a full-time staff."
Virtual Model Could Prevail
But in light of today's economy, the virtual model "could prevail, especially for a lot of smaller credit unions," added Victor Russell, board chairman and president, who, like everyone else on the 17-member board and associate board, is a volunteer. "Brick and mortar credit unions are spending on buildings and maintenance, utilities, insurance, security and more," Russell said.
KAPFCU is the first and only "virtual" credit union, but may soon be joined by Realtors Federal Credit Union, which recently announced plans to run on the Web-only circuit. Realtors, chartered by the National Association of Realtors, will draw from a much larger crowd than KAPFCU, however, with a potential membership of more than 1 million realtors across the nation.
"Our nationwide field of membership made it impractical to establish a branch network," said Jesse Boyer, executive vice president and CIO at Realtors. "Consequently, we are implementing a more progressive virtual delivery system. Following our initial start-up period, our financial pro-formas reflect an ROI that is significantly lower than industry averages. We believe others will see the Internet-only option as a more forward-looking, scalable, cost-efficient and nimble solution."
Meanwhile, the 4-year-old KAPFCU serves Kappa Alpha Psi, a 130,000-member college fraternity, and seeks to improve the social, economic and financial conditions of African-Americans and Hispanics in America, Russell said.
The decision to run solely from the Internet was a first for credit unions, and it was a no-brainer for KAPFCU, according to Russell.
"We take the costs associated with brick and mortar and direct that all towards our members," he said. Russell said he estimates that most brick-and-mortar credit unions have to take 15% to 25% in facilities management costs from their top line, whereas KAPFCU probably doesn't exceed 10%.
"We have the potential to significantly change the capital investment which is required to start and maintain credit unions in low-income communities," said Russell.
Internet Paves The Way
The Internet also paves the way for the ING Direct of credit unions to serve its widespread membership, McCray said. "The virtual platform has allowed us to provide services from D.C. to Alaska."
The platform also means that the KAPFCU board has to travel more and maintain and market a "high-tech" Web presence, something that other million-dollar CUs may consider a luxury, he said. "But tech costs are critical to our existence."
As KAPFCU works to prove itself financially - it currently has $600,000 in auto loans - the credit union is also campaigning to highlight the challenges faced by emerging credit unions, said Russell.
"We're advocating a change in NCUA policy," McCray said. "We're looking for regulatory relief or some understanding of the trials and tribulations it takes to get an institution of $15-millon or less started."
Boyer also listed a number of challenges: "Another obstacle will be educating our potential members about the convenience of a branchless delivery system. I've been asked numerous times, "How will I deposit my check?" or "How will I get my money into the credit union?"
KAPFCU members should be able to use KAPFCU ATM cards for cash withdrawals at STAR Network locations by the second quarter, said Russell. And "we're quickly approaching a bill pay module." Technologies to enable additional services will gradually be added as the credit union comes to understand the needs of its membership, Russell offered.
Currently, members can direct-deposit, mail or wire money into their savings accounts. Members can download printable applications for membership and personal, vehicle, home improvement and unsecured loans.
MORE@CUJOURNAL.COM
Read more about small credit union technology at cujournal.com and type the following headlines into the search function:
Small CUs, Big Problem: NCUA Works To Bring IT To Computerless CUs
Small CU Joins The Online World (For Free) And Sees Numerous Options Ahead
Two CUs See Loan Volume 'Skyrocket' With New Tech
For info on this story:
www.kapfcu.org
www.realtors.org
