Guest Author Marvin Umholtz: Stop Feeding the Strategic Crocodiles Snapping at CU Heels

The following strategy-focused overview candidly dissects the challenges and risks that are dangerously snapping crocodile-like at the heels of credit union leaders.  The mere fact that there is so much change going on and so much change that could go on in the 2012 to 2013 timeframe makes credit union’s reluctant to take major strategic steps when significant energy and resources might be demanded to manage through these unprecedented challenges.  Although potentially unsettling for those who like easy answers, this overview’s’ fundamental premise is that today’s credit union leaders must thoroughly understand what they are up against and mitigate it.  Credit unions aren’t paranoid if malignant forces are truly out to get them!  Use this overview as a discussion-starter at the next Management Team or Board of Directors meeting. 

Strategic Macro-Trends Affecting 2012:

• Today’s political, legislative, and regulatory risks far exceed the traditional operating risks – credit, interest rate, liquidity, transaction, compliance, strategic, and reputation.  The crushing regulatory burden exacerbated by compliance’s escalating cumulative complexity now drags on the credit union business model and threatens its future viability. 
  
  
•  The polarized Congress and the gridlocked legislative environment that results cause strategic uncertainty in financial services regulation, mortgage finance, and the economic recovery.  The November 6, 2012 elections could lead to a massive macro-directional overhaul of the federalgovernment.  That added ideologicaluncertainty makes scenario planning and financial modeling difficult at best – perhaps impossible. 
  
  
• Many credit union officials claim that the National Credit Union Administration (NCUA) Board has been relentless in imposing its interventionist agenda on credit union decision-makers.  On a regular basis the NCUA Board demonstrates through its policy directives, supervisory edicts, rulemaking, and enforcement actions that its priorities too often stray from an emphasis on safety and soundness toward micro-management and counter-productive social engineering.  However, the biggest burning question – How much is the corporate credit union crisis resolution going to ultimately cost? – remains unanswered.
  
  
• In addition to its own pre-disposition to re-regulate credit unions, the NCUA is mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the Consumer Financial Protection Bureau’s(CFPB) statutory mission to examine for and enforce additional complex and costly requirements on credit unions.  The NCUA is destined to become a branch office of the marketplace-controlling CFPB enforcing a “level playing field” of fewer consumer choices and limited credit availability.
  
  
• The global economic situation has not been this troubled in decades.  The U.S. Federal Reserve System Board of Governors has promised to keep interest rates at unprecedented lows through 2014.  Only slight improvements are expected in overall economic growth and employment over the next several years.  Consumers will continue to focus on deleveraging their debt and limiting their spending.  The federal debt continues to grow and the political inability to deal with demographically unsustainable entitlement programs embeds more uncertainty into the fiscal dynamic.  The wearying margin-less economic situation obstinately refuses to go away.
  
  
• Additional strategic hot topics: net worth expectations, capital access, deposit insurance reform, moral hazard, too-big-to-fail, systemic risk, loan portfolio mix risks, charter conversions, prepaid cards, consumer activist groups, financial literacy, credit union service organizations, participation loans, partisan political polarization, and many specific credit union-identified hot topics.  
  
  

Key 2012 Strategic Takeaways:

1.     Fundamentally Different Decade Ahead.  The next decade will be fundamentally different – economically, competitively, demographically, culturally, and politically – from the preceding decade.  Using the same strategic approach to the financial services marketplace as in the past would be insane.  The economy in particular is expected to inch its way along impeding everyone’s business plan.  To keep the credit union’s metaphoric head above water, its leaders must fully understand the prevailing undercurrents that radically impact on strategy.

2.     External Risks > Internal Risks.  External risk factors – especially political risk, regulatory risk, and complexity risk – will have more impact on a credit union’s strategic success than will internal factors.  What one does not control will exceed what can be controlled.  Get used to it – uncertainty and how well it gets incorporated into strategy is critical to a credit union’s successful operation.

3.     Federal Government Not Friend.  The Congress, the National Credit Union Administration Board, the Consumer Financial Protection Bureau, and the Federal Reserve Board have their own political agendas and are not a credit union’s friends.  Don’t let them fool anyone into thinking otherwise.  Instead, expect them to keep making things more difficult.  Treat their increasingly costly, complex, and burdensome demands with deference – but validate, verify, and when appropriate challenge their directives.

4.     Ultimate Stabilization Costs Unknown.  Regardless of whether the NCUA Board’s loss estimates for the corporate credit union legacy assets are realistic or not, the Board sets the Temporary Corporate Credit Union Stabilization Fund(TCCUSF) assessment based upon those estimates and they drive the credit union’s costs.  Nobody knows for certain how deep the multi-billion dollar TCCUSF hole really is or how long it will take to pay it off.  Plan for the worst, hope for the best.

5.     Industry Infrastructure Fractured.  As a direct result of the 2008 financial system meltdown, the current credit union industry’s legacy infrastructure – including its in loco parentis regulators, non-risk-rated deposit insurance regime, and even its traditional trade associations – are showing signs of rust and structural weakness.  Proactive demolition and reconstruction of these faltering institutions sans dogmatic platitudes, entrenchedoligarchies, and one-size-fits-all approaches could go a long way toward restoring real return on investment for each increasingly diverse and independent credit union.

6.     Heavy Mortgage Loan Mix Untenable.  In the absence of a serious refocus of lending strategies credit unions are at risk of becoming the next Savings and Loan debacle.  Collectively credit union loan portfolios are dangerously loaded with low-return fixed-rate mortgages.  Many credit unions also rely heavily on originating and selling to the secondary market that is currently in flux due to the conservatorship of Fannie Mae and Freddie Mac, the glaring absence of any private market investors, and Congressional proposals that could radically reduce the demand for mortgages.  It’s an accident waiting to happen that credit unions must anticipate and avoid.  

7.     Non-Bank Competition Toughest.  Big banks, community banks, thrifts, and even other credit unions are not a credit union’s biggest competitors.  Big box retailers, insurance companies, payday lenders, and other non-banks are running circles around traditional federally insured financial institutions and it will only get worse because most of the non-banks’ offerings are convenient, uncomplicated, and consumer-friendly.  Credit unions, and especially Congress and regulators, should learn from these competitors’ successes rather than try to stamp them out.

8.     Boomers & Seniors Rule, X & Y Drool.  Aging baby boomers constitute a major portion of credit union memberships and along with many seniors dominate credit union boards of directors.  Generations X, Y, and the very young will not be a credit union’s salvation in the near term no matter how hard they try to attract those smaller demographic cohorts.  Each credit union needs to find out what their existing baby boomer members want and find a way to profitably give it to them.  Neglecting boomers could be fatal to the institution’s bottom line.

9.     CU Business Model Threatened.  The traditional low-cost, high-service credit union business model seems increasingly at risk from its cumbersome governance structure, limited access to capital, reliance on loan and investment income, legacy modest means mission, innovation-killing hyper-regulation, and inadequate products and services authorities.  Credit unions desperately need additional ways to generate income, broaden service offerings, streamline delivery systems, and generate scalable growth.  The credit union business model will need to evolve in ways that will make the traditionalists uncomfortable, but the alternative is stagnation.  Credit union leaders must proactively advocate this business model evolution since it won’t be simply handed to them. 

10.  Urgency for Change.  Lead, follow, or get out of the way.  Credit union elected officials and management executives that are unwilling to be drivers of change should seek early retirement.  The future belongs to credit unions that are committed to and intensely involved in change.  A change management skill-set and a sense of urgency will be required if a credit union wants to emerge unscathed at theother end of the coming decade’s strategy-altering uncertainty-laden gauntlet.

 Have questions/comments for Marvin Umholtz? Leave them in the comment section below. 

Go Ahead, Stay Under the Covers - the Monsters Can Still Get You.

by Ron Daly 

A while back, the credit union Twittersphere had a conversation about blog comments and whether a blog is really a "blog" if it doesn't allow any feedback. 

"A blog without comments is still a blog, it's all about frequency of posting," some said. "A blog without comments might as well be a static web page," said others. Good examples on either side, but my question was always, "why block comments?" 

So...why block comments? I think I know why. It's because someone might say something bad. 

I've heard a lot of hubbub about "negative feedback" in the past five years. With the emergence of social media and the acceptance of blogging as a medium, people immediately skim over all the basics and jump right in on asking, "What if someone says something negative?" 

What if, indeed? 

The Monsters Are IN the Bed 

The idea of "monsters under the bed" isn't new to any parents out there...we've all had to check for them at some point. We know the truth, but if it makes our little ones feel safer? Sure, we'll check. We'll put in a nightlight, or we'll buy an extra teddy bear. We'll make sleep possible and, hopefully, lasting. 

When the "monsters" are not monsters but are instead an unsatisfied member? Don't worry about them being there or not being there. They're there. There IS a monster there, not under the bed, but in the bed. The question is, do you want to DEAL with the monster or PRETEND it isn't there? 

I think the term of choice for bloggers/social media managers/marketing people who consciously ignore bad feedback or go out of their way to hide it is "tone deaf". I also think there's something really sad about wanting to "go after" commenters or social media users who say something negative. Want to see where that gets  you? Read this story about Boners BBQ attacking someone for leaving a bad Yelp review [ABC News]. 

And while we're on the topic, what about social media from INSIDE the workplace? "We don't want people saying anything that might make us non-compliant!" 

And you manage that...how? Turning off social media? You turn off social media on their network, that's not going to stop anyone from doing something anti-compliant from home or on their phone.

"What if they complain about the credit union or our members?" So, let me get this straight - that's something you DO NOT want to know about, AT ALL? 

Monster Resistant, Not Monster Proof

The truth about business is, you'll never make everyone happy. You'll make some people really happy, you'll be fine with a lot of people, and you'll get a couple of folks good and angry. Getting the angry folks back on your side isn't a matter of just throwing money at them - sometimes, complaints and gripes are solved through careful evaluation. 

Let's run this down: 

• The complaint is anonymous and full of cuss words - Probably not something you need to burn a lot of energy working on, as it's just some punk playing with your comment fields or being a jerk on Twitter or Facebook. Moving on...
• The complaint is angry, but seems to be about a genuine problem and has an email address attached - Why not reach out to that person via their email and ask them more about the problem? For every one of these complaints you get, you're probably not hearing several more; this complaint might actually solve a problem you've been overlooking.
• The complaint is addressing a very specific problem, relative to that member - Then deal with it and follow up with that member, who will be VERY appreciative of your time and attention. 
• There are sixty complaints, all dealing with the same problem - Odds are, unless you are a top ten credit union with billions and billions in assets, you won't have enough members for this level of feedback. But if you find yourself dealing with a mob scene on your blog, figure out where they're coming from - who's got a good point, who's just gloming on, who's a defender of the brand. 

I think that's the worst part of the decision to completely block out feedback - this idea that you're holding back a tidal wave of negative people saying negative things. We've run this blog for about three years now and we've never had seventy comments to moderate at once. We do moderate, one comment at a time, and we post the ones that meet all our guidelines. Haven't seen our guidelines page? Here it is. Go look at it. That's been here from day one. 

As for social media, we take our own medicine - we use Social Sentry. It tracks social media usage on your office network, public and private, and also tracks public posts from users outside of the office all the time. When I, as the admin, see social media use I don't think is fit for the network, I intervene. When I see an account I want to follow, I follow that account and I get their public feed. I don't spend a lot of time worrying because I stay on top of things. Better than being in the blind, right? 

Managing the expectations and the reactions of members is easy. Just be clear, be consciencious, and be fair. When a problem arises, solve it. But don't think ignoring comments or completely disallowing them will stop people from talking about you. 

Be in charge of your repuation.  

Not Measuring Results -- Some Jaw-Dropping Insights into Credit Union Social Media

by Ron Daly 

Recently, to gauge our clients' level of interest in our new social media "getting started (or not)" course, we decided to send out a survey and see where our clients were (or weren't) with social media. 

The course that Jimmy Marks, our Creative Media Director, spent the summer building focuses on: 

1. Deciding whether or not to get into social media and the information you'll need to gather first
2. What it takes to make good content
3. Getting fans and followers that match your goals
4. Safeguarding yourself against compliance and security issues
5. Monitoring your results

...and we wanted to see how useful that advice would be to current clients who were interested in social networking. 

We sent out a simple survey. The results we got back were shocking. 

First, some table setting:

Average size of credit union surveyed: ~400 million

Average year-over-year share growth: 5.04%

Average number of members: 35,216

Now, the numbers worth noting:

• 63% of CUs surveyed are involved with and using social media in some form. 
• 54% of those are using Facebook, the winner by far. Second place was a tie between YouTube and LinkedIn
• Of the CUs that said they are using social media, 51% had been using social media for less than two years.

Interesting thusfar, but here's the number that made my jaw hit the floor: 

• Of the CUs surveyed, 76% DO NOT MEASURE THEIR SUCCESS OR THE RESULTS OF SOCIAL MEDIA AT THEIR CREDIT UNION. 

What??? 76%??? It's true, according to our results. 

Now, I'm not one to just hear numbers and completely ignore how they got there. As I looked at a later question, where we asked respondants what information they would want to hear in a social media workshop, many people said they needed measurements and better metrics. As a result, part of me wonders how much the lack of measurement has to do with not understanding what these CUs are measuring or how to measure it.

Some of the results were actually very helpful - many CUs are measuring their results in feedback and next-steps in the marketing/sales funnel, not just numbers of "likes" or followers. I worry, though, that much of the problem with social media is how people think it's a solution to something. If you don't have a clear message and a clear understanding of how people make buying and borrowing decisions, what difference could YouTube or Twitter possibly make? 

At DigitalMailer, we have lots of followers and friends and likes and so-on and so-on and so-on. But make no mistake, we don't call any of those "leads". Not until we've been contacted by that person via email or phone. It's great to promote the brand and talk about what you're up to, but that's not where our scope is focused. Twitter and Facebook help us keep in touch with partners, clients and some very interesting people - but pleasing clients and making products and services that save people money is the thing that keeps the lights on. 

In our workshop, we've got a lot of helpful information and some good actionable steps. More importantly, we encourage the kind of forethought it takes to talk yourself (or your superiors) OUT of doing social media if it's NOT the right way to spend your time, money, or creative energies. 

The workshop is $500 and includes a 90-minute presentation and a downloadable workbook. To sign up for our next session, click here. 

GUEST POST: How the New Government Watchdog Agency Follows in the Footsteps of Credit Unions

This post is a guest post from Justine Rivero of Credit Karma. 

The Consumer Financial Protection Bureau, or the CFPB, sounds like another too-long, government acronym in the news lately, but there are exciting reasons credit unions should pay attention.
 
When the CFPB goes into effect on July 21, its regulatory powers will address abusive financial practices and provide a safety net against financial meltdown. Simply put, it aims to be the biggest government powerhouse for consumer rights Washington has ever seen.
 
While debate erupts over whether the CFPB is a good thing, head of CFPB Elizabeth Warren outlined why the CFPB is an ally of credit unions as well as consumers. In fact, the CFPB seems to have very similar goals as credit unions. Here are four ways it looks like the CFPB has taken a page from credit unions.

1)     Treating Customers Like People.  In a speech to the Credit Union National Association, Warren remarked, “Your work—creating a valued partnership with your members—can be a real competitive advantage, not a way for others to take your business. So I see the [CFPB] as an ally of credit unions.” The CFPB aims to instill in the banking industry something that is already at the core of the credit union spirit—consumer-friendly practices and healthy customer-business relationships. Credit unions are in a position to leverage being an ally of the CFPB. Warren encourages an open line of communication with credit unions, telling credit unions to contact elisabethvale@treasury.gov with concerns.

2)     Products as Simple as A-B-C. The CFPB will focus on creating consistent, straightforward products so consumers can know exactly what they’re getting into. The hope is to minimize the tricky or vague policies that often leave consumers confused and tapped-out. For example, the CFPB created a prototype of a simpler mortgage form that has everything a homeowner needs to know, boiled down to two pages. With clearer financial policies, credit unions benefit from more informed, educated members.

3)     Concerns Will Be Heard. The CFPB has already set up the Consumer Question and Complaint Assistant to help direct consumer questions or complaints. The Consumer Response Center will launch in July, which will have the power to address complaints and help consumers. This will encourage the banking industry to be more receptive to their customers , and understand something right that credit unions have gotten right all along—focus on the customer, and not the financial product. It’s a recipe for success.

4)     More Collaboration. Opponents of the CFPB claim it will regulate the banking industry to death. But what’s been working so far—hiking fees, deceptive practices, profit-oriented practices—hasn’t really been working at all. The CFPB plans to use its “watchdog” powers to ensure companies are following consumer protection policies. That gives the financial industry a chance to better meet consumer needs. Customers who actually understand financial products are better in the long-term for financial companies’ bottom line. This sort of transparency could save the financial industry.
“We need to make credit unions part of the DNA of this bureau [CFPB],” Warren said. “For this bureau to succeed, credit unions must remain a major presence in the American economy.”

The CFPB embodies many of the same principles as credit unions. The CFPB is trying to create a more consumer-friendly financial landscape, because happy consumers make for better customers. Credit unions already know; it’s already a big part of their formula of success.

Justine Rivero is the Credit Advisor and resident Credit Rockstar for Credit Karma, the pro-consumer credit advocate that helps more than 2.6 million consumers realize the everyday cost savings of having great credit health.
End
 
Credit Karma™ is a completely free credit management service that provides free credit scores, personalized savings recommendations, and financial education. We believe free access to one's credit score is a fundamental consumer right. Credit Karma helps more than 2.4 million consumers realize the everyday cost savings of having a good credit score. Visit us at www.creditkarma.com.

Happy Birthday, Mobile Phones! What Do You Get for the Phone That Has Everything?

by Ron Daly 

This month marks the 38th anniversary of the first mobile phone call. Martin Cooper, a Motorola employee (below, photo via thenextweb.com), stood on the street with a gigantic (by today's standards) cellular phone and had a conversation. And in 38 years, we've come a long, LONG way. 

The phones got smaller, they got more functionality, and they went from being a convenience to a "necessity". I'm not one of those people that sleeps with his phone under his pillow at night, but my iPhone is my GPS, my on-the-go email inbox, my research assistant and, occasionally, my phone. It's a businessperson's tool, and the thought of going back to waiting for all my "get it done" information is a little frightening. I'm not alone, obviously. From Kottke: 

Once someone has an iPhone, it is going to be tough to persuade them that they also need to spend money on and carry around a dedicated GPS device, point-and-shoot camera, or tape recorder unless they have an unusual need. But the real problem for other device manufacturers is that all of these iPhone features -- particularly the always-on internet connectivity; the email, HTTP, and SMS capabilities; and the GPS/location features -- can work in concert with each other to actually make better versions of the devices listed above. Like a GPS that automatically takes photos of where you are and posts them to a Flickr gallery or a video camera that'll email videos to your mom or a portable gaming machine with access to thousands of free games over your mobile's phone network. We tend to forget that the iPhone is still from the future in a way that most of the other devices on the list above aren't. It will take time for device makers to make up that difference.

When it comes to credit unions, mobile might be one of the next big mountains to climb. Many CUs aren't running a fully capable website right now...how can they be expected to come up with a useful mobile app for a smart phone? And more importantly - how important will that be in a member's decision to stay or a potential member's decision to join? 

Some very insightful information on mobile apps and credit unions: 

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

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...

The State of the (Credit) Union

by Ron Daly 

Last night was the State of the Union address. Whether you watched live or just tuned in to the highlights this morning, little mention was made of credit union. That is, no mention was made. So for everyone's benefit, I decided to scour the web and find the main concerns of credit unions in 2011.

But wait, there's more...and you're part of it. Tell us what articles and issues are close to your heart or important to YOU in 2011. Maybe PFM? Maybe online branches and mobile technology? 

Leave us a comment in the comment section with a link to the article or issue you want to cover. 

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FREE CHECKING: The continuation (or destruction) of free checking is top-of-mind to plenty of industry pros. 

• View: 'Killing Free Checking Will Kill CU Edge' (from CUJournal.com)
• Will Customers Freak Out If You Kill Free Checking? (from TheFinancialBrand.com)
• How are you dealing with the end of free checking?‎ (from the Atlanta Journal Constitution)
• CU Checking is Largely Fee Free (from Credit Union Magazine)

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ALTERNATIVE OR SUPPLEMENTAL CAPITAL: The debate continues - should CUs seek supplemental capital? 

• Credit Union “Net Worth Ratio” and Supplemental Capital Reforms Sought (from BankersWeb.com)
• Supplemental Capital Tops 2011 List (form CUJournal.com)

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CHANGING CORPORATES: The Corporate system is still changing - read what CU experts have to say.

• A Corporate Recovery Stopped in its Tracks (from CURising.com)
• NCUA Urged To Seek Corporate CU Recoveries (from CUJournal.com)
• Corporate CEO Predicts Exit Of 5-7 Corps In 2011, More In 2012 (from CUJournal.com)

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CONFIDENCE: Who's confident in credit unions? 

• Credit-Union Members Less Confident Of Their Finances -Discover (from WSJ.com)
• CU CEOs Remain A Pessimistic Lot (from CUJournal.com)
• Credit Unions Spark the Fire of Economic Recovery (from CURising.com)

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POTPOURRI: A little bit of everything else...

• Some "buzz" issues to keep your eyes on in 2011 can be found in the JWT Slideshow, "100 Things to Watch in 2011". Go give it a look. 
• Click here to see CNN's full wrap-up of the SotU address. 

Leave us a comment in the comment section with a link to the article or issue you want to cover. 

 

Ron's Crystal Ball Says Knowing and Understanding the Member Will Make the Difference

by Ron Daly 

There have been plenty of 2011 predictions made in the first week of this shiny new year. We sifted through and found some of the more outstanding predictions made and thought we'd share them with you, our faithful soapboxers. 

From Transaction Directory: 

Mobile banking applications experienced a lot of media attention and some traction in 2010. 2011 will see more roll out of solutions by major banks; however it’s utilization will still be limited to the “early adopter” consumers. The real traction for mobile bank- ing will occur in the B2B world where notifications/alerts and approval requests kind of functionality will begin to resonate in the market. 

Also: 

The USPS will continue to struggle and lose billions of dollars. It is likely that postage costs will go up and services will be cut resulting in slower mail delivery times. In addition, bill recipients are becoming more demanding about where they want their bills delivered. On the B2C side, bill portals like Doxo, Manilla, and Zumbox will gain some traction with consumers. On the B2B side, Accounts Payable hubs like OB10 and Ariba will continue with their momentum of consolidating inbound invoices.

We saw a few of these coming - particularly, the bit about the postal service. Not to beat up on the post office, but so little of what people get via mail needs to be received that way. Online bill pay, email and text alerts, and email marketing can be done with less money and to greater effect. Mail still has a place and probably always will - but we've had our eye on the issues facing the postal service and the future seems dim. 

A heartbeat that we hear pretty clearly under all of the predictions we've read? A greater need to understand the member and meet them more than halfway. From the eMarketing and Commerce Blog: 

2. Goodbye to "pay and pray" advertising. The physical advertising world is about to be disrupted in a way not seen since the advent of the internet. Brands will begin to reject unaccountable "pay and pray" advertising in favor of precisely targeted, specifically timed trackable messages.

3. Nice to know you. Standing out is about delivering the right message to the right person at the right time. Marketers that create millions of micro-campaigns to make their message useful to consumers — i.e., hone their messages based on data — will reap results.

I couldn't agree more. Show a member that you know them, that you get what matters to them, that you want to do things solely for them. You might brush off the idea that members want "special treatment". Do so at your own risk. 

Let's talk about the article by Brett King on the Huffington Post, "The Finance Sector Gets a Start-Up Overhaul in 2011". There's a lot of gold in this article but the main thing to focus on is the diagram of technology versus behavior versus infrastructure change. 

The thing that makes 2011 so interesting, according to King, is the bevy of startups that want to shake up the way members interact with their credit union. What stands in the way of each of these new companies' success is the distance between the adoption of these new technologies by both the institution and the consumer. The invention of the "app" as we know it has really shifted our concept of ease of use and accessibility. The Internet changed things by proving you could buy, sell, transfer and transact sight unseen. The iPhone proved you could drive the interaction further into the personal sphere by bringing the ease of the Internet to the cellular phone. Does anyone who knows this expect there to be a "reverse exodus" back to face-to-face, in-branch transactions? 

The last bit of the article says it all, in my opinion: 

...The biggest risk to the finance sector today is the growing gap between the institution and the customer. The rate at which this gap is opening up is increasing rapidly, as the adoption of newer technology increases too. This is where we are going to see an explosion of start-ups and new businesses who aren't afraid to reinvent the bank customer experience. This is where the banks who do get customer and try to reinvent the journeys customers are taking will win.

It's also where banks who wait for ROI, or wait to understand the impact of social media, mobile, near-field contactless payments and other such technologies before investing, will lose out massively.

The moral? The idea of "bleeding edge" might make you queasy, but it can't make you feel any more sick than the idea of losing business because you won't bring better, smarter services to members. 

All the articles we mentioned are worth a read. We'd love to hear YOUR predictions for 2011. Which horse is worth a bet and which one won't leave the starting gate? Tell us about it in the comments. 

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The New "Da Vinci Code": Credit Card Agreements

by Ron Daly 

If Dan Brown, author of The Da Vinci Code, needs some brain food for his next book about little-understood ancient texts, he should look no further than credit card agreements. I understand the language in these things for the most part, but for some of them it STILL feels like I'd need an entire library, the Mona Lisa and Tom Hanks to help me figure it out. 

I bring it up because of this article from Reuters, "Trying to Read Credit Card Agreements" by Felix Salmon. An interesting read with a lot of interesting findings. From the article: 

How long will it take to get readable credit-card contracts? My guess is somewhere in 2012, if we’re lucky. Right now, although we’re moving in the right direction, we’re also moving far too slowly...

And of course there’s no point in reading this kind of thing: I doubt one cardholder in a hundred could even begin to say what it means to “honor claims of privilege recognized at law.” I certainly couldn’t.

According to this article, four out of five adults don't have the reading skills to understand the wording in these things. And fifteen pages long? People these days can't be bothered to read the expiration date on milk.

So, what's the solve here? How can we make this information clear, concise, and easy for anyone to understand? 

I have some thoughts based on some hot trends in information sharing. 

1) A YouTube Video

Pros: People can watch a video of their agreement terms rather than having to parse text; you can have audio AND video, which means you can highlight the points you really want to hit with dramatic music and text.

Cons: The stupid comments; The idea that if you're going to make a YouTube video it has to be "funky" and "Gen-Y" (and yes, people are using Gen-Y as an adjective). 

2) Infographics

Pros: Turns tough-to-understand information into eye-catching graphs that are easy to understand.

Cons: The alternative to being too hard to read is being too simple to understand thoroughly; tough to take seriously, which people SHOULD do with a CC agreement.

3) "Twitter-izing"

To clarify: No, not a Twitter account of a CC agreement - instead, you'd make it so that no portion of the agreement was more than 200 characters or, say, thirty words.

Pros: Keeping it concise means people don't feel overwhelmed; would require that long passages be broken up into manageable chunks; tough to use a lot of "three-dollar words" when you're on that tight of a budget

Cons: See the section on Infographics. 

 

Clearly, there's not a great "social media" approach to credit card agreements. So what IS the answer? I think Anthony Demangone sums it up very well in his recap of the same article: 

What are you trying to say?  Once you know that, say it as clearly as possible.  There are times when we must use precise words or "legal terms of art."  Outside of those times, though, writing or disclosures should be clear and easy to understand.  Don't use 50-cent words when a nickel buys you exactly what you need. Don't force readers to choose between confusion and reaching for a dictionary.  And you should hire a monkey to slap you whenever you use any of the following terms in a document meant for general consumption: heretofore, whereas, or any Latin phrase.  

Hired-slapper-monkeys aside, this is an issue we'll need to address as a best practice before we're required  to address it as a regulation. Elizabeth Warren is already eyeing this topic (thanks again to Anthony for the link), so you'd better bet your boots it's going to be someone's headache at your CU. 

What steps are you taking to act on that bit of information? What steps have you already taken to make your CC agreements better? Who should members call to help with any misunderstandings about terms? Could any old employee help you take care of it? 

Leave your thoughts and feedback below.