Archive for the ‘credit union’ Tag

Guest Post: Credit Union Outsider

This is a guest by the not-so-anonymous Bill Grizack. Bill is Managing Director of BrightLeaf Financial Network, a CUSO whose mission is to bring technology-enabled financial planning and advice solutions to the average credit union member. Bill is responsible for developing BrightLeaf’s high-level strategic direction and managing the CUSO’s direct sales effort. He can be reached at bill.grizack@brightleaffinancial.com.

Credit Union Outsider

I have been working with credit unions for the last five years or so.  I don’t work at a credit union, nor have I ever worked at a credit union.  My job is to sell online financial planning services to credit unions.  That said, I have been keenly observing credit union behavior and rhetoric all along the way.

My frustration with credit unions in general, and leadership of credit unions specifically has been growing for five years, and is now at a boiling point.  Someone needs to snap these guys back to reality.  I guess this is my attempt to do so.

At heart, I believe in the credit union mission.  Every credit union I have spoken to or visited (over 500 or so in the past five years) has a mission something like this – “Our credit union’s mission is to improve the financial lives of our members.”  This is a mission I believe in.  Unfortunately, I have yet to experience this on any mass level.  For the few of you that live and breathe this mission, I applaud you.  For the rest, I say, quit deluding yourselves and get to work.

The behavior I have witnessed and been subjected to leads me to think that the real mission for credit union’s should read: “Our credit union’s mission is to improve the financial lives of our members, as long as it means we don’t have to take any risks, change our behavior whatsoever, spend any money or put out any additional effort.”  Harsh, I know.  I have a motto – “It’s not a value judgment, it’s just true.”

Let me defend my argument using the typical credit union rhetoric.

Credit Unions are better because we are about people not profits.

In the 2009 J.D. Power & Associates study in retail banking, they asked consumers to rate their current primary financial institution on their overall satisfaction.  To be specific, below is the JD Power definition of overall satisfaction:

Overall Satisfaction: This score is based on how customers rate their overall experience with their current primary financial institution.

By this measure, we can certainly declare the winner of who consumers think are the best financial institutions from a customer service perspective.  Below is a breakdown by region of the number of credit unions in the Top 10:

Region # of CU’s in Top 10 Region # of CU’s in Top 10
Mid-Atlantic 0 Southeast 0
Mid-West 0 Southwest 0
Mountain 0 West 0
New England 0 Nationwide 0

That’s right, not one credit union was ranked in the Top 10, in any region of the US.  If you say you are about people and not profits, yet consumers do not rank you first among financial institutions, what are you really doing or saying.  This point of rhetoric is a farce.  The statement “people not profits” implies that the banks (and all other for profit entities) are scumbags, yet, consumers find the banks tops in customer service.  Just because you are nice, does not mean that you are about people.  On top of that, are the folks that work in bank branches mean?

Credit unions are better because we offer the best rates.

There are a number of rate ranking systems out there, so I chose bankrate.com as an industry benchmark.  For the last six (6) months, below is a list of credit unions by product type that rank in the Top 10 for best (lowest for loans and highest for deposits), taking into account fees:

Product # of CU’s in Top 10
Mortgages: 0
CD’s: 0
MMA & Savings: 0
Auto Loans: 0
Credit Cards: 0
Checking Accounts: 0

Two for two credit unions.  Not one credit union ranked in the Top 10 for any product set.  So if you are returning your profits to members in the form of better rates, and yet you don’t rank in the Top 10 for rates for any product, how are you better again?  Oh yeah, you are nice.

Credit unions are better because we offer the best services.

In a Forrester Research study of Consumer Ranking of Financial Institutions performed in 2008, consumers were asked to rank financial institution services based on factors like convenience, usefulness, cost, etc.  Below is the a table that shows the number of credit unions in the Top 10 (again by region):

Region # of CU’s in Top 10 Region # of CU’s in Top 10
Mid-Atlantic 0 Southeast 0
Mid-West 0 Southwest 0
Mountain 0 West 0
New England 0 Nationwide 0

At this point dear reader, you should be noticing a pattern.  As you break it down further, the Forrester survey did not list one credit union in the Top 10 for best branches, most convenient ATMs, best online banking, lowest fees, closest branches, knowledge of staff or call center access.  Best service?  Yes, yes I forgot, you are nice.

The list of rhetoric points does go on, and as you dig in you find that credit unions do not perform.  Another example – looking at the same JD Power and Associates study I mentioned above, not one credit union is ranked in the Top 10 for having the lowest fees.  Credit union rhetoric says that credit unions are better because they have the lowest fees.  I don’t think so.

The counter argument to all of this data is that in aggregate, credit unions have the lowest average fees and the best average rates.  This is true on average, but what this argument neglects is access.  A consumer does not have access to the average rate, only access to the financial institutions in her area.  A better measure would be a weighted average of rates (or fees) based on access to those rates (or fees).  Of course no one in the credit union industry has done this analysis.

Now that the rhetoric is out of the way, and sufficiently debunked (at least in my opinion), what should credit unions be talking about that would be something we could all talk about?  I think the answer is staring credit unions right in the face, every time they walk into their own lobbies.  If credit unions were to actually try to live up to “Improving the financial lives of their members,” then that would something remarkable for us to all talk about.

What would “Improving the financial lives of their members” look like for the credit union industry?  I will take a run at that below:

  • Every single member of every single credit union gets a target goal plan and a target spending plan.
  • Each member gets access to not the best rates, but the best set of products to help them achieve their target goal plan and target spending plan.
  • Members get access to relationship pricing that gets them better rates the more business they do with their credit union.
  • Each member of a credit union gets access to best in class delivery channels that work for them – call center, branches, online, etc.
  • Members of credit unions get a refund check each year equal to their fair share (by product relationship) of the credit unions profits at the end of the year.
  • Every single member of every single credit union gets a review of their target goal plan and target spending plan every year.
  • Rinse and repeat – and be nice about it.

If credit unions don’t adjust, my belief is that they will be marginalized even further in the financial industry.  They have a noble mission.  It is time to live up to it.  At least that is what this credit union outsider thinks.

Looking around for the “Keep your Gas Guzzler” campaign

The Skeptic household is a typical 2 car gas guzzling American home. We’ve got the good-mileage-long-commute car and the gas-sucking SUV. The SUV is older, paid off, and gets about 17 MPG. Recently, we entertained the idea of trading in the gas eater for something more fuel efficient, an idea that the TV and Internet seems to indicate many people are entertaining.

I won’t bore you with the math here, but basically it would cost us ~$3000/year in fuel to drive the least efficient vehicle on our longest commute everyday. (We don’t actually do that, but it’s a fun budgeting excercise.) It would only cost a Prius ~$1000/year in fuel. Sounds pretty good, except we’d probably be paying ~ $375/month ($4500/year) for a car payment. That’s $2500 more over the course of the year than we would spend to keep SUV for another year. Even if I found a used Civic, the fuel savings would probably not make up the cost difference.

“Ok, we get it. You’re a cheapskate and don’t mind singlehandedly destroying the environment. What’s the point?”

The point is, that if you’re a CU that wants to promote thrift, members turning in their paid off vehicles is probably not something you should be pushing*. I know there is a chunk of the population that naturally would be up for a car turnover this year and if a gas promotion will draw those people to your CU, go for it. However, that’s not all people, and I’m going to go out on a limb and say not a great deal of people.

How great would it be if a CU acknowledged this and promoted sessions/meeting/consults to help people evaluate their car situation and, if the situation leans towards keeping the current vehicle, offer other tips on how to save money on their current commute.

People are eating up thrift info right now (just watch your favorite local and national news tonight) and it would be a great time to re-enforce this core purpose.

* I’m not saying you can’t do both or that doing a gas promo means you don’t care about thrift, I’m just saying it’s not for everyone.

“What if it’s hugely successful?”

In a post back in March, I talked about Bank Fear. Apparently it’s not just Banks that CU minds are scared of. In fact, based on what you read, you might think CU people are just about the most scared, pessimistic people in the FI world today.

I’m referencing the some of the responses to CUES Experience presentations given in mid May. (That’s to Tim McAlpine for sharing those with everyone who wasn’t there.)

Here’s my challenge to anyone attending upcoming CU conferences. After a presentation, especially one of those super innovative ones, suppress the desire in your mind to dive into the “worst case” scenario. Fight against all those years of status quo conditioning and instead, try something different.

Envision the “best case” scenario. Try questions like:

  • What if this radically enhances our customer experience?
  • What if we have an huge influx of Gen Y members?
  • What if this creates such a great work environment, we have to turn away really talented applicants?
  • What if we become hugely influential in our community?
  • What if our Young and Free representative ends up being our CU’s CEO at the age of 30?
  • What if this drives the community bank down the street out of business?

Now these may sound silly, but is it any more silly than “What if Larissa gets arrested?”

I’m just asking you to try it. Who knows what may happen.

Bonus Points: The challenge becomes a dare. If you actually stand up and ask one of these (or similar) wildly optimistic questions at a conference in the future and can document (through video, audio, or a few witnesses) I’ll send you a $15 Starbucks gift card!*

*I can only do that for the first person that I hear from. So the race is on!

Information Hippyism and Bank Fear

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.

Pie in the Sky: What kind of services does a credit union offer?

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…)

The Crack Addict’s Credit Union

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.)

Happy International Credit Union Day

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:

Happy Credit Union Day.

Maybe we should just call them “customers”

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.

Credit Unions as diamonds in the rough

Over on the Filene blog, Ben Rogers (who is heading what could be a really cool project focused on credit unions and young adults) gives an interesting take on credit unions. I’ll post his full quote for context, but I find his first sentence most intriguing:

“Credit unions are a diamond in the rough. As a young American, I never would have found them or understood them if not for my work at The CEO Report. There are millions of young Americans in the same boat. It is my sincere hope that this project will go a long way to test new models and ideas for credit unions to become more relevant not only to young consumers, but also as an employment option for talented, young professionals and perhaps the introduction of young professionals onto credit union boards.”

I actually think ‘diamond in the rough’ is a good way to describe credit unions. (Though the deep cynic inside me wants to push it closer towards ‘pressurized coal’, I’ll run with the ‘diamond’ reference for now.)

So while most cu blogs would talk about the ‘diamond’ piece of the analogy, let’s take a look at the ‘rough’.

Obscured from plain sight

A diamond in the rough is hidden from plain view, flying under the radar, undistinguished from its surroundings. I feel the same can be said about credit unions in the context of the financial landscape that a consumer sees. Is there anything that helps me know whether a building is a bank or a credit union? Inside or out?

Uncut and Unpolished

Not that the people or the efforts of individual credit unions are, but as a whole there is a refining process that I believe credit unions are in the middle of. That means some are not going to make the cut, but the ones that do will be something to look at.

Ok I’ve taken the analogy about as far as I can. I’d love to hear your thoughts…