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

Mobile Banking: A Roadmap To Your Future Member

Mobile Return on Investment
This week I attended the 5^th Annual Mobile Banking & Emerging Applications Summit in New Orleans and learned that almost everyone in the room both Big Bank, small banks and credit union were all running towards this new “golden” channel and were not really sure of what it is supposed to look like when they get there.  The prevailing question for many of the attendees was what do I have to roll out and what is the ROI. Most expert players in the mobile arena could not provide a hard and fast ROI on the channel.  Then magically a slide appeared in one presentation in which Forrester research stated there was a 15 percent ROI for the mobile channel.  Twitter lit up as everyone suddenly tweeted that the magic formula had been found! However, before you go and change that PowerPoint presentation you were going to give to your senior executive team on why you need mobile you first need to understand the math behind the hype.

The 15 percent return on investment is based on the assumption that you are going to be able to change consumer behavior from channel to channel.  So that member who goes into the branch or calls your call center is suddenly going to just use this new channel. Does that sound like your member? Not mine either. 

The 15 percent assumes that low value transactions of moving money or checking a balance will now take place over the phone and not involve the call center.  When many of the panel experts were asked about their own experiences at their financial institutions after they launched mobile the opposite seemed to be the trend. Your members simply used you more. They took that large check to their local branch and then called the next day to the call center to see when the hold would be lifted after checking their balance on their Smartphone. 

Another challenge in calculating the ROI is getting to the behavior and seeing if there was a change. It seems to hold true across the board that it is more exciting to buy the technology than it is to track member usage patterns. To compound the issue further even if you do show some subtle shifts it becomes very difficult to isolate the different factors that could have influenced that shift in your member’s behavior. So imagine a market that has sizable cost to deliver that does not have a measurable ROI…yep…that’s mobile.

So where does that leave mobile? Consider that 18 of the top 40 financial institutions have already implemented mobile banking. You can see that for many of our competitors the prevailing concept is that mobile is now table stakes in keeping consumers satisfied.  This is with good reason as according to recent research over 58 percent of all Americans use a mobile device for non voice data communication on a typical day.

The challenge for credit unions looking to enter this channel is that Big Banks are moving into this channel aggressively just look at the buzz over a Big Bank launching a tablet app to see the hype it generates. This hype influences our members as having a mobile device is now normal. So you not offering a solution is seen as more of a problem as mobile usage becomes more of a part of how people interact with their financial institution.

Where to Start
You need to think about what product you are going to launch that gets you the most bang for your buck.  When you consider the cost of building an Iphone app and the 250 different versions of Android (don’t even think about the BlackBerry which is dead in this market space) the easiest entry product is a mobile web browser designed by a reputable vender.  A mobile web browser should be a top priority on your mobile roadmap. The browser solution provides the most comprehensive and cost effective modality of all the solutions.  The majority of your smart phone users will be able to be served with this solution. Don’t get caught up in the app craze. Have the discipline to launch in phases and learn from each phase. It is your staff that will have to support it.

When asked what is the most popular method to conduct mobile banking the most popular method for smart phone owners was mobile internet browser at (77 %), then SMS test messaging (28 %),  and then (26 %) for a downloadable mobile application.

So step one on the roadmap is the mobile browser. In looking down the road on your roadmap you have to at some point consider a triple play solution (App, Web Browser, SMS texting) as this allows your members the chance to choose the delivery mode that best suits their needs or preference.  This also allows you to reach all of your member segments with a mobile solution as you cover regular feature phones and smart phones. 

Now many are quick to dismiss the text banking solution but I think that is a mistake. Instead you need to think about how to broaden this product beyond just weekly push alerts. Look and see how you can utilize real time balance alerts. Add fraud alerts to the mix. When your card processer notices a transaction that is outside the member’s normal spending patterns send them a text telling them to confirm the transaction.  You really want to create ROI? Add cross sell tags on the end of low balance alerts for lines of credit and overdraft.  Think about quick hit messages that create calls to action.

Last Thoughts on the Mobile Channel to Consider

Retention- How are you going to be your members PFI helping them to pay, manage, and save – anyway, anytime, and anywhere? This is exactly what Big Banks are trying to solve.

Cost Savings- Can you shift low value interactions from your branches and call center to the mobile channel. This frees up staff to engage in longer and deeper conversations with your members without altering your staffing model.  Can you reduce fraud by using real time alerts to engage your members faster? Please don’t tell me you are calling your member at the number on the system when you see a spending pattern shift. Just between us but that doesn’t work as often your member isn’t home. The good news is they do have their mobile phone on them.

Driving Member Acquisition – members will see this the same way as ATM networks. The Big Banks have an ATM everywhere. Even if I never use an ATM I want my financial institution to have them.  Today 1/3 of 11 year olds in the United States have mobile phones.  For them mobile is part of the world they have grown up in.  You need to understand that mobile is now here and is not going away. 

Big Banks are growing mobile users 25-30 percent annually lowering their cost per transaction. We all know this is a margins game. If Big Banks continue to gain efficiencies and credit unions continue to stand still then the end result is we are priced out of business in the rates we offer our members.

Share your thoughts where are you on the mobile roadmap ?

Real Teaching Moments With Our Members

The old gentleman’s eyes looked away as he sat at my dinner table and told me this story from his youth back in the 1930’s. It was going to be a perfect day. His class was going down to the lake for a class outing and picnic. Each student was to bring a sack lunch for the day. 

The boy was the son of a farmer and times were very lean in 1930’s for rural farmers. The boy gave his mother a week’s notice that he would need to take his lunch. On the day of the outing his mother handed him a sack lunch with a tomato biscuit, a country ham biscuit, and a biscuit with homemade butter and jam on it.  The boy excited about the day, kissed his mother and left for school.

The ride to the lake was enlightening for the boy as he heard everyone ask one another what they had brought for lunch. As the students headed toward the lake the boy held back and found an old stump with a hole in it. He quickly shoved his sack lunch down the stump hole and ran after his classmates.  When it was time for lunch he pretended not to hear the voice of his young teacher. She was new to the small country school and had come from the city.

The teacher called to him again and this time there was no ignoring the urgency or tone of her voice.  “Where is your lunch?” she asked when he joined the group with no lunch sack.  “I forgot it at home” he replied.  “Well then you can have my tomato sandwich” and with that statement she handed him her sandwich and then reached into her purse and pulled out a slightly crumpled sack. 

“I am going to have a biscuit” and with that she pulled out the country ham biscuit the boy’s mother had packed and started to eat it and commented to the children that she had never had a country ham biscuit before.  The boy stared at her with dismay.

The old man paused as he told the story and his voice caught for a moment. He explained then that he had been ashamed of the lunch his mother had packed as it was a poor farmer’s lunch.  That morning on the ride over to the lake he had heard that the other children were all having white bread sandwiches; which back in the 1930’s was a luxury.

The man’s eyes focused on me as he finished his story. He said, “After all these years I still remember her and how much pride I felt as she ate my mother’s biscuit." He then added, "She was a good teacher.” 

Now think of our members today. The average consumer is saddled with $6,493 in credit card debt and juggling an average of six open credit cards, according to credit health website Credit Karma’s latest data. That’s just our member’s debt on plastic. We have members who see others getting ahead but like the boy in the story stand back ashamed to speak up and ask for help. They see themselves struggling when everyone else is getting ahead. They see their homes, with a typical mortgage of around $171,665, sliding underwater in equity. They wonder how they ended up with the typical auto loan of $15,152, plus another $29,572 in student loans on an education that has not delivered all that had been promised. That’s a  grand total average of $222,800 for the average consumer.

For many credit union members the recession played fast and furious on their household finances, and left many families struggling paycheck to paycheck.  Paying a car, home, or college education in cash has become impossible for most. For many, putting the grocery bills on a credit card is the “new normal “that happens each month in order to pay the mortgage or the rent.

Each month of the “new normal” blinds the member to the dangers ahead of them. So what are the red flags we need to educate our members about to help them see the spiral of relying too heavily on credit?

As the financial experts we need to be aware of these three road signs and do our part to educate our members.  I would hope that every credit union leader reading this blog offers some type of free CBR review for their membership. If nothing else each of you should post these warning signs to your brand new Facebook page. Remember that new social media blog you have started but were not sure how to make it actionable? Well, my suggestion would be to post this on that blog and then add a line about calling the credit union to get a free consultation to look over your credit bureau.  So without further fanfare here are the teaching points we should all be educating our membership on. These points have been written so you can publish them straight to your membership

Credit Warning Signs To Post To Your Members

You’re Only Paying the Minimum. 

If you’re paying the minimum on your debts, two things could be happening: you’re using more cash toward expendable monthly purchases, or you can only afford to pay the minimum. In both cases, you aren’t prioritizing paying off your debts. Paying only the minimum might mean you’re making affordable payments month-to-month, but you could end up paying hundreds or even thousands of dollars in interest over time—you’re essentially paying the bank to maintain your debts. Reset your budget to pay more towards the minimum payments.

You’re Turning to Plastic to Pay What You Can’t Afford.

How often have you realized you’re low on cash or emptied your checking, and needed to use your credit card instead? True, one of the uses of a credit card is that it allows you to buy things you couldn’t otherwise afford. But on the flip side, should you be financing something you can’t pay for right now? Your debts accrue interest and make it even more unaffordable over time. Putting a $600 purchase on an 18% APR credit card and paying just the minimum results in $300 in interest charges over the life of the debt—that’s a 50% increase from the original debt! Your credit card is best used to pay things you can afford to pay in full every month; that’s the credit-building action that boosts your credit score and steers clear of debt.

Your Credit Score is Falling.

Relying heavily on credit isn’t just costing you money; it compromises your financial future. When lenders take a look at how much debt you are carrying and how much credit you use, it’s a sign of risk that you may mismanage or default on the credit they extend you. Plus, with debt and credit use factoring into about 30% of your credit score, a decreasing credit score is the first sign that you are in over your head. If you don’t know where you stand with your credit health, start with checking your credit score regularly for free at Credit Karma and monitor for any drops in your score. Contact your credit union and ask them to go over your credit with you.

Practical Application

Looking to add loans to your bottom line? Start a promotion educating members on the nature of credit. Offer tools like Credit Karma for online members. You should also offer a free credit review to every new membership you open. Go over the CBR with them and talk about the impact of slow pay or other items you find in the trade lines. Look for outside debt and look to refinance that debt saving the member even more money.

Some of our members are confused and ashamed of what they simply do not understand. Rather than bury those questions and ignore the problems we need to help our members by creating real teaching moments and showing them how they can move forward.   

Visit CreditKarma to learn more about online credit monitoring solutions you can offer your membership

Credit Union Culture: Cooperative or Cut Throat ?

Who is the Enemy At the Gate
In my capacity assisting credit unions with their Business Continuity planning, I have noticed a great deal of distrust among the credit union family. Many credit unions feel that their sister credit unions are their enemy.  While friendly competition should be the norm, the attitudes I detect seem to be of a much more cut throat in nature that contradicts the cooperative spirit of the movement.

While conducting training for the management team of one credit union, my suggestion of credit unions supporting each other in times of crisis was viewed as an anathema.  Sending the little old lady trying to cash her Social Security check to the main branch five miles downtown was preferable to setting up a mutual agreement with another credit union with a nearby branch to offer one teller space in the event of a crisis.

The Not So Cooperative Nature of Credit Union's 

Shouldn't “People Helping People” extend to “Credit Unions Helping Credit Unions”?  I certainly think so.  ALL credit unions should still be part of the cooperative network. Yet, too often many credit unions seem locked into “If Acme CU is bigger than me, they must be stealing membership from me!”  Though not a new development, it certainly seems to have gained momentum in recent years.  Perhaps it is an outgrowth of the community charter movement.  Perhaps it is as a result of the regulatory pressures brought on the management.  Perhaps it is fallout from the economic times.  Perhaps it is a combination of all three.

Credit Union membership shouldn’t be a zero-sum game!  Credit Unions don’t steal other credit unions members.  After all, unlike the NCUA thinking as they initially proposed their new corporate rule, real people can be a member of multiple credit unions without impunity.  People will become members depending on service, services, locations, and rates.

Credit unions should actively recruit new members from the population who don’t know the benefits of credit union membership.

We Need A "We Are the World" Moment

Credit unions should help each other out. We should embrace our common mission and unique charter and join together to help offset the enormous expenses we incur as smaller community based institutions. Mutual assistance should be le mantra de jour, not the exception.  How?  Here are a couple of simple examples to provoke some ideas:

• If one credit union’s branch is incapacitated, for whatever reason, other credit unions in the community could offer working space or teller space, especially if it were a mutual assistance agreement.  This is ideal if both use the same core systems.
• Consider supporting each other with staffing assistance.  Why pay the fees to temp agencies for temp staffing when another credit union might lend a person who’s already trained?
• Consider using staff from other credit unions to assist in facilitating Business Continuity exercises with inputs and role playing.  They could act as press, disgruntled members or members with off-the-wall questions to enhance the stress of the exercise.  They could also work as trusted agents assisting the exercise facilitator.
• What about some joint public events?—Sponsor a lunch & learn about credit unions; host balloons and ice cream event in the park for kids and young parents (potential members, right?); organize a pet parade to support the local animal shelter; provide staffing for the local public radio fund raiser.  OK, I may not be the most creative in the world, but you get the idea!

The Battle for Board Walk and Park Place

Like power hungry community titans in a real life Monopoly game some credit unions seem bent on owning all of Board Walk and Park Place and leaving only Baltic Avenue to their credit union neighbors. This credit union distrust seems especially intense where several credit unions share overlapping community charters.  Each credit union sees the same pool of potential members as “theirs" and as they seek to increase their membership they perceive themselves in competition for those members with other community based credit unions. 


This sense of competition can be a good thing.  It could force each of them to evaluate their mission, their service, and their approach to the various segments of the community.  Yes, even though they all have community charters, their potential new members are grouped into different and specific demographic segments.  Credit unions should play to their strengths, play to their best demographics, play to building a loyal following. Viewed correctly, each should find a synergy with the other credit unions that can become a growth multiplier in the membership recruiting game.

OK, so who is the enemy?  It’s certainly not the other credit unions.  It’s the banks who see us as playing on an unfair field.  It’s the banks who try to impede credit union progress (should we be looking to them for critical services?).  It’s the banks who want to make sure credit unions are taxed.  It’s the banks who won’t support the underserved.  It’s the banks who are so creative at imposing additional hidden fees. It’s the banks, with their lack of real interest in their customers’ welfare, who should drive credit union membership.

That’s where the credit unions should focus their animosity.  Not at each other!

This blog article was written by Ken Schroeder, Vice President for Business Continuity at Southeast Corporate, where he is responsible for the life cycle management of all business continuity functions. Mr. Schroeder provides consulting services to member credit unions and has been a featured speaker at numerous conferences, forums and other events. You can learn more about Ken at Ken Schroeder

CFO Corner: A Glass of Liquidity – Hold the Rocks: Your Liquidity Strategy

Everyone Is Drunk on The Spiked Kool Aid

It was a nightmare…flashing lights…loud music…empty dance floor. No, I wasn’t in some 70’s throwback bar it was actually the client party for a financial services convention. Everywhere I looked people were laughing and drinking to music that most of them had never heard before. These same industry leaders last year were wringing their hands unsure of NCUA assessments, watching their capital reserves drop before their eyes as commercial loans in sand states literally bit the dust.

Last year the only liquidity anyone was thinking about was what they could pour into their glass as they were hoping it was all a bad dream. Fast forward to today and the world is upside down as Big Banks have emerged stronger with higher assets, broader consumer bases and TARP has becoming a bad memory as quarterly profits erase past mistakes.

Credit Unions have begun to breathe again as evidenced by the record attendance at this convention. Credit union leaders are feeling better about their financial positioning and are starting to get some swagger back in their step. Watching everyone else talk about recovery even I was starting to get a smile on my own face. Then I read this great article written by Edward Lis, our CEO guest blogger, and suddenly I had to wonder why were all of us drinking the spiked Kool Aid when 12 months ago we thought the sky was falling. 

So here is the million dollar question, “Why be concerned now about liquidity when most credit unions are awash with funds resulting from a flight-to-safety fund inflows and loan portfolio outflows due to lack of loan demand?” Edward lays out some thoughts every senior management team should be considering as they prepare a liquidity strategy for the next rising-rate environment that some economists are predicting could kick off by late-2011.

The Fly in the Kool Aid

Before you waive off the article as the fly in your spiked Kool Aid consider that rising rates typically are used to manage economic recoveries. So it is likely rising rates will be accompanied by a return of flight-to-safety funds to the market and a spike in loan demand, putting many credit unions back in the tight liquidity environment of a few years back. Many credit unions have rate floors under their variable rate loans.  As rates move up, rates on these loans won’t move for a while. But your cost of funds will. The result is a compressed net interest margins or NIM.

The objective of a viable liquidity policy and strategy is to provide a framework to minimize the adverse effects of a significant and sustained liquidity crisis.  This can result from changing economic or interest rate conditions, deposit outflows, unusually strong loan demand, intense competition, an international crisis, or any other factors that can deplete the liquidity of the credit union.

In the event of a serious and sustained liquidity crisis, you might find you need to adopt various strategies. Some of these strategies are preventative and must be implemented prior to the onset of a crisis.  Other strategies are reactive and may be implemented immediately.   The strategies will differ in terms of the implementation time, costs, risks, financial implications and regulatory consequences.

  

Looking for a Glass of Liquidity – Hold the Rocks

The first place to look for sources of liquidity is within your own balance sheet. Some areas to consider are listed below.

• Loan Payments and Prepayments-a credit union may write loans with long repayment schedules, however, with that said; loan portfolios continue to be relatively short term-the turnover rate. Track and test loan payments and prepayments in all economic environments to estimate the level of cash inflow to the credit union under a variety of scenarios. As a reminder, when interest rates are falling-prepayments will increase, and when rates are rising-prepayments will slow down.

• Increasing Member Deposits-to bring about an inflow of deposit funds without cannibalizing previously deposited funds are often referred to as “disparity” or “segmentation” strategies. They are designed to identify depositors based on rate sensitivity and encourage an inflow of deposits when needed.  You should be forecasting your liquidity needs and anticipating those needs in the marketing of your deposit products.

• Selling of your Assets-mortgage loans written to conforming loan standards can normally be sold in a short period of time with one major issue to remember: Loans will be sold at their “market price”, which may be more or less than their “book value”, depending on the current level of interest rates. Other types of loans have the potential for sale as well, i.e. consumer loans

• Non-Member Deposits-non-member deposits, also referred to as brokered funds, can provide near-immediate and short-term funding.  Note these come at a high price and the funds are very rate sensitive.

• Loans from the Corporates-the corporate credit union is still the lender of first choice for a majority of credit unions. Loans fall into two major categories: A line of credit and a term loan. A Line of Credit-these come in two varieties: committed and uncommitted. A committed line, most common, the credit union pays a fee based on the size of the line and its duration. There is a contractual assurance that the funds will be available to the credit union when those funds are needed.  An uncommitted line of credit, funds may be available based on the lender’s-the corporate-ability and willingness to fund. Generally, there is no charge for an uncommitted line of credit, but the certainty of obtaining the funds when you need them could be in doubt.

• Term Loans-these involve a specific amount borrowed for a specific period of time. It may be a bullet loan with the principal due in full at maturity, or an amortizing loan similar to an installment loan. Rates can be fixed or variable.

• Federal Home Loan Bank (FHLB)-the FHLB is a quasi-government organization with the objective of supporting and providing loans to financial institutions that make first mortgage real estate loans or that purchase and hold mortgage-backed securities. These organizations offer a diverse line of lending services to qualifying credit unions. Much like the corporate system, liquidity from the FHLB involves lines of credit and/or term loans at fixed or adjustable rates often at more favorable rates than the corporates.

To borrow directly from the FHLB, a credit union must be a member. To be eligible for memberships at the New York Federal Home Loan Bank refer to

 http://www.fhlbny.com/aboutus/membership.htm.

Note: For a credit union not belonging to the FHLB, check to see if your corporate credit union has an agency relationship allowing the natural-person credit union access to FHLB resources without becoming an FHLB member.

The Central Liquidity Facility-the Central Liquidity Facility is administered by the NCUA Board.  CLF advances to natural-personal credit unions are normally limited to short-term, temporary needs. Borrowing directly from the CLF requires that the credit union apply for membership in the CLF and purchase stock. However, many corporate credit unions are appointed as CLF agents and may be able to facilitate an advance to natural-person credit unions that are not members of the CLF. For more on the CLF refer to the following link :  Http://www.ncua.gov/Resources/CreditUnionDevelopment/ResourceConnection/Files/Partners/NCUA-CLF.pdf

The blog entry you have just read was written by Edward Lis who was a former CEO and CFO of two different credit unions. If you enjoyed this article I encourage you to learn more about Edward by visiting www.edwardlis.com

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