The CU Skeptic

The cu blogosphere has enjoyed a long run of freely shared information and ideas. The consensus has been that the benefit of sharing outweighs the fears. I believe much credit for this atmosphere belongs to OpenSourceCU. They have been doing this for a long time and their passion for openness has noticeably influenced those who have followed their initiative.

I suppose that I have taken this environment of openness for granted. Events of this week have shown me that not everyone is on the same page.

Earlier this week, I posted a comment on the JayRay blog. (The article itself was titled “There’s a Difference?”, how could I not comment?!) A response in the thread was given with a pretty staggering stat: “Credit unions saved consumers $11 billion last year.” I thought, “Wow, that’s an interesting number. I wonder how they came up with that?”

Rather than publicly ask for the source, (aren’t 79% of all stats are made up?) I sent the respondent an email with the following text:

Thanks for the comments on my blog and the response you gave on the jayray blog. Do you mind pointing me to the source where you got that 11 billion dollars number from. I’d love to take a look at it. Thanks!

The response I received was cordial but less than forthcoming. I won’t post it here (unless the sender wants me to) but I will say that I was not given the source. I was invited to call and discuss it, and, if my intentions were not to use it to help banks, I could probably secure it.

I didn’t (and still don’t) understand the big deal about revealing information used as argument in a public forum. (I’d say if you can’t reveal a stat source, don’t use the stat.) However, calling just for the source of some stat in a random blog comment seemed a little extreme, so I just let it go. Until today.

Today I’m reading the latest article on the Currency Marketing blog and, in the context of what I experienced earlier this week, it looks like Bank Fear is sweeping across the blogosphere. I don’t fault Tim for posting what he did. In fact, the openness to post about the process is what I love about this community. However, acting out of fear is not innovative, nor is it productive.

If banks can really “topple” credit unions, shame on credit unions.

In fact, “bank attacks” should not be credit union fear #1. Irrelevance should be. Just read the original JayRay article. Melina’s experience is echoed over and over by young people that start in this industry. That’s the situation credit unions need to address, not the fear of the big bad banks trying to get the 10% market share currently occupied by credit unions.

I believe the current state of the credit union blogosphere is helping credit unions combat this public enemy #1, and I for one, would love to see it continue in this manner.

I brushed by this in my post on Principle #1. It’s a stupid question, right? A credit union offers financial services.

What if your credit union didn’t put itself in that box? What if your CU saw itself as offering community services, some of which were financial?

Could this kind of credit union work? Would its diversity of services help or hurt it’s members?

What would it look physically look like? (I’ve never mistaken a community center for a bank. I’m just sayin…)

There’s a great discussion going on over on the Filene blog that is centered around an article and what it can tell us about the credit union difference. I encourage you to check out the whole writeup and the comments.

I’ve copied my comment because I’d like to go just a little deeper with it here.

* Citi claims some 370,000 employees worldwide, so the reduction we are talking about represents a little over 8% of their workforce. Don’t get me wrong, that is a lot of families, but unfortunately layoffs of this size are not unheard of in our present day economy.

* It looks like Citi wasn’t going on a hiring tear to increase profitability or throwing people at their problems. They were playing the acquisition game that our financial institutions (both banks and CUs) are so in love with. The people were just by-products of the acquisition.

If you’ve got some spare time, look at the Citi 4th Quarter and Full-Year 2007 Earning Review. If I’m reading everything correctly, I read that 50% of Citi’s 2007 Expense Increases and that 75% of the Headcount Increases were due to acquisitions. All this to get a 4% boost in revenue. I know it’s crazy, but that’s the game everyone is playing right now.

What does this article and these comments tell me about the CU difference?

The difference between shareholder and stakeholder value is intrinsic in the bank v. cu debate. While some say the everyday corporate world needs to approach value from more of a stakeholder position, this article makes it clear that this is currently not reality. Credit Unions naturally take this position and it is evident in the way they approach everything they do.

However, I also believe that as banks become focused on stakeholder value, triple bottom lines, and the like, the magnitude of this competitive advantage could shrink significantly.

So here’s the question burning in my brain: At what point is laying off employees good for a credit union? I’m not talking about firing bad employees. I’m talking about letting people go to increase member value.

Presidents, GM, and Board Members: Would you let 1% of your staff go if you wouldn’t lose productivity and could drop rates across the board? What if it allowed you to offer more small business loans? More education loans?

Credit Union Members: How do you handle inefficiency at your cooperative? Would you let 1 employee (and fellow coop member) go if services didn’t take a huge hit and it meant everyone got a bigger dividend check?

You see what I’m getting at? I understand that credit unions are definitely more emotional about these things, but you can’t run a coop on pure emotion. (Even the “triple bottom line” still includes a financial line.)

I’m interested in hearing how real life CU people handle these types of things. Would you ever even consider this? Has anyone had to do this after a consolidation? Was it worth it?

(Anonymous or Pseudonymous comments are welcome. They kind of have to be!)

Here we go with Voluntary Membership:

Credit unions are voluntary, cooperative organizations, offering services to people willing to accept the responsibilities and benefits of membership, without gender, social, racial, political or religious discrimination.

Many cooperatives, such as credit unions, operate as not-for-profit institutions with volunteer board of directors. In the case of credit unions, members are drawn from defined fields of membership.

We can learn a lot of the credit union basics from just these few sentences.

• What is a credit union? A volunatary, cooperative, not-for-profit organization
• What does it do? Offer services
• To whom does it offer services? Anyone willing to accept the responsibilities and benefits of membership that fits within the credit union’s defined field of membership
• What can the credit union base it’s field of membership on? Definitely not on the basis of gender, social (status), race, politics or religion
• Who oversees the credit union? A volunteer board of directors

This credit union sounds like a pretty decent place. Volunteerism, responsibility, benefits, and limited discrimination. It sounds nice, but I still have some unanswered questions from the text of principle #1:

• What kind of services does a credit union offer?
• What are the “responsibilities” of membership?
• What are the “benefits” of membership?
• On what basis can a credit union define it’s field of membership?

I hope to tackle each of these questions with a kind of “wide eyed” naivety in later posts. But first, let’s answer based on where we’re at.

Credit unions offer financial services. Responsibility of membership is usually limited to small financial obligation upon joining. Benefits of membership vary greatly from credit union to credit union. Probably the most consistent is lower rates on loans. Fields of membership are defined by geographical areas in which a person lives, works, or worships.

Does that sound about right? Does this description match the mental image you get when reading principle #1? Not so much for me. The biggest disparities I see between philosophy and practice are in member responsibility and fields of membership.

Member Responsibility

A $20 requirement for deposit is hardly what I have in mind when I read principle #1. I think of an ongoing commitment. I almost think of chores. Would I join a financial institution that had a list of chores for me to do? I don’t know if I would. I do know that if I did, I’d make sure I did them, and I’d make sure the others in my cooperative were doing them as well. (That’s the way momma raised me!)

What would cooperative chores even look like? Maybe general meeting attendance. Maybe community involvement. Maybe completed training sessions. Would I consider the benefits of membership worth taking on these responsibilities? If I didn’t, would you really want me in your coop?

Fields of Membership

Now I can’t say geography is a bad place start with field of membership. It makes sense. It’s easier to coop with people you are geographically close to. But I believe this is rapidly changing. Our world is getting smaller and geography is becoming less and less relevant.

If fields aren’t based solely on geography, what could we base them on? It’s no secret that I am a fan of Tim McAlpine’s affinity model. I think this a great direction and I would love to coop with a group of like minded pseudonyms.

“But we’ve got laws and regulations!” Ok. I get that. Here’s some thoughts.

• Create an “affinity charter” process. That’s right. CU Skeptic is talking about NCUA and Washington. This would give some oversight to the process, to ensure it does not infringe on discrimination, all while making a huge stride towards making credit unions more relevant.
• Incorporate affinity into your community charter. Try satisfying NCUA’s “local community” requirement and then go the extra mile by throwing in some affinity. Which is a more community based institution: a cu that serves all of Los Angeles or one that serves the bloggers of that same area?

I have no idea if the above are feasible, but why shouldn’t they be?

Wrapping Up

So there you have it. My not so brief take on Voluntary Membership. What do you think? Feel free to comment, or if you respond on your own blog, leave a link in the comments so we can all keep up.

I’ve been wanting to do this for a while and it finally looks like I can carve out enough time to give it the attention it deserves. I want to start a discussion about the 7 principles from a 2008 and beyond perspective.

I believe there is plenty out there about the origins of these principals and how each one has played out in the world of credit union “yesterfar” but there’s not a ton of talk about what those principals mean today and how they (should) influence credit union practices.

Now some of you might say that the principles mean the same today as yesterday and that’s why we don’t need to talk about them. We may come to the end of this discussion and find that you, Mr. Timeless, are correct. Never the less, I think the discussion can only help the understanding of the community, and specifically my generation.

I also want to stress that this is a discussion. I am definitely short on answers as I look down this list, so your thoughts, comments, and banter are welcome, appreciated, and needed.

A quick last minute thought and then I’m off to write about Voluntary Membership. Along this journey, let’s not just take the time to determine what these principals do mean in the present day credit union, but lets also be bold enough to talk about what they could mean to the CU of tomorrow. Don’t worry, I’ll still be skeptical (it’s kind of my thing) but that doesn’t mean you have to be.

I’ve seen “The Difference between Banks & Credit Unions” a few times now and from the first viewing, there has been one piece of it that makes me want to shout and scream and throw things.

Props

First let’s give Larissa her due props. I absolutely love the presentation style. I am super impressed that she was able to use a style made “popular” by some very smart and talented people (CommonCraft) and somehow not make it lame. It was clean, smart, and funny, and that’s not easy to do when talking about credit unions.

What’s the problem?

It’s the bench scene. I just can’t stomach it. If you want to watch just the clip, it starts at 1:32 in the video. I’ve provided the transcript below.

“Hey. Hey, do you like my ipod…my bank gave it to me.”
“Hey do you like my long list of free services…my credit union gave them to me. owned.”

Sorry cu stick figure, but from my perspective, you got got the short end of that deal. Bank boy is sitting there with an ipod and you’ve got a list. A LIST!

Not only is your long roll of paper useless for rocking out, the free services you hold so dear were part of Bank boy’s account as well. He got an ipod. You got a propaganda scroll. Owned.

Why are you picking on a 19 year old girl?

Actually, I don’t blame Larissa for this misstep at all. It’s a line credit unions have been holding on to for a long time. “We offer more free services.” The problem is, I’m just not sure it’s true anymore. I think before we go off touting “more free services” as one of the big draws to a credit union, we may want to stop and see if it truly is a “credit union difference.”

Why does it matter?

With all the talk about a national marketing campaign and the giddy hysteria to put this video on every cu homepage in the world, I think it’s important that if something is claimed as a “cu difference”, it really is. Promoting something as a “difference” that isn’t only blurs the lines between banks and credit unions even more.

So that’s my question: Is “more free services” a credit union difference?

Update: Tim does a great job of calling me out and giving me a Canadian banking lesson below. I highly recommend you check out his comment.

After reading Ron’s headline I thought maybe I wasn’t going to have to be “that guy” on this one, but as Tim pointed out, by definition, I am “that guy.” Glad to be back in the swing of things.

There is a great conversation going on that started with Tim and Ron and has become an all out community event. (Even warranting a full blown response article and the introduction of a new verb from Tim.) While I have my own thoughts on the underlying issues, the first thing I want to know, from those who are obviously more deligent in their blogging than I, is “How much time does blogging actually take?”

I’ve heard (and sure am a testiment to the fact) that blogging does take time, but how much? I created a super short survey that I would love to have you input on. Have fun.

The Real Cost of Blogging Survey

Update: I currently have 6 submissions to survey. When I get 20, I’ll publish the results.

I’m reading the latest OSCU article about a holiday loan being offered by Detroit Municipal Credit Union and the conversation lent this nugget in regard to members financial responsibility (or lack there of):

“People are going to do it no matter what. Would you rather they go to a check cashing co or a CU?”

What a great position to take! You know there are always going to be people who are not financially responsible, so why not make the credit union a clearing house for them to gather. While they are there maybe you can help them pick up other bad habits.

In fact, I like pairing this with Tim’s arguement for a more narrow field of membership for more relevant credit unions, so here we go.

• The Gambler’s Credit Union. Why would we keep letting these people go to bookies?
• The Crack Addict’s Credit Union: Digging through your grandmother’s purse is no way to live.

And I wish I could come up with one more for the trifecta, but I’ll let you guys take care of it in the comments.

(PS. Thanks to the CU Communicator for missing me during my month long absence. If you blog, you know sometimes life gets busy. I hope to do better this month.)

Even the skeptic can take a day to just sit back and be appreciative for the role that credit unions have played in financial history and focus on the ideals that make the soul of credit unions truly inspiring.

There’s a lot of stuff around the web about this, but here’s some links to get you started:

• History of Credit Union Day
• Verity’s CU Day Writeup
• Mt. Lehman’s Blog (They are throwing the CU Day bash that I would love to be at!)

Happy Credit Union Day.

There’s a conversation going on over at the Everything CU blog about cu vocabulary and jargon that brings up an issue I think we should talk about.

One idea mentioned (in this and other posts and comments) is the thought that if credit unions refer to the people that consume their services as “members” or “owners” this will cause people choose credit unions over banks. While I understand both terms are correct references to the privileges granted to those at a credit union, and I agree both are neat, cool ways to think of these people, this notion ignores the role that drives the interactions of these people and the role they identify most with: “customer”

Story time

I really love the outdoors. Camping, hiking, and backpacking really get me going. In May, I was at a local REI picking up some gear. The cashier asked if I wanted to become an REI member for $15. There was a discount and year-end payout involved, so I signed up. I had become an REI member! Cool.

As I was leaving, the cashier also threw in this nugget of information. “REI is a cooperative and with your membership, you have become a part owner.” I had become a part owner of REI! Way Cool!

How many times have I been back to REI since? Zero. How many times have I visited their website: Only a couple.

What went wrong between me and REI? Am I an unhappy member and owner? No. I just haven’t had a consumer need that drew me back to REI. Have a bought other gear? Yes. I’ve just found it cheaper or closer.

My REI membership and ownership has NO BEARING on where I buy my gear. None at all.

The same is true for my financial needs. An older Seth Godin article talks about a “Customer Hierarchy of Needs” and while it looks to be geared towards more technical products, it easily extends to the financial world. Only after I become a satisfied customer can my interactions help me move to a level of considering what it means to be a member and an owner.

So what’s a cu to do?

1) Survey your members and find out which term (or definition of term) they most identify with and which one drives their interactions with you. Maybe one of the marketing gurus around the cu world can help us come up with something .

(My bold predictions: Most people don’t stop by your branch or website as an “owner” to check up on if things are running smoothly. Your member/owner actually sees herself as a customer first.)

2) If my prediction holds, abandon the talk about “members” and “owners” and try to provide the best “customer” experience in the financial industry. This is the reason people will choose your cu over the bank next door.

3) If you really want to stick with “members” (maybe you’ve printed t-shirts and mugs and branded toasters) make membership mean something. As Gene Blishen reminds us in one of his posts about the 7 principles, there is a “responsibility of membership” and I believe that this “responsibility” can be the key to moving a person from a customer to a member. Make a customer invest a piece of himself that is larger than just his money, and I believe you have a much better chance of him becoming a happy member and repeat customer.

4) If you’ve just made the decision to start using the term “owners”, I can’t say I know what to tell you. The thought of ownership seems so far up in the atmosphere that you will have a hard time getting people with feet on the ground level to understand, recognize, and appreciate it. Try to identify those that are already thinking at a “member” level and develop ways to help them to the next level.

I’d love to hear what you think.