Suze Orman gets into the prepaid card game -- and out of the good graces of the CU Industry?

by Ron Daly 

 Remember a while back when Suze Orman went to bat for the NCUA as an "educator"? She wanted to get the word out about how NCUA served the same function for CUs as the FDIC did for banks. A noble goal, and helpful for those who are confused about what all those letters mean on the bottoms of loan promos and direct mail pieces. It raised the question, "Is Suze Orman the right spokesperson for CUs?" 

Well, it's a false dilemma, really. See, Suze Orman wasn't hired to promote CREDIT UNIONS, she was hired to promote NCUA and their capacity as the insurer of cu deposits. But people read "Suze Orman" and "NCUA" and interpreted that as "Credit Union Spokeswoman".

Which is unfortunate, because Suze Orman just decided to set herself up as a prepaid card magnate. Click here to read about it on US News and World Report's website.

I really don't know how to make heads or tails of this. Sure, Suze Orman has a lot of brand equity, specifically with the "underbanked", but to lend that equity to a prepaid card? She's taken the road the Kardashian sisters weren't able to walk a little over a year ago; the only difference being that Orman actually seems to understand how money works and the Kardashians...well, the less said, the better.

An Associated Press story claims that the aim of the card - which Orman has (reportedly) already pumped $1 million of her own money into in development costs -  is to boost the credit scores of users through a deal with TransUnion. This new breed of credit score would reward users who previously paid for things with cash or other prepaid cards, but Business Insider doesn't seem to think so.

According to the PR Newswire press release, the card comes with "Suze Orman's advice and tips on personal finance," (which are delivered...how?) and is also "insured up to $250,000. The Bancorp Bank; Member FDIC". So, there's a bank involved somewhere along the line, but a few steps removed...

I guess the question is, has this move soured your opinion of Suze? Some of the choice tweets on the topic I read over yesterday and today: 

Yes, much has been made of the $3 monthly fee, which is actually low compared to cards like the Kardashian Kard. But a card that preaches better finance management while taking out $3/month to "cover costs"? Would "Pre-Card Suze Orman" approve of that? 

Ron Shevlin from the Aite Group always has great links and thoughtful reads on the topics of the day, and he found one by Ron Lieber in the Times. In it, Orman swears she won't be making much money on the card and certainly doesn't want to be making money off of the "99 percent's backs" (her words). She insists that if the rates increase dramatically, she'll kill off the product. But surely there's some reward for her, considering how much she's already invested...what is it?

This reaction is one of the more damning, in my opinion. Ondine Irving has worked with Suze Orman in the past to get the word out about credit union credit card programs and has been a pretty big Suze Orman "stumper". She's not happy with these new developments. I sense she won't be the only one. 

I'm eager to hear your comments on this in the comment section. 

 

Bringing a Knife to a Gun Fight - Why Cutting Marketing is a Bad Idea

by Ron Daly 

I'm sure you've heard the old adage "never bring a knife to a gun fight". Good advice - even though I've never been in a gun fight, I know I'll never be bringing a knife. Why? Because you're not only under-prepared, you're going up against someone with a huge advantage. 

I bring this up because of an article in the CU Journal by Paul Lucas, a branding consultant who's worked with a number of CUs and companies (including my own) on their branding. Based on a recent Bankrate article about what consumers shop for in a financial institution, Paul came up with some pretty interesting conclusions about the role branding and marketing play.

From Paul's article:

...17% of shoppers start looking for a new bank because of dissatisfaction with rates and fees, but only 4% of them choose their new bank because of rates and fees.

Why does that happen?

Because shoppers are swayed by brand image, advertising and bank branches in convenient locations. Perhaps this disconnect helps explain why more people are changing banks more often.

How did they choose which institutions to shop? The selection drivers lead me to believe that brand awareness is the key, and of course that's heavily driven by brand image. The big banks get strong awareness by buying it.

Paul also mentioned that BofA spent $2 Billion dollars on marketing in 2010. Two. Billion. Dollars. Spent by one bank. In one year.

What percentage of your budget goes into marketing? Paul makes a good point: 

The banking industry spends around 5% of income on marketing. If the credit union industry spent 5% using smart, targeted creative we could increase awareness, making us more competitive against banks.

Instead of spending more, however, many credit unions have cut the very things that sustain brand image: advertising, branch maintenance and member services staff. It's a downward spiral that left spinning long enough can take a credit union out of the game.

While CUs might have it where it counts (low fees, better rates, more specialized service), every inch of ground they gain gets thrown out the window when they don't pay to make it known.

Now for my two cents -- You really want the business? Time to start asking for it. Maybe the "gun" you bring to the fight isn't $2 Billion, but as any shooter will tell you, firepower's not the only important factor - having a better aim means a LOT. Time to really focus in on the member/potential member. What do they need? What do they want? What do they fear? 

One other important fact from Paul's article says the main reason people start shopping for a new FI is because of a shift in their life's circumstances. Maybe it's time you started wondering what those circumstances are...and how you can be there to help. 

I welcome your feedback in our comment section. 

 

 

Taking the "Bank" out of "Banking": How the Steve Jobs Decade Has Changed Finance

by Ron Daly

Brett King over at Bank 2.0 posted an article titled "How Steve Jobs Killed the Branch". There's been a lot of talk recently about Steve Jobs stepping down as the CEO of Apple and moving into a more private role in the company. Tim Cook has taken Jobs' place as CEO and the black-turtlenecked dynamo has quietly stepped aside, due to his health concerns. The news of this change sent a shockwave through the Internet as Apple fans and tech fans alike shared their shock and their appreciation for a man that has many times over beaten the odds (go read about Steve Jobs' impact and listen to his 2005 commencement speech here. Very good stuff.)

Brett's article focuses on one important aspect of Jobs' legacy. From the post - 

This is not the sole legacy of Steve Jobs and the team at Apple, but when we look back on banking in 10-20 years time when branches have disappeared, we will attribute the destruction of the traditional value chain of banking to the death of the ‘store’. Not all stores are destroyed, of course, but where you have goods or services that can be easily digitized or where distribution does not absolutely require physicality, then the value chain is disrupted. The two big upsets in this evolution of the store were really Amazon’s destruction of the book store, and iTunes destruction of video and music stores.

I think Brett has a point there. The Kindle really did a number on bookstores and paper books alike (the Borders down the street from us is going, going...). The iPod destroyed all the Tower Records and Sam Goody's of the world because, finally, you didn't need a twenty-disc CD changer in your car - you just needed a little rectangle with a wheel. And why? 

Because paperbacks and hardcovers were just a means of distributing the words in a book. CDs and Casettes were just a way to store the music until it hit your ears. The medium wasn't more than the message. In some cases, it was much, MUCH less. 

As technology has advanced, our dependence on cash and checks has diminished. Debit and credit are pushing out cash and NFC is threatening cards - we'll keep making strides away from the physical aspects of money management until branches are almost obsolete. Why? Because money's not a physical thing anymore. At least, it doesn't have to be. And you don't need a bank to do all your banking.

When you can:

• Open an account online
• Deposit remotely online
• Apply for a loan AND get approved online
• Resolve NSFs and low-fund situations online
• Transfer money between accounts online 
• Budget online
• Buy online

...why go to a branch to get things done? 

Steve Jobs didn't exactly kill the branch. But he certainly didn't stop the bleeding. 

The Most Hated Companies in the Country - How Do Members Feel About You?

by Ron Daly 

The American Customer Satisfaction Index (ACSI) released their findings on which companies were the "most hated" last week. Most of the companies on the list aren't a big surprise - you've got your airlines (Delta's number two for super high baggage fees), you've got your big banks (JP Morgan and B of A), you've got satellite/cable companies (Cox, DISH). But there were  a few surprises. 

Coming in at nine and ten were MySpace and Facebook, respectively. Most of the complaints and dissatisfaction were based on privacy issues. I'm sure Groupon will be on next year's list, given their recent spate of bad press. How interesting that social networks are considered "companies". Sure, they have a corporate structure, but I'm always surprised to think of them as anything more than places for people to hang out - it's odd to think that they're actual corporations. It's stranger, still, to think that people are so worried about "privacy" - typically, whatever information you put on Facebook is whatever information Facebook shares with people. If they were showing people your private messages or selling your email address to spammers, that would be something else. 

But the biggest shock was who was numero uno. PEPCO - Potomac Electric, the power company that services the Washington, DC area. They're the most hated company in the country and they only serve one fiftieth of it. When asked about the rating, PEPCO had this to say: 

"We at Pepco know we have work to do and we're doing it every day," the company said in a statement. "For us to be distracted by this kind of sensationalism would be counterproductive."

Which is a nice way of saying "whatever". 

Which brings me to credit unions. When's the last time you asked your members exactly how they felt about you? Have you done a simple survey, something like a NetPromoter Score evaluation with instant "low feedback" alerts? Do you have a rolling feedback survey set up? DigitalMailer can help with all of these endeavors. It's corny, but it's true - you can't manage what you don't measure. How about your funded loan process, OR loans that were approved by you, but the member turned down your offer? That kind of feedback measurement is perfect for those of you wanting to be the member's primary financial institution!

Measure now with a survey so you can manage the changes you'll have to make to stay competitive.  

Click here to email us and we'll give you $100 off any of our survey services! 

Spend a Little (Less) Time on Me: Why a Self-Service Strategy Means Everything

by Ron Daly 

I read a good piece on the Profit Stars website titled "The Holy Grail of Banking: Profitable Customers and Members Strategies to Attract and Maintain the Lifeline of Your Financial Institution". Long title, but good content from Dave Foss about what's going to make or break financial institutions in the next few years. 

The whole article's worth the read but I want to focus specifically on the role of technology and innovation in all this. Read this passage from the article: 

3)    View self-service strategies as necessities. Advancements in consumer and small business technology have made self-service strategies a necessity. Banks and credit unions are leveraging solutions for mobile RDC and P2P payments as an acquisition and retention strategy for profitable clients. Javelin reported in its 2011 Mobile Remote Deposit Capture Report that one in every four consumers finds mobile RDC desirable, and 13 percent of those consumers will change their financial institution based on its mobile capabilities. Plus, financial institutions with solid mobile foundations will be well positioned to benefit from mobile payments, a very near reality.

So, what is the goal of technology for financial institutions? Is it to make things easier on the member or the FI? I'd argue both if the technology works well. And then, with any discussion of new technologies for credit unions and banks, we get that old grumble about how important it is to pay attention to the branch. Yes, it is important - and your online branch is a branch, too. It needs attention. And it should be the fastest and most efficient branch. 

Technology should be decreasing the amount of time and worry that people put into their money management. If one corner of your online branch is more complicated than going to a physical location,  that part needs attention. Why are 25% of the people in the above report attracted to remote deposit capture? Because it's one less trip they have to make. Maybe instead of the idea of "service" meaning "being really nice to the people that come in to the branch", we should strive to equate "service" with "how small we can make the amount of time people need to spend face-to-face with us." 

 Tell us your thoughts in the comments section. 

 

What's Taking You So Long? A Sneak Preview "Build a Better Email"

Today, I read an article titled "20 Things Financial Institutions Should Do (But Don’t)". It's the kind of article that seems like it was written just for you. Specifically, because of this part: 

5. Email marketing

It's simply stunning how many financial institutions still don’t utilize email marketing tools. Even today, you still hear bankers say things like, “No, we don’t really collect people’s email addresses.”

It IS stunning. Especially given these statistics from Pew Research*:

• 94% of online adults use email
• 62% of online adults use email as part of a typical day
• Biggest online trend: “Certain key internet activities are becoming more uniformly popular across all ages.” This includes email.
• 38.5% of internet-supported mobile activity was on email among American mobile users
• 74% of online adults say email is preferred method of commercial communication.
• 63% of mobile email users check the account a minimum of once per day. 
• In 2010 30% of total email time was devoted to commercial emails, compared to 17% in 2005.

When are you going to get into email? More importantly, how are you going to be heard above the din? 

We're here to help with both of those questions. 

Recently,  DigitalMailer issued a whitepaper with helpful tips for email marketers. "Build a Better Email: Tips for Email Marketing Success" is free and available now over at DigitalMailer.com/Build. 

To give you a taste of the helpful hints in this free whitepaper, we've included a few of them here. Give them a read: 

#2 Divide your messages into numerous discreet programs

Rather than having a single all-or-nothing email list, create four or five sub-topics from which customers can select. Most users will select at least one, so you’ll have a way to reach most online consumers with service-related topics. As shown below, DigitalMailer clients offer up to ten different email topics to choose from.

#9  Don’t botch the FROM line

Although we see it less often now, the biggest email mistake is not including the financial institution’s name in the FROM line. It’s an absolute kiss of death for effectiveness, the equivalent of sending letters without postage. They just won’t get read.

#17 Think of mobile and tablets

How good does your email look on a Blackberry? How about on an iPhone? An iPad? Start looking into the display aspects of smaller, mobile screens. The Internet’s next evolution is, quite literally, in the palm of your hand.

#25 Explain why it was sent

Include a short statement as to why consumers are receiving the message, and how to opt-out or opt-in (for those receiving it from a forward). This typically works best in the footer of the email.

#30 Monitor message delivery

As the battle rages against spam, collateral damage to legitimate opt-in marketers is increasing. To make sure your messages get through, you should have two test accounts at each major ISP. One account set with filtering on, the other with filtering off. Even if your email vendor monitors delivery, we recommend test accounts as an added safeguard

Get the full list by downloading our FREE whitepaper! Click here!

 

*Editor's Note: The Pew Research Articles mentioned are:

 Pew Research Center, 9/2/10 – Cell Phones and American Adults 

“View From the Digital Inbox” 2011; data = primary research by Merkle and Pew 9/2/10

From Pew Research Center, 12/16/10 – Generations 2010

Tracking Dodd-Frank

by Ron Daly 

We're recovering from GAC 2011, a three-day frenzy of talk, regulation, talk, meetings, and more talk. The Crashers crashed, the Hill-hikers hiked, and the lawmakers got to see first-hand that credit union folks are dedicated, motivated, and united. 

The one thing EVERYONE was talking (and tweeting) about? Interchange. It's big, it's bad, it's going to hurt, according to this article from the ABA (yes, that ABA).

• During the first two years, the proposed rules will eliminate $33.4-$38.6 billion of debit card interchange fee revenues for banks and credit unions. As a result, consumers and small business will face higher retail banking fees and lose valuable services as banks and credit unions seek to offset the loss of debit card interchange revenue.

• As a result of the anticipated increase in banking fees, the number of unbanked individuals will increase. As a result, many low-income individuals will have to use higher-priced alternative financial service providers, such as check-cashers.

Is this what we want? Obviously not. We need to get ahead of this thing and think about what we're going to lose as a result of these changes. We need information. We need action. 

I encourage you and your senior management team to subscribe to the "Dodd-Frank Tracker" on the ABA website. It DOES cover issues that impact credit union, it's pulling in resources from all over the web and condensing them for YOU. The more you know, the more you can fight against interchange regulation - or react to the fallout. 

Click here to go to their blog directly, or click here to go to their FeedBurner Feed where you can subscribe to their email updates. Read the articles, act on the information. 

Did you dream about cards replacing cash? You dreamed too small.

by Ron Daly

 Maybe we've aimed a little low...

Granted, most of us didn't see the change coming - "Smartphone? What the heck is a smartphone?!?" we said in disbelief. Sure, we had Blackberries, but the iPhone surfaced and struck a mighty blow to the way we think about our cell phones. Maybe the phone wasn't the important part. Maybe the smart is where the new money is. 

And boy, is there ever money in smartphones. Not only in the app market, mind you, but in the transfer of money between a buyer and a seller. There are mobile banking apps, of course. There are PFM apps. There's even a device from Square that allows a person to swipe a credit card on their phone. That's pretty mind-blowing. But Starbucks - that's right, Starbucks - has just invented their own way to pay for things via smartphone. 

From the Transaction Directory: 

"Today, one in five Starbucks transactions is made using a Starbucks Card and mobile payment will extend the way our customers experience and use their Starbucks Card," said. Brady Brewer, vice president of Starbucks Card and Brand Loyalty.

Last year, Starbucks customers loaded $1.5 billion onto their cards, a 21 percent increase from 2008.

In a related story, CNN Money reports on the growing popularity of “mobile currency,” whereby customers use their mobile phones in place of cash or credit cards.

“There’s a lot of money at stake if it’s done right,” said Omar Green, director of strategic mobile initiatives at Intuit.;

For years, we've talked as an industry and as a society about the end of cash, the next wave of finance, and what the future had in store for our money. And maybe we were dreaming small - we just figured debit use would increase and cash would start to drop off as a form of payment. We weren't counting on smartphones to be the next step. Were we? 

Well, as recently as a year ago, Newsweek was predicting that the cell phone would edge its way in as a payment method, as did creditcards.com. And here we are, seeing one of America's most interesting businesses jump in and get wet. 

While we are fighting the Interchange battle, who's watching this critical shift in the payment system? No more checks, no more Visa, no more MasterCard OR Interchange income...

Stay tuned...

Are YOU Proud to be a Credit Unionist?

by Ron Daly

What IS a "credit unionist"? Having just made it up, I'm not sure, but because so many of you hate being called "bankers", we've got to come up with something else. If you've got better ideas, I'm all ears.

Why do I ask if you're proud to be one? Because the ABA has created a website called "Proud to Be a Banker". 

http://proudtobeabanker.aba.com/

At this website, you can read stories of bankers and banks that "contribute to and improve their communities -- from economic development and small business lending to philanthropy and financial education." That's according to their "About This Blog" section.

Basically, it's the feel-good stories of banks, big and small, across the country. And why? Maybe it's because of all the things banks CAN'T be proud of over the past few years. Maybe it's because WikiLeaks, in between torpedoing our current diplomatic efforts, threw out a vague threat that they'd reveal some SERIOUS dirt on a major US bank in 2011? Whatever the reason, there's now a mill for this warm-and-fuzzy grist. 

Where's ours? 

Where do credit unions go to talk about the good work WE do? I know it's out there, so why can't you just reach out and grab it? In one source, at one time? 

Because no matter what you think about our industry, the truth is that nobody's going to give us a leg-up. Not for free, anyway. At some point, we're going to have to be heard by virtue of the noise we make for ourselves. This "Proud to be a Banker" thing has some good ideas (listing stories by state, sorting by type of good deed) that could be adapted.

But what about showing the total charitable and community development contributions of CUs that have submitted stories? Let the numbers speak for themselves.

What about pictures, like little head shots, and contact info so that you can get in touch of the people contributing? 

We could do this, folks. We should do this. 

What do you think? 

 

TARP Banks Missing Payments! Time to Send the Repo Man?

by Ron Daly 

Read this article the other day: "More Than 90 Banks Miss TARP Payments". According to the article, 91 banks and thrifts skipped the May TARP payment, seventeen more than those that missed payment in February and 36 more than those that missed their payment in November. 

I don't know how that makes YOU feel, but I'm guessing you're not slowly clapping at your computer, impressed with the great strides made. I'm guessing you're in a state of disbelief and, like me, you find it insulting that for eight of these banks this is the FIFTH MISSED PAYMENT. 

Now, before I get too steamed, let's be fair - according to Treasury Secretary Tim Geithner, banks have repaid about 75% of the TARP money they got back in 2008 and the start of 2009. The impact on the taxpayer is expected to be around $105 billion all in all, which is down from an initial estimate of $341 billion. So not all the news is bad news on the TARP front.

But still - five missed TARP payments? How does any bank get away with that? I know you're not all "money people", but five missed payments on anything else nets you a visit from the repo man. 

Your car loan's not paid up and you haven't taken steps to talk to the bank? They're coming for it. Some big, burly guys are going to roll up to your driveway, put the thing on a wrecker and take it back to the branch. Simple, right? 

It's more complicated for banks. The CNBC article calls out Midwest Banc Holdings as an example of a bank that just couldn't cut it: 

In some cases, small banks are renegotiating the repayment terms. Midwest Banc Holdings, for example, agreed to swap $84.8 million in preferred shares issued under the TARP program in 2008 for $15.5 million in common shares. That would have meant an 80 percent loss for the government—and the U.S. taxpayer—on the initial investment. But the swap was contingent on the bank raising more private capital, which it failed to do. Regulators seized the bank in May.

Is there not more that can be done? Are we just going to have to eat the losses without any upside? AIG has already cost us something in the area of $180 billion, for which we get nothing. Foreclosures and housing numbers are still in rough shape and many "toxic assets" have yet to be dealt with by their holders. The oversight panel can keep an eye and raise concerns, but where's the repercussion for those that don't make the payments? While we're all so busy looking for "asses to kick", let's point our foot at those institutions who balk at repaying the taxpayer for OUR investment.  

What do you think? What do we do with banks that haven't paid? What do we "repo"?