Originally published on CUinsight.com.
Back in Columbus’ day, geographic expansion for Old World nations was a relatively straightforward process. Over the centuries, both countries and credit unions have found growth to be much more complicated.
All of us learned the story of Christopher Columbus back in grade school. Notwithstanding the fact that there were already plenty of people in America at the time of his arrival, under the Old World law of the time all Columbus needed to claim the New World was a flag, and presumably a witness or two, as he reportedly uttered –
“I claim this land in the name of Queen Isabella, and hereby declare that henceforth all lands and territories extending to the furthermost point north and to the furthermost point south shall forevermore be called ‘North and South Columbus,’ and that my name shall be so inscribed on all future maps of this Glorious New World.” (Christopher Columbus, upon landing in the New World, October 12, 1492).
Fast forward to today, and new “lands and territories” come with more risk, cost and red tape for the nation’s credit unions.
It is not surprising that NCUA chose to ignore the extensive body of historical precedent set by the unbounded imperialism of the 1400s. Instead, NCUA set more stringent requirements in place for what a multiple common bond Federal credit union had to do when it received permission from NCUA to expand into an underserved area. A credit union has to establish and maintain an “office or facility” in the area [see 12 U.S.C. 1759(c)(2)] within two years, and then to maintain an “office or service facility in the area (see Chartering Manual Chapter 3.III.F)”.
This requirement often served as a deterrent to credit union growth and helping the under-banked, since establishing a service facility is neither easy, risk-free nor inexpensive.
Simply put, a physical branch can cost $1 million to build, and hundreds of thousands of dollars to maintain – and a wrong choice on location can translate into a very expensive mistake. But With the advent of the Internet and smart phones, banking no longer requires a visit to the branch for every banking need. The core functions of financial services are increasingly being performed remotely, severing the connection between branch and business. Which also means that the regulatory structure under which we exist has to adapt as well.
In particular, a new breed of ATM that is video-enabled has blurred the distinction between branch and ATM, raising the question about how to adapt the regulatory environment to new technologies. (For more information on video ATMs, let me refer you to a webinar from NCR, our Preferred Partner for ATMs.)
So on June 6, 2012, NAFCU President and CEO Fred Becker sent a letter asking NCUA to permit a video-teller machine to serve as a “service facility.” The letter noted that advances in computer technology, digital communications, and delivery of electronic financial services, including video-teller machines, allow FCUs to perform the same functions that a live, in-person teller can at a branch.
Fred noted that NCUA defines a ”service facility” as ”a place where shares are accepted for members’ accounts …[including] a credit union owned electronic facility that meets, at a minimum, [the] requirements of accepting loan applications, disbursing loans, or operating on a regularly scheduled weekly basis.”
Most importantly, Fred noted that video teller machines met that test.
NCUA has agreed – to be specific, to comply with the definition of a service facility under the Federal Credit Union Act and the NCUA Chartering Manual, a video teller must:
- Provide real-time, face-to-face video access to live tellers at regularly scheduled, weekly hours;
- Use credit union employees or local shared-branch employees as tellers appearing on the screen;
- Allow a member to conduct all the transactions she or he could if visiting a service facility of another sort permitted by the FCUA and the Chartering Manual; and
- Be in a physical location within an underserved area or a physical location in reasonable proximity to the group being served for group additions.
So we are almost back to where we started withColumbus– no question that installing and operating a video ATM requires more than just planting a flag, but it certainly reduces the cost and risk normally associated with expansion into a new under-banked area. The end result should be a winning proposition for both credit unions and for the under-banked, and we should all be thanking NCUA for being willing to adapt their regulations to meet the opportunities presented by new technologies.
Post written by Dave Frankil, President, NAFCU Services Corp.