Courage Needed - Stopping Fraud

Helping Those Who Refuse To Be Helped

How do you help someone who refuses to help themselves? That is a million dollar question for many community based financial institutions. It can be maddening and can feel like you are chasing your own tail.

The best way to help someone is to have the courage to talk to them about the choice on the table. That of course is the one thing that many financial institutions are reluctant to do. That reluctance enables criminals and “cyber sirens” to steal hundreds of millions of dollars from our member owners each year.

For each of us and our members scarcely an hour of the day goes by in that we are called upon to make choices of one sort or another. Some are trivial, some are more far-reaching. Some will make no difference in the grand scheme of things, and others can make a grave difference.

Categories of Choice

A man I admire once shared his perspective on choice in this way, “As I’ve contemplated the various aspects of choice, I’ve put them into three categories: first, the right of choice; second, the responsibility of choice; and third, the results of choice. I call these the three Rs of choice.” This perspective shares critical elements that play a key part in any financial cooperative.

Consider the first element that of choice. Our financial institutions are financially owned by our members and many members take great pride in this fact. On more than one occasion I have had an older member, who has escalated to me for some reason, remind me, “That you work for me. I am an owner of this credit union.”

However, this pride of ownership can change for members when you consider the responsibility of choice. For some members the concept of who is responsible for choices made becomes a line in the dirt that when crossed takes you from being “their” financial institution to “that” financial institution. The view of "being all things to all people" can be frustrating and dangerous if not kept in check.For example, a member complains about a policy that prevents fraud and suddenly you find everyone is second guessing the policy. You can’t allow the vocal minority to become the voice of a silent but content majority. Too often it is the vocal member who sends one email to the board or the CEO who suddenly has everyone scrambling to change policy or rework critical processes.

This danger becomes more critical when the member has no real perspective on the complexity of the issue they are weighing in on. Take card fraud prevention strategies as a topic. For most members they want to use their card wherever and however they feel best. From their perspective it is none of your business how they use the card. I can completely understand that perspective as that was the one I had until my own card information was compromised. When I asked how this could happen I suddenly found out just how much I didn't know about card fraud or online fraud. I simply knew how to use the card without any knowledge or understanding of how to protect the usage of my card. 


Recently in doing some research on card fraud prevention strategies I came across a warning from the FBI. In a May 21 memo, the FBI issued a warning to hotel guests. The caution was prompted by fraudsters who are using hotel Internet connections to target travelers. What’s their hook? Old fashioned malware.

The fraudsters use a pop-up window to trick travelers into installing “software updates” on their computers. The updates are actually malware that allows the fraudsters access to a hotel guest’s personal computer and data, such as online banking credentials.

Think about the member who is unaware of the warning mentioned above going on vacation and using the amenities at their hotel. To them nothing seems amiss. Fast forward one week later and the member calls in because they have noticed that there are fraudulent charges on their card or a wire has been authorized from their personal line of credit. The burden of responsibility has shifted and they wonder why they were not protected from the choices that they had made.

This game of choice and consequence plays out in various forms. I have listened to a branch manager relate how a member fell for an online dating scam in which they send their “new love” a money wire because they needed travel funds. Then the truth is revealed as the love interest disappears and the member realizes they have been conned by a “cyber siren”. Sadly, they then realize that they now own the responsibility of the loss. For the member the realization that the result of their choice has made them wiser but financially poorer is not of much comfort.

The Forth Category of Choice is Courage.

It takes managerial courage to decline a potentially fraudulent card transaction. It takes courage for a teller to ask the member where they received the funds for their new “work from home” job. It takes courage to ask if there is a “special reason” for the new large wire transfer. It takes courage to ask members to call you prior to traveling outside of their normal spending areas. All of these actions take courage. They fall to the institution to adopt and educate the membership on. 


The Federal Trade Commission estimates that 10 million people a year are victimized by credit card theft costing close to 50 billion dollars per year for card related losses. The tools we have available are impressive: common points of purchase analysis, advanced authorization scoring, Fair Isaac FALCON scoring of transactions, flash fraud rules across the network. Yet, the most powerful tool we have is in engaging is our members and educating them so that they work with the institution and not against the institution.

Most members will adapt and will be glad that someone spoke up and tried to help them with the choices that they are asked to make each day. We are the professionals. We bear the responsibility to educate members on the tactics that criminals and “cyber sirens” use. If we fail to exercise the various aspects of choice; the courage of choice, our right of choice, our responsibility of choice; then we can’t be upset at our members for the results of choice.

Practical Application

• Does your front line staff ask courageous questions to help protect your members ?
• Do you post on Facebook or your website fraud warnings or travel tips to prevent fraud ?
• Do you use real time fraud scoring to protect the credit union from fraud losses ? 
• Do you have real operational goals around fraud losses including run rates and bench marks ?
• Do you run predictive analysis to understand fraud trends and the cost to your membership?

Credit Union Branch Strategy- What Strategy ??

You can almost picture our tiny blog huddled around the circle of the other amateur blogs in the monthly blogging support group, “Hello…my name is Credit Union MBA and up to this point I have gone seven months without writing a blog. Today I fell off the wagon. Not just any wagon mind you. No, I fell off the wagon writing a blog about…the future of the branch. I know…I am not proud of it.”

 I mean we have all read dozens of blog entries this year on the Future of the Branch. I myself have yawned through a few of them. However, a few of them resonated with me. I felt the old addiction start to call to me. Maybe this is the year when financial institutions will have a real conversation about channel strategy?  Could this really be the year that the digital channels will finally move from the proverbial “kids table” and join the other channels around the board room table? The tipping point in executives pondering channel strategy suggest that this might indeed be the year. 

A Channel Strategy - I Don't Need No Stinking Channel Strategy

Earlier this year I have attended a few conferences and had the privilege of sitting at the table with the executives from some of the nation’s largest national banks, regional banks, community banks and credit unions. The good news for all of us in community based financial institutions is that no one and I mean no one has this channel migration figured out. My observations of the various institutions are listed below:

•  Not one person at the table could clearly articulate their institutions overall channel strategy (possible exception was a national Canadian Bank).
• Each of the participants were actively trying to play catch up and understand what exactly they needed to do with branches and staff they had invested so much time and resources into.
•   Many of the participants discussed the challenge of trying to coordinate and allocate capital or resources across the channel spectrum.  Many admitted that the channels do not coordinate with each other when it came to resource or capital allocation. An all too common theme was that branches will look to create new branches, call center does its own thing, and digital channels look to expand. This approach is built upon channel champions advocating independently and thus no real cross-channel strategic prioritization happens within the organizations.
• The group consensus was that closing branches across the board was not feasible. This approach was too disruptive to local communities, and to internal cultures. It also did away with the talent that had been invested via training, coaching, and mentoring to the branch staff.

 So what are the brutal facts we in the credit union world need to acknowledge as we try and come up with our full spectrum channel strategy? The brutal facts are that the world around our branches has changed. Specifically two real challenges to the traditional branch channel strategy are the migration of transaction volume and the change in the service fee environment. These changes put at risk a model that has heavy occupancy cost and staffing costs that has been allowed to flourish because it was able to float on top of the rising tide of service fees. That tide has changed.

Transactions are Migrating across Channels

Distribution channels have continued to spawn and grow since the advent of the ATM. Today branch network competes with the IVR, call center, online, and mobile and now social networks channels are immerging.  The trend for financial institutions has been to try and blur the lines of distinction between the various channels. I myself have been a proponent of the channel agnostic approach in the past. I have come to realize though that this type of approach has a fundamental flaw in it. The flaw is that you no longer proactively create your channel strategy.  When all channels are equal in the eyes of your members then you place your channel strategy in the hands of the group of people who are not even concerned with a channel strategy- your members.  

“When you have a loss of distinction between the various channels value propositions then the member creates the channel strategy for the financial institution. This can be seen as transaction volumes continue to migrate.”

So let’s consider some fundamental changes to the environment that are impacting channel strategy. The first is that branch traffic (counting new account opening) are projected to decline by 3 percent per year through the middle of the decade.

2010 -14.9 billion transactions

2012-13.54 billion transactions

2014 - 12.71 billion transactions

Online and mobile transactions are expected to grow rapidly, becoming the primary transaction channels within 2-3 years.

2010 - 28.5 billion transactions for online

2012- 30.8 billion transactions for online

2013 - 32.1 billion transactions for online

2010 - 5 billion transactions for mobile

2012 - 6.4 billion transactions for mobile

2013 -10.5 billion transactions for mobile

The United States faces a prolonged environment of stagnate retail lending growth. This is compounded by fee income that, in the past, was considered stable and is now being targeted and eliminated with new regulations.  Consider the following: Service Charges on Deposit Accounts, 

FDIC Institutions

2009 - 41.7 billion in service charges

2010 - 36.2 billion in service charges

2011 - 34.1 billion in service charges

Changing Consumer Behaviors 

All deep drivers of consumer behavior point to one direction - lower use of physical channels (branch and call center). The accepted assumptions about the consumer view of convenience and trust/safety that underpin the current branch strategy are in play. This has downstream impact as the branch networks become expense areas of focus as for the past decade it has been non-interest income (fees) that have funded and sustained the operational expense of the branch network.

Any decline in service income will open a gap in branch occupancy expense coverage.  You can expect uncovered branch network expenses to appear and grow rapidly. This will be a mind-shift for channel leaders who have grown and matured as channel leaders over the past decade in a service fee environment that is now eroding.

The environment ahead is very different than what many of these leaders have built their experience upon as the existing banking model no longer generates sufficient returns. Added to that, many of these leaders are not as familiar with non-physical channels and, therefore, are not sure what direction they need to take. 

"McKinsey estimates that without substantial business model changes financial institution ROE will fall below the cost of capital."

The way forward is a combination of innovation (pricing strategies and target segmentation for product development) and cost management initiatives. Every financial institution will have to embrace digital channels to protect ROE. 

Questions to Consider:

• How do you create space in the branch for digital channels?
• How do you create a space for the branch in the emerging digital economic intersection your members are now using?
• What are the specific channel value propositions you are educating your members on?
• What external threats are seeking to do the same thing (PayPal, Facebook, BankSimple)? 

Who Are You Trying To Be Like: An Old School Banker ?

Mobile:To Do or To Be ?

Many of us create “to do lists” that help move us toward goals we want to accomplish. Too often we repeat the process of adding and subtracting from a never ending list of things we need to do. Like cars hot wired to get us to our closest branch we simply proceed as instructed. Turn right…check…turn left…check…proceed four miles to the left…turn into the branch location on the left.

So why is it that people don’t have “to be" lists? After all we all know that “to do’s” are just activities or events that can be checked off the list when done. It seems rather simple when you put it down on paper. The same cannot be said for, “to be” lists. The reason is that “to be” lists are never done. You can’t earn check marks with to be’s. They continue to evolve and change as the circumstances in which we find ourselves change.

Too often I see credit union advocates looking for us to fall in line with industry “to do” lists. We need to support supplemental capital or we need to support an increased cap on business lending. What I rarely hear is what we need “to be”.

We have an aging demographic and a younger generation of consumers who do not know the difference between a credit union and a bank. We have ATM networks that supplement branch networks but the future credit union member is only concerned about their social network. So as we look forward five years we should ask ourselves who we are planning to be.

Do we plan on remaining relevant and meeting the needs of our members? Do we think our traditional branch and ATM network will be enough to meet those needs? Are we busy being better versions of the credit unions of 15 years ago or do we realize that we have to reexamine who we need to be for the next 15 years.

The writing may not be on your wall but if you look down at that Smartphone you are carrying it is definitely on your screen. So here is your first mobile alert: It is estimated that there are somewhere around 120 million internet banking users in the U.S. By the end of this year it is expected that more smart phones will be sold in the U.S. than traditional clam shell cell phones. One large Big Bank is predicting that 150 million smart phones will be sold each year by 2013.

According to another study conducted by the Tower Group there will be 53 million mobile banking users by 2013. If that pace holds true that means we will see a lift of more than 300% from 2010. Here is your 2nd mobile alert: Mercatus estimates that 30% of branch teller transactions will go away over the next three years because of the anticipated explosion in business and consumer remote deposit capture usage.

I know everyone kind of smirked at that one. The prediction of the branches crumbling into dust and going the way of the dinosaur has been around since…well…the dinosaur. That being said you have to consider we are approaching a tipping point when 58 million, or nearly one in four U.S. adults, attempted to open a financial account online in 2010, a more than 100% jump from 2007, according to Javelin Research.

So with 15 percent of credit unions rushing to mobile that means by default you have around 85 percent of them sitting on the sidelines waiting to see where the trends are going. So looking over the last four years what are the trends ? If you look from 2006 up through our current recession, US financial institutions transactions were expected to grow at an annual rate of 10 percent between 2006 and 2010 with the fastest growth in remote services with the online channel growing at 27 percent and call center growing at 7 percent. What channel is not growing? That would be those branches we all love to build.

Yep...that is the silent shot in the dark that most of us did not hear. What shot you ask? The number of branches in U.S. banks dropped by 1% in 2010, the first drop in industry history. Add to that future branch consolidation by Big Banks and suddenly the writing on the screen starts to become a touch easier to read.

This contraction in branches comes at the same time the industry has experienced growth in remote services. This growth is in part due to the increasing levels of trust members are placing in remote channels. This channel migration translates into opportunity to gain new members especially core relationships.

When we look at the competitive landscape we find that it breaks out into three distinct groups. You have credit unions who are about 15 percent mobilized. Then you have community banks which have been slow to mobilize holding fast to a brick and mortar strategy. Lastly, Big Banks are moving full speed ahead into mobile.

So with budget season right around the corner it is time to start thinking about our remote services “to be" list so let me suggest two questions to consider as we define what we want to be.

Have “To Be” on the Front of the Tablet Movement.

The advent of online baking brought millions of consumers to the realization that they could perform simple transactions with a laptop or a desktop computer. Most of the online consumer activity performed is still centered on “lean forward” activities. Lean forward activities are thought intensive and require uninterrupted time to concentrate on the task at hand. For example, setting up bill pay or categorizing transactions in a PFM tool.

The tablet has changed the way consumers interact with financial institutions. Today consumers sit on their couch and browse with their tablet on commercial breaks as they watch TV. They take their tablet to lunch and read an ebook then quickly open a financial app to conduct a quick transaction. Credit unions need to move to the front of the line and create a space for the rising number of tablet users.

There is a window of time to distinguish themselves from the local community banks and stay at the forefront of innovation with a financial app designed specifically for the tablet. The world in which we operate has changed. Today’s members expect the freedom to manage their finances on a variety of platforms and devices on the go. The proof of this can be seen by the widespread adoption of the iPad (25 million sold) and the14 billion apps that have been downloaded by consumers in the past three years.

Introducing an tablet app will help you drive growth and loyalty by accommodating even more of your member’s preferences. Instead of building that million dollar branch that serves a ten mile radius in the local market you need to invest in the technology that allows your members to access their finances when, how and on the device they choose. Some basics you will want to cover with your app:

• Viewing account balances and account transaction history

• Transferring funds between eligible accounts (remember cross member transfers)

• Paying bills on the spot (for eligible customers)

• Locating nearby ATMs and branches using the phone’s GPS

• PFM tool optimized for the tablet. Make the most of that large screen and create interaction that maximize the “lean back” time that the tablet offers.

Time “To Be” Serious about Creating a Real Virtual Branch

When you consider the movement in technology and the mass adoption of new technology by younger consumers, the one activity that young consumers can’t do without a branch is deposit checks. Allowing the mobile device to deposit funds now means your members have a true choice in how they want to interact with you. The wave is coming. Ignoring this trend is like saying you are in the record store business and you can ignore music downloads. Anybody bought a CD lately?

A recent Javelin study highlights mobile remote deposit capture as a strategic driver of member retention and acquisition. The same study noted,” …one of every four consumers [as] finding the service desirable or very desirable, this service can be used as a potential draw to lure customers away from other financial institutions.” 

The research also shares that members who adopt the solution have lower cost to serve as they tend to prefer self-serve channels. Credit unions need to charge forward on this growth opportunity. Partner with a respected vendor who can help you navigate the iphone and the 250 versions of Android and develop a robust mobile app that will enable more of your members to easily deposit checks via your mobile banking app.

In a recent article for Credit Union Times Robert McGarvey quoted Drew Sievers, CEO of mFoundry, a developer of mobile banking technologies, “Within 18 to 24 months almost all larger credit unions will be mobilized. This is happening very fast.” With Big Banks moving forward and larger credit unions moving forward where do you see your organization? Please don’t tell me you are looking at the stodgy local community bankers that are only interested in big branches and business lending as your peer group. Now is the time to look past your “To Do” list and start thinking about your “To Be” list.

Credit Union Inspiration: Looking Beyond The Mark

Light and Inspiration
Have you ever been reading in a room as the warm afternoon light slowly dimmed? Often you don’t even notice the dimming of the light until someone walks into the room. Puzzled they ask you why you are reading in the dark and then flick on the light switch. In an instant a bright flood of light fills the room and shadows that had been advancing on you disappear. What previously had been dim and hard to see suddenly becomes clear and recognizable. In this experience the light can be characterized as immediate and intense. Compare that experience of an early morning sunrise. If we were to stand together and gaze at the horizon and watch night turn into morning what would we see? Almost every time I have tried this I always miss “the moment”. I seem to get lost in my thoughts and miss the slow and almost imperceptible increase in light on the horizon.In both cases the result is the same – increased light. In contrast to turning on a light in a dark room, the light from the rising sun did not immediately burst forth. Rather, gradually and steadily the intensity of the light increased, and the darkness of night was replaced by the rays of early morning. 

As we have all come to expect the sun did dawn over the horizon. Oddly though the visual evidence of the sun’s arrival was apparent hours before the sun actually appeared over the horizon. In this experience the light can be characterized as subtle and gradual.

From these two everyday experiences with light, we can learn much about the nature of leadership and inspiration. Inspiration can come in a variety of ways sometimes it comes in a flash of insight and it is immediate and intense. Yet, at other times inspiration can come in a much more subtle and gradual manner. The two experiences with light I described help us to better understand these two basic patterns of understanding our own inner voice and how we perceive inspiration.

A light turned on in a dark room is like receiving that bolt of insight from the universe all at once. Many of us have experienced this pattern of inspiration as we have been given answers to questions or business issues we have studied or pondered.


If you were to talk to other leaders around you and question them regarding their own experiences regarding inspiration you might hear words such as immediate and following a “gut feeling”. Many business case studies are filled with random flashes of insight that dramatically changed the course of the company’s strategy and direction. While there is no doubt this bolt of lightning can occur the reality for many of us is that this pattern of dramatic inspiration tends to be more rare than common.


If you are anything like me then the gradual increase of light radiating from the rising sun is like receiving a letter from the universe with a snappy joke at the beginning and then a much more subtle “line upon line, precept upon precept” type of instruction or insight. For me big, grand, strategic visions seem to come in small increments over time. They tend to follow according to my desire to move forward with the knowledge that I already possess. To take risks and then step forward knowing the next answer is around the corner. 


Looking Beyond the Mark
As leaders we tend to extol the dramatic flashes of insight so much that we may fail to appreciate and may even overlook the customary pattern by which the inspiration actually happens. Too often the simpleness in receiving small and incremental impressions from hallway conversations with peers or staff that over time act as breadcrumbs to a desired answer or the direction we need may cause us to look “beyond the mark”.

I have talked with many individuals who question the strength of their visionary abilities. They often underestimate their strategic capacity because they do not receive frequent, miraculous, or strong impressions on how they should lead their business units. I believe these individuals are being too hard on themselves and simply do not recognize how they receive inspiration.

Another common experience with light helps us learn an additional truth about the “line upon line, precept upon precept” pattern of inspiration. Sometimes the sun rises on a morning that is hazy or foggy. Due to the overcast conditions, seeing the light is more difficult, and identifying the precise moment when the sun rises over the horizon becomes a fool’s folly as it is not possible.

That being said even on such a morning we have sufficient light to recognize a new day and to chase after our widely important goals. In a similar way, we many times receive inspiration without recognizing precisely how or when we had our flash of insight.

Gathering Inspiration- One Bolt of Lightning at a Time
As we all come out of lending season it is time to start thinking about what strategic initiatives we need to be planning for. As you draw up your list I would challenge each of us in the credit union industry to look beyond the mark. Our members live in a world of payday lenders and big banks that are focused on building branches based on tiers that insure that the customers with the most money get the most service while those with no money get nothing but self service. 

As we look around for inspiration we have to be willing to widen our circles in which we collect knowledge. We have to be willing to look across channels and other artificial boundaries. As we do this we are able to find sources of insight that allow us to collect that "bolt of inspiration" one bolt of lightning at a time.

A place to start is to consider your own organization and how it mentors upcoming leaders? The reason this is critical to gaining personal inspiration is that it allows you, as a mentor, to formalize the lessons of your own career experience. As a nice side benefit you often will be surprised to find yourself learning from them as you recall life and leadership lessons you have not applied in some time.

As leaders we have to be able to stand ready for those moments of blinding inspiration. We have to be able as credit union thought leaders to be able to move those ideas into action. However, if we only stand ready for the occasional flash of insight then we doom ourselves to spend much of our working careers not looking for inspiration at all. We have to be able to discern inspiration in both its boldest manifestations as well as it most subtle.

Credit Union Lending: Learning To Hustle

I remember as a boy going to spend the night with a friend.  His mother worked evenings and had not been told I would be spending the night and was naturally put out with her own son for inviting me over.  She handed her son one dollar and said, “Fine, he can stay but you are going to have to hustle for your supper.” With that she showed us a bare refrigerator and left for work.  My own mother was a waitress so I was not alarmed by the empty refrigerator. However, I was concerned over the whole concept of “hustle for your supper.”  My friend then flashed a big smile and said, “Come on, it’s time to hustle.”

Before long we had turned the house upside down looking for spare change. Our one dollar had grown to five dollars in spare change found under beds, in dirty clothes, and behind the cushions on the sofa.  I was amazed so much money was literally just waiting to be picked up.

We got on our bikes and peddled to the corner store where we bought a “soup bone” and some carrots and potatoes.  I also insisted on a can of “mixed vegetables” to round out our “hustle soup”.  As we headed back to his house I was so excited to see how our soup was going to turn out. We boiled the bone with the vegetables and added the can of extra veggies at the end.  As I recall the soup was one of the best I had ever had. It was part water, part scrawny carrots and potatoes, and a great deal of “hustle”.

I have given a great deal of thought on two recent blog postings, “Credit Union Culture Cooperative or Cut Throat” and “The New Credit Union Mantra: Stop Breathing”.  Both posts got a tremendous response on the blog and on various credit union discussion groups.  The comments clearly showed people who longed for the “old days” of when credit unions truly thought of themselves as cooperatives.  So that led to the idea of the “hustle soup” from my childhood memories.

What we need is to each add a small tip to the soup. Since we are all in lending season I thought it might be worthwhile to throw in “lending tips”.

So my tip is that of using chat to generate loan volume.  Many financial institutions use  web chat so this is not cutting edge technology. However, most use chat as a general member service tool.  I think this approach adds complexity to your call center operations. Chats typically take twice as long as a phone call. So while you have added another channel for your members you have added a channel that takes twice as long to fulfill the same type of service request.

Rather than using chat as a general member service function use it only on your rates page.  Change the title of “Chat” to something more specific, “Connect with a Loan Specialist.”  Instruct your chat specialist to turn every chat into an outbound phone call when possible. 

Just this week I had an agent come up to me so excited about a web chat that he had earlier in the day. The member started the chat off the rates web page and asked about our lowest rate.  The agent asked if he could call the member to more quickly cover all his options and give him the solution that best fit his need. As they were talking the lending agent offered to review his credit history prior to taking the application so that they could present the best possible application to the underwriters.  As the agent went over the CBR he noticed three trade lines that could be refinanced at a lower rate. The end result was that this web chat generated three applications for a total of 65,000 dollars that booked that same day.

That brings up my second tip which is training your lending agents to take double and triple applications. Too often loan officers become order takers and they forget that their primary role is that of saving the member money by borrowing money at a lower rate or helping a member refinance to a lower rate.

This primary function requires people who love to help people with loans. Only the best of the best should be loan officers.  Once you have these people you need to remove all non sales duties from them.  You don’t have your most passionate lenders doing the paperwork. You give the paperwork to people who love paperwork!  Make sure you prioritize call routing in your call center so that you have a pure application queue. Contrary to what you may think all calls are not created equal.

You can do this in your branches as well. Use your first impression station to funnel lending opportunities to your best lending specialist. Try to keep them as busy as possible taking application after application. You have other people in the branch who like to balance checkbooks and open certificates.

Lastly, you only use web chat on your lending page.  You make sure it is the highest priority. Think about what you have here.  You have a person on your web page wanting to talk rates! That is a golden opportunity you have to make the most of.

I typically see centralized lenders who have focused duties generate as much as a whole branch.  I kid you not. A good phone lender who is set up correctly can generate around 2-3 million in applications and book between 450,000 to 900,000 thousand in a month. I realize that this depends on the volume you have.

My main point is that you don’t have your best lending officers balancing check books for people. You have other people who would love to do that but have no desire to do lending. You want people to do lending who are not afraid of having to make their own “hustle soup”.

Alright, I have added my two tips for lending success now it is your turn.  It is time for each of us to act like we are all part of a cooperative.  This might be hard to believe but this blog has readers from all over the world who can add something and gain something. Each of you can contribute and make this posting the ultimate cheat sheet for lending success.  Each of us has Big Banks or other giant competitors we have to go up against each day. Let’s all add something here. Small credit union or large we are in this together…. it's time to hustle for our supper. 

Credit Union To and Fro: How Focused Is Your Credit Union

A story is told of two men who formed a partnership. They built a small shed beside a busy road. They obtained a truck and drove it to a farmer’s field, where they purchased a truckload of melons for a dollar a melon. They drove the loaded truck to their shed by the road, where they sold their melons for a dollar a melon. They drove back to the farmer’s field and bought another truckload of melons for a dollar a melon. Transporting them to the roadside, they again sold them for a dollar a melon. As they drove back toward the farmer’s field to get another load, one partner said to the other, “We’re not making much money on this business, are we?” “No, we’re not,” his partner replied. “Do you think we need a bigger truck?”

In today’s credit union there are thousands of things to focus on. Thanks in part to modern technology the contents of various reporting services and other database resources are all at the fingertips of many of us. Too often it is easy to find ourselves spending countless hours mindlessly following data streams down various rabbit holes or scanning other avalanches of information. One would be tempted to ask, “To what purpose?” Those who engage in such activities are like the two partners in the story, so busy loading and unloading melons onto a truck and then hurrying back and forth to the roadside store. They spend each day hauling more and more but failing to grasp the essential truth that we cannot make a profit from our efforts until we understand the true value of what is already within our grasp.

As many of us are in the middle of our lending season we followed all those reports down the rabbit holes to conclude lending growth is more of a challenge and so we are all looking for the magic bullet that will give us the loan growth we budgeted last fall. The temptation is to go to the product manual and come up with a new gimmick or product feature that will create a new wave of member lending. However, a less glamorous solution is to look at our leadership teams and then consider the amount of focus they have. Are our teams acting like the two men in the story trying to decide to buy a bigger truck or maybe keep the same ole truck but just “paint it'?

Yet, if you were to pull your leadership team members together and have them list the top challenges and tasks for the week would you find them focused on the items that are your most pressing goals?

This topic of focus has been on my mind since I read the story of Army Ranger Joseph Kapacziewki who was injured when an enemy grenade was dropped into his armored vehicle in Iraq. His body was severely injured. His lower right leg was shattered and his right arm left useless with extensive nerve damage. It seemed that no part of his body was spared by the blast from an enemy’s grenade.

In 2005 when doctors worked to help mend his shattered limbs the easy prognosis was that this was a Ranger who would not run into battle again. That prognosis was not one that Joseph shared. It certainly was not the prognosis he choose to focus on.

His story is a testament to the ability to focus on a singular goal. When he learned that his body had a natural intolerance to morphine he endured countless hours of pain as he mended from each surgery. I marvel that his first thoughts on getting his finger to twitch was to have his wife wheel him down to the hospital's practice firing range with a laser-equipped M-4 rifle. For hours every day, he would lie behind sandbags and fire the weapon, retraining his hands and fingers that had lost feeling how to once again handle a weapon.

There are no comparisons between what this man endured and with what we endure in our day to day lives. However, there are lessons to be learned on the power of focus. We can learn to see past the potholes in the road and focus instead on the blue patch of sky ahead of us.

I have seen leaders like this who refuse to accept the status of just being good. They drive for results and have the expectation that those around will also drive for results. They have the ability to see past the mindless activities of day to day operations and ask clarifying questions that help others zero in on the core mission of what the group is trying to accomplish.

My challenge to you is to ask your leadership team, “What are we trying to accomplish?” The next question is what can you do to remove the clutter that is on the table so that the only thing your team is looking at is the very thing you are trying to do?

As credit unions we are at times so preoccupied by what the bigger credit union or the Big Bank is doing we forget to take a hard look at what we ourselves are doing. We work in a time when it is easy to focus on why it is too hard to succeed due to a tough economy. We read blog articles that make excuses so that we can settle on just being “old fashioned” credit unions. The price of not knowing what to focus on is measured in credit union members having to settle for less...to expect less from you each and every day.

Are you like the two men in the story who spend each day hauling more and more but fail to grasp the essential truth that they cannot make a profit from their efforts until they focus on the true value of what is already within their grasp.

To read more about the real hero of the story please visit

Army-Rangers-amputee-Purple-Heart

The New Credit Union Mantra: Stop Breathing !

A Bad Memory
Ever had one of those childhood memories you haven’t thought about in years come flashing into your mind and you wonder “where did that come from?”  No...well that makes this intro a slight bit awkward then doesn't it?  For me the memory was from 1st grade and I was sitting next to the meanest kid in the class. As we were working on some worksheet he whispered to me, “Stop It.” I looked at him like he had burst into Opera. “Stop what?” I asked. Glaring at me he replied, “Breathing…Stop Breathing.” So there I was sitting next to a future serial killer and thinking to myself, “how do I stop breathing.” The answer was I couldn't and so I did what any six year old from the Gulf Coast of Texas would do, I punched him as hard as I could and made a break for my friends across the classroom.


In Your Own Words

Today in credit union land we have a similar scene happening between credit unions where some credit unions seem intent on sending the same message of “stop breathing” to other credit unions within their markets.  When the article, “Credit Union Culture: Cooperative or Cut Throat” was posted I honestly expected to have people bash the article and come rushing to the defense of the credit union movement. I was sure people would talk about attending local chapter meetings and expound on the 7 Cooperative Principles. Sadly, it seems our industry is changing and many of us are unsure of the behaviors we see around us.

In reviewing the various discussion boards we posted the article, “Credit Union Culture: Cooperative or Cut Throat” on the level of responses was incredible. The following responses are a sample of the types of responses the article generated from you, the experts, on the state of credit union culture:

• “Unfortunately credit unions have changed a lot over the years in their philosophy when it comes to helping other credit union. With many CUs having expanded their FOM to community the competition and unwillingness to share has majorly increased. At least that has been my experience. There are still some that remember that we, as credit unions, are all in this together.”

• “Over the last few years I have spoken with many credit union CEO's who agreed that a majority of volunteers and CEOs alike have lost sight of their cooperative roots. The Seven Cooperative principles supposedly define our business model and the value proposition forming the heart of every credit union's brand.”

• “It's my belief that any trends displaying cut-throat, suspicious and unwilling to cooperate with one another behavior are all symptoms of losing sight of our common heritage--our cooperative roots.  Any initiatives to reverse this trend will one day be viewed in my opinion as saving the movement.”

• “…CUthroat. It's an everyday occurrence to see larger credit unions in my area push their way into our founding company - a university. You wouldn't see me walking on the site of their founding companies & current plants to sell my credit union.”

• “ As a CUDE, I am a believer that credit union philosophy is good business as anyone. That said, the world has changed; the economy tanked; the examiners have gone nuts; and successful credit unions rightly believe they need mass to survive. Healthy CU's are leveraging their capital by making merger overtures where it makes sense. Unhealthy, and small, credit unions may perceive that as cutthroat. It's survival.”

• “Community charters killed credit union cooperation. It seems that the 7 Principles guiding the industry today are growth, growth, growth, growth, growth, growth and more growth.”

• “CUs that feel that they are being taken advantage of should react. How? Grow profitably! Scale to a point where the competition - be it another CU or a Bank - can no longer abuse based on scale.”

• “Nonprofit status does not mean that the competitive forces in your industry have ceased. CUs must recognize that US does not need 15,000 Financial Institutions. Not all will survive. Many will be acquired; many will fail. The question that each CU executive and Board member should ask themselves is, 'Which category do I want to be in'?”

Reading the comments above you have to wonder if credit unions have crossed a tipping point in which we slowly do to ourselves what the banks could never do to us…make us disappear. Much like the school grade bully who threatened every time someone around him took a breath many large credit unions have sought to grow no matter the cost to themselves or to the movement as a whole. They have pulled back resources from smaller credit unions and have circled the wagons around themselves.

In the past I would have shaken my head and pointed my finger at all the talented bankers who have sought refuge and employment in the credit unions.  As much as I would like to blame the newly recruited the truth is we can’t blame converted bankers. We have to own our industry culture ourselves. Those of us who really care about the culture of credit unions have to own our own willingness to stand up for the principles that attracted us to cooperatives to begin with.

Given our current course once the dust settles we end up with a few hundred mega credit unions as small credit unions are swallowed by larger counterparts. While some might view this as inevitable the end result of thinning the credit union herd is less credit unions to compete with banks. It means fewer voices trying to make a difference.

In a world of fewer credit unions the question becomes, “Quis custodiet ipsos custodes”or “Who will guard the guards?." We all know it is the presence of community based financial institutions that keeps rates and fees in check for consumers within our communities.

The Solution Is Us

The irony of this trend is that the cooperative nature of credit unions is exactly what is needed to save credit unions. As we emerge after the economic recession we face a landscape in which the largest banks have come out with more capital and expanded market share. Credit union leaders now find themselves trying to survive with diminishing profit margins, increasing regulatory expenses, and stronger lending competition from captives.  In the face of these new realities credit unions need to turn back to their foundations and relearn to trust each other and collaborate to survive.

One way for this to happen is another recent trend of a few progressive credit unions to seek out strategic collaborations for core processing and other large budgetary expenses with other like minded credit unions.  These collaborations are founded on a common desire to gain operational efficiencies that creates economies of scale that return value to the membership of each of the credit union partners.

This model allows an alternative to the “hunt and skin” model of credit union mergers that have happened over the last three years.  As credit unions begin to research this alternative they need to start with core system alignment. The largest players in core data processing are aware of this movement and have begun to build the tools to enable this.  Jack Henry with its “PowerOn” forums or Open Solutions with its newly released “DNAppStore” have both invested in the tools to allow credit unions to collaborate directly with one another.

An example of this type of collaboration can be seen with *Open Technology Solutions (OTS) based out of Denver Colorado.  Together the individual credit unions form a combined collaboration that has over 7.6 billion in assets. This size allows for it to negotiate deeper price concessions from key vendors and then pass those cost savings back to their respective bottom lines.

As Big Banks emerge stronger and largely unrepentant from the recession it is foolish for credit unions to fight over islands of sand as banks are focused on driving profits. As banks push members into our arms with new fees we need to form the alliances that will allow us to grow in a way that complements one another.

Collaboration takes true vision and heroic leadership as management teams learn to trust one another and take hold of core corporative principles. For those leaders who have the courage and skill to navigate these new waters they will find that building large scale operations is where the real opportunity is for their members as they are able to roll out more expansive services with less cost.

To learn more about an example of an operating credit union collaboration check out Open Technology Solutions