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60 posts categorized "Loans and Lending"

January 23, 2013

People Are Lending Directly to One Another…So What Are We Doing Here?

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by Ron Daly 

Today on CreditUnions.com, I was drawn to an article titled "Beyond the Home Loan: What can credit unions learn from online crowdfunding platforms?" [Here's the Full Article.]

While the article doesn't spell out the overall lessons, there are a handful of examples. Good enough, I suppose, because it got me thinking - what are we missing? 

Credit unions, as best I understand them (and after 30+ years in the business, I can honeslty say I do), were created to give members a way to lend to and borrow from one another. They were created as an alternative to the system. Now, for consumers, it seems like we're just another part of that "system". 

Bank customers and credit union members know that good loans go to good paper. If you're trying to buy a home or a car and you have a good credit score, you won't need to look for too long to get what you need. But if what you're trying to do is create a movie about Linotype machines or start a small business selling weirdly-shaped candles, you'll likely go wanting. And for the people who have rough credit, quick, high-interest loans with fewer strings mean more than "relationships" with a bank or credit union. 

As far as peer-to-peer finance and technology goes, you're crazy if you don't go read "A Game of Leapfrog" by Brent Dixon. 

From the article, originally published on the CU Watercooler

But meanwhile, many credit unions still don't even offer online account opening. We're saddled by regulations. We're a weighty, slow-moving beast. We make excuses.

Consumer finance is not just begging for disruption, it's experiencing it. In a few short years, many traditional institutions will be passed over. Leapfrogged. It's easier to build than reform, and people are building.

So, what can credit unions learn from peer-to-peer finance today?

  1. Time to Re-evaluate the "People Helping People" Message -

    Everyone I talk to in the industry loves that phrase, but how many credit unions are interested in the proof of it? When a person lends to Kickstarter, they get a "thank you" in the form of a gift - maybe a version of the product the borrower is developing or a branded package of swag with the up-and-coming product or company logo. What's the "thank you" gift new members get at your credit union? A letter? A free pen? 

    Better yet, where are the booklets and brochures with member success stories? Show me the story of a member who joined and went from broke to flush thanks to the credit union. Show me the small businesses that have benefited from the CU's guidance. Those stories have got to be there. Otherwise, my fees and interest are going toward nothing, as far as I can tell.

  2.  Partner Big, Lend Small

    According to the CreditUnions.com article above, services such as Kiva and Fundly use proven tech platforms like Paypal and Amazon to process payments and securely move money to and from borrowers and lenders.  Why can't credit unions partner with tech providers for everything they need - better online banking and account opening, smart phone apps, tracking of the loan process, etc.?

    It's not that they can't, it's typically that they won't...or don't want to. Even when vendors provide all the due-dilligence and proven testimonials and case studies, credit unions will still look for ways to doubt results. Who does that help? Not the member, certainly, and not the loan portfolio.

    And look at the amounts certain people are requesting - $300? $500? They'll go to a payday lender before they walk through your front door, how is that a good thing? It's not because the money isn't expensive - the rates on these small, short-term loans are outrageous. But people see fewer barriers to entry. They don't know they're walking into a trap. Shouldn't being more accessible be a goal for every credit union?

  3.  Never Turn Away From Your Social Missions

    People value charity, philanthropy, benevolence - not because they're "trendy", but because they're the right thing to do. We know hundreds of credit unions that partner with great causes but rarely explain the depth and their level of involvement. Why shy away from talking about things like Credit Unions for Kids? Share the good news with more than just a parting shot in your newsletter - make it a cause that you champion, not just "support".

  4.  Play the Game, But Play to Win -

    Sure, LendingClub and Prosper.com are growing enterprises. But are they human enterprises?  Can they really lend and handle deposits the way you can? Are those prepay debit cards celebrities seem to love so much really a better alternative? The answer to all three of those questions is "no". 

    You can provide deposit insurance. You can provide security. You can provide convenience. You can do it all and, if you do it well, you can show everyone that you're not "just another bank" - you were facilitating "peer-to-peer" before it was cool. And you're still here now.

It's not just lending that's being overtaken by "the people" - it's debt forgiveness, too. The Rolling Jubilee raised half a million dollars, bought up thousands and thousands of dollars of debt from banks, and forgave it. These "gifts of forgiveness" went out to average consumers, bogged down by medical or educational debt, and told them their debt was forgiven in its entirety. 

Your average consumer now knows that there are multiple ways to manage one's money - there's the bank, there's the credit union, or there's "none of the above". 

We USED to be the way people loaned money to one another...now, we're a hinderance. We get our "people helping people" status back by being adaptable, affordable, approachable, and dependable. 

Let's get to it.

 

May 30, 2012

Who Are the People in Your Neighborhood? Four Good Ideas for Getting Locally Known

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by Ron Daly 

Album.peopleneighborhood

[image via the Muppet Wiki]

It's time for you to take down that big, scary, Lex Luthor-esque map of the world you have in your office. You know, the one with all the big push-pins in it showing how you're going to take over the world?

If you're reading this, you're a credit union person. Global domination should be off your agenda. Why?

  1. It's a tad bit frightening and we're not necessarily a terrifying bunch.
  2. It's impractical
  3. It's improbable

I've seen credit unions with extra-inclusive fields of membership. I've seen credit unions that have branches in far-flung corners of the globe. But let's be realistic - where are you?

Where Are You? 

It's a big question. For years, we were trying to puff ourselves up to seem big and impressive. Now, we need to recognize that "local" isn't a bad thing - it might be our saving grace. 

Many CUs are repositioning at this moment, trying to remind locals that they have alternatives to their community banks and the big banks. "If you live, work, or worship..." covers a lot of ground, so get out there and show people what you're doing in, and for, that area. 

How? Here are four "good start" ideas: 

Continue reading "Who Are the People in Your Neighborhood? Four Good Ideas for Getting Locally Known" »

May 24, 2012

GUEST POST: Mark Arnold on Becoming Your Members' PFI

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Mark Arnold, CCUE, is an acclaimed speaker, brand expert and strategic planner. Mark speaks regularly to audiences around the country on branding, marketing, strategy, leadership, personal growth and generational issues.  With over 20 years experience in the financial services industry, Mark’s breadth of knowledge covers areas such as marketing, business development, human resources, training, and sales. You can follow him on Twitter [@jmarkarnold] or via his blog at blog.markarnold.org

_______

 

BEYOND A SAVINGS ACCOUNT: BECOMING YOUR MEMBERS PFI

“Credit unions must see themselves as relationship managers. As relationship managers, credit unions better position themselves to become members’ primary financial institution.”

—CUNA E-Scan 

While there is a big rush today to get more new members, one marketing strategy your credit union may want to focus on is getting more from your existing members. Most marketing experts estimate it is eight to ten times easier to expand a relationship with a current member than it is to acquire a new member. Just think about it: what would happen if every one of your members just added an additional product or service per household? Odds are, your net income would skyrocket.

Credit unions must get their members to go beyond just having a savings account and strive to become their members’ primary financial institution. “Financial institutions that make retention one of their top three priorities often enjoy deeper relationships, steadier growth and clearer focus on the core business,” says CUNA’s E-Scan.

According to CUNA, here are the odds of your credit union losing a member based on product usage:

  • 2 to 1 of losing a member if they only have a saving account
  • 10 to 1 of losing a member if they have savings account and a checking account
  • 20 to 1 of losing a member if they have savings account, a checking account and a loan
  • 100 to 1 of losing a member if they have savings account a checking account a loan and any fourth product

Product penetration and member retention are directly linked together.

Two steps your  credit union can take to going beyond just having your members’ savings account are:

1)      Offer relationship pricing

2)      Get sticky products in their hands

Continue reading "GUEST POST: Mark Arnold on Becoming Your Members' PFI" »

January 11, 2012

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

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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: 

Screen shot 2012-01-11 at 12.53.15 PM

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? 

Screen shot 2012-01-11 at 4.12.06 PM
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?

Screen shot 2012-01-11 at 12.55.22 PM

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. 

 

November 08, 2011

We're declaring national "Take your Compliance Team to Lunch" month!

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I'm not sure why this is, but most CU people I know don't look forward to an appointment with their dentist, NCUA or their Compliance Officer. Compliance and Internal Audit are thankless jobs that play an important role in keeping financial institutions safe and on track.

With all the bad rap Compliance Teams get, I thought we'd point out some recent conversations of how Compliance Officers are looking for ways to make Compliance a profit center. Once you CEOs and CFOs stop laughing, read on.

Compliance as a Profit Center?

Banks and Credit unions are finding ways for their organization to save money based on recommendations derived from the Compliance Team. So when you think about it, if they save enough money for an organization, Compliance could be a profit center when looking for ways to reduce costs and still be in compliance.

For example, are there paper disclosures that are printed over and over again due to regulatory changes that can be switched to electronic delivery? How about daily notices that are printed and mailed that are more a "courtesy" than a required mailing?  Are there ways for the CU to go "green" and still comply with ESIGN? (good ESIGN info in this compliance post but you'll need to be a subscriber to read it online)

In this post on the Trinovus Blog "Make Compliance a Profit Center", they suggest three ideas for financial institution Compliance folks to consider which help improve the bottom line.

Anthony Demangone, NAFCU's Senior Vice President and Chief Operating Officer, when asked if his view of compliance changed due to his new role at NAFCU, shared five ways folks can really help themselves as compliance officers.

  1. Bone up on your communication skills.   
  2. Think globally about your credit union. 
  3. Options. 
  4. Understand statistics, PowerPoint, and Excel. 
  5. Come with solutions.

(Read the full post here)

Granted, not everything from Compliance will save money. But if Compliance folks just find one big way to save money, make the recommendation with an estimate of how much the organization will save and watch management's attitude change as compliance helps improve the bottom line in these tough times.

So, we're declaring national "Take your Compliance Team to Lunch" month! There's no one better equipped inside your organization to figure out how to comply with all the regs and save you money. In November, walk down the hall and just say hello. Or bring them coffee and a pastry when the office is having a breakfast meeting without them. Even better, add a little more light and turn on the heat in their work areas. Compliance Officers are people, too!

What do you think? Can it work? Have ideas to suggest where your Compliance Team has saved you money and improved your bottom line?

 

October 03, 2011

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

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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. 

 

 

July 13, 2011

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

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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! 

February 03, 2011

Why would anyone go to a car dealer anymore?

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by Ron Daly

Did you hear the news that January new car sales are up 15%.  And I’m happy to report that my family is one of the contributors to the rise in car sales. Yes, after two years of paying off debt and my wife driving a 2003 lease turn-in with over 100K miles, we decided the time was right to get her a new ride.

She researched models, read reviews, created our “price range” and even bravely test drove five cars without the intent of buying any of them. Her secret, telling the car salesmen that she still needed to test drive other models before deciding on the one she wanted. It only became a small white lie when she was down to the last one.

After the research, she found the exact car with all the options she wanted at a local dealer online. We went to the dealer and, after the sticker shock wore off, took the car for a spin.  Now for the fun part… we made an offer on the car. As we patiently sat there playing the haggling game for about and hour and half over price and trade-in, we both decided we should just walk away and left without her dream car.

Now, we are not ones to give up easily. We called the sales guy the next day and restated our offer which was politely rejected. Being credit union folks, we decided we’d take another approach and see if our Northwest FCU car locator service could find us a similar car or get the exact car that we test drove that weekend.

Get this – by noon the CU Manager had secured the exact car she was looking for, for $3,000 less than what we had offered the dealer on Saturday and Sunday. As for the trade-in, the dealer wanted to give $6,300, CarMax offered $7,000 and the CU Car Wholesaler that came on site at NWFCU wrote us a check on the spot for $7,500. (CU savings $3,500 so far). The car was then delivered to the credit union where a salesman picked up the loan check from NWFCU and gave my wife a tour of her new dream car in the CU parking lot. This entire process was FANTASTIC!

So my questions – 1) why would anyone go to a car dealer anymore and 2) if you offer this type of service, how well do you promote it? 3) Or get members to spread the word?

Car dealers scare me and frankly, the only person I like to argue with is my wife. As Northwest FCU  members we were saved money on the purchase and trade-in, got a great rate on the loan and had a hassle free experience. We are thrilled and telling everyone we know about the great service our credit union provided.  Spread the word… we love our credit union!

 

October 12, 2010

2,689% APR, Anyone? The Macro-Micro-Loan

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by Ron Daly

We were made aware of a service called Wonga by our friend Ron Shevlin, who attended Finovate 2010. Wonga is a short-term micro lender that loans as much (as little?) as £400 (it's a British company) for a maximum of only one month. Micro-lending has been a hot topic lately, you give a little and get a little back and you feel like you're helping someone get their dream off the ground. 

Wonga is a little different. See, you're not borrowing the money because you're a small business owner - you're borrowing it because you want £400 (approx. $633) right now. So that means you're buying...what, an iPad? A very expensive dinner? New wardrobe? A really serious round of drinks? 

Spotting yourself a small amount of money doesn't seem crazy, with the right percentage and fees on the money you're borrowing. And how much APR does Wonga tie to lent money? 

2689%. 

You read that correctly. 

Continue reading "2,689% APR, Anyone? The Macro-Micro-Loan" »

August 31, 2010

Get your college student out of your house...and into your other house?

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by Ron Daly

Most of you folks have already taken your college students back for another year of higher learning. Man, is that on campus housing ever expensive!  Wouldn't it be nice if there was available real-estate near your child's college? 

Chances are, there are houses and apartments abound near your young person's school...and that could mean a real-estate treasure trove for you. 

From the Washington Post

By buying a place and taking out a mortgage, non-deductible dorm rents can be converted into tax-deductible mortgage interest payments.

Parents also benefit from tax deductions for real property taxes, depreciation and the costs of repairs and replacements, as well as travel expenses to locate, acquire and periodically inspect the investment property. The parents' tax burden might also be lessened by the capitalization and amortization of capital improvements made to the residence.

The article presents a pretty compelling case for buying a piece of real estate near a school, focusing mostly on write-offs and tax deductions, but also points out the benefits of not moving your student every year they're in school (hallelujah) and the eventual resale value of a building for whom there will always be interested buyers and renters. 

It's not all smiles, however; the article presents several drawbacks to owning a home near the university, including...well, the fact that your university student will have a home of their own to manage - or not manage - or, heck, outright destroy. Being a landlord is tough enough, but then there's dealing with your own kids as tenants and college students. 

My take? If you've got the means, you should go for it. Your student needs a place to stay, you need a write-off or two, the economy needs a pop in first-time home sales - everyone wins! If the money's cheap, make it happen. Just be very specific about your expectations to your young person before you hand over the keys. 

My take as far as credit unions go? How about a lending-bundle? Programs like Student Choice are making student loans from CUs more convenient to find and programs like CU Realty are giving you great mortgage rates and even cash back. A borrower that's smart enough to smell the opportunity is a borrower you want. 

What do you think? Let us know in the comment section below.