Archive for the ‘credit unions’ tag
Mark encourages CUs to address questions about the organization’s value proposition and how it engages members. The CU Insight article, penned by CUES’ Charles Fagan, suggests that CUs identify the right planning horizon, get artistic, and leave time to incubate ideas.
No argument from me. All great ideas and suggestions for what to focus on in a strategic planning effort. Charles even goes on to recommend that CUs “include key players from all areas and levels in the organization”:
“CUES is small enough that we were able to include every staff member in the brainstorming sessions. This was a great professional development opportunity for our young professionals and others on the team who don’t think organization-wide on a day-to-day basis. Being inclusive also helps get staff buy-in for the ideas generated and the resulting strategic plan.”
Being inclusive is important. I had a boss at a consulting firm who told me that “only senior execs formulate strategy” and as a result we had to ignore the front-line managers who really understood what the day-to-day issues were.
But regardless of how you structure your organization’s strategic planning process, regardless of which questions you address, and regardless of whether or not you get artistic and leave time for incubating, it’s likely that you’ll still have a strategic planning problem.
The problem is a people problem. At the risk of oversimplification, you will likely have two distinct personalities participating in your strategic planning process: Dreamers and Solvers.
An employee’s job description might be a predictor of which strategic planning process role they play, but it isn’t 100% accurate. Their job description notwithstanding:
1. Dreamers look for greenfield/blue ocean opportunities. The dreamers are those who want to address (and even create) the potential market opportunities. Their contributions to the strategic planning process tend to focus on suggesting new products and services the firm could/should offer, the new consumer segments to go after (Gen Y is our future!), and the new emerging technologies that promise to make the organization orders of magnitude more effective and efficient (a billion people are on Facebook!).
2. Solvers want to fix today’s problems. Solvers are problem solvers. They see and feel the pain of the weaknesses of the existing system and want the organization to fix them and fix them now. They use the strategic planning process to advocate for these fixes, if for no other reason that there’s usually no other process that organization has in place for allocating resources to fix these problems.
The problem that results from this dichotomy in roles stems from two issues:
- Dreamers are not always particularly good at figuring out the “how do we get there from here” question.
- Solvers’ time horizon is usually too narrow and their content focus is a whole lot more tactical than strategic.
If you work at a credit union, you might have a third type of contributor (and another problem): The board of directors. In my experience, many of them — while highly committed to the success of the CU and often quite successful business people in their own right — aren’t particularly good contributors to the strategic planning process.
If you’re the CEO (or member of the senior exec team) at a credit union, planning your CU’s strategic planning process/offsite, you’ve got some challenges to deal with:
- How do you balance the focus of the effort between the truly strategic and the tactical?
- How do you incorporate input from both the Dreamers and Solvers?
- How do you evaluate the skills of a facilitator who may be better at Solving than Dreaming (or vice versa)?
- How do you overcome (or at least recognize) your own inherent biases in this process?
No easy answers here. The first step is to recognize that there is no “formula” or “recipe” for successful strategic planning.
In a recent industry analyst meeting, the CEO of a large financial technology firm laid out his firm’s vision for expanding into new markets within the financial services space. I asked him “Who do you see as your primary competitors standing in the way of your quest for world dominance?”
His answer (as best as I can recall) was “well, we have a number of competitors in the variety of spaces in which we play.” He did name four firms — one of which I wasn’t familiar, another which I would never have thought he’d mention (since this particular organization doesn’t sell software to financial institutions).
My take: His answer was unsatisfactory. You’ve got to know who you’re going to knock off the pedestal on your way to world dominance. And this is of particular importance to credit unions.
Let’s say you’re the 250th ranked tennis professional in the world. There are 249 other pros ahead of you on the list, but only one matters — that Djokovic guy. If you beat Djokovic you might not jump from #250 to #1 (or #2), but if you beat him, you’re in the big leagues. On the map. On the radar.
It might take you a while to get a chance to beat Djokovic, but the other piddly-sh*t pros don’t matter. They’re just the peons you have to slay and step over on your way to the top.
In the world of financial services, the focus of your FI’s competitive strategy doesn’t necessarily have to be the largest provider in the market. It should be the one who has the best reputation, or best products, or best service, or best whatever it is that you compete on.
Why is this so important? In a word, alignment.
When you know who you’re (really) competing against — or better yet, when you know who you want to knock off the pedestal — your organization has a much easier time deciding what to invest in, and what not to invest in.
What the other piddly-sh*ts do doesn’t matter. They’re pretenders to the throne. Only your firm is the true contender to the throne.
Why tell you all this?
I saw a tweet today, from someone attending a credit union conference, quoting Chip Filson telling CUs “Don’t try to be ‘nice’ banks.”
Excellent advice, I couldn’t agree more.
But it reflects a problem that credit unions have: They set their sights on knocking banks off the pedestal.
No offense to bankers, but people, allow me to let you in on a little secret: If banks are on a pedestal, the pedestal isn’t very high off the ground.
Every survey I see (not to mention do) shows that credit unions are seen as having better customer service than banks, and higher advocacy (that is, seen as doing what’s right for the customer) scores than banks.
And I doubt that every one of those surveys is spot on. But it begs the question: If it is true, then why aren’t credit unions tearing up the charts in membership growth?
The answer has to be: Because they’re not clear about who they’re really competing with. They don’t know who they have to knock off the pedestal on their way to world dominance.
When I observe and hear about credit unions’ strategic (or so-called strategic) planning efforts, I’m underwhelmed. These efforts quickly devolve into tactical planning efforts that determine which projects will get funded in the coming year.
Strategy isn’t just about how you compete, it’s understanding who you compete with. Sorry to be critical, but there are a lot of credit unions out there doing a lousy job of strategy creation/formulation.
Some university professors recently researched the effect of personal relationships on P2P lending platforms. They discovered three “effects”:
- Pipe effect. Friends of a borrower, especially close and off-line friends, act as financial “pipes” by lending money to the borrower.
- Social herding effect. When friends of a potential lender, especially close friends, place a bid, a “social herding” effect occurs as the potential lender is likely to follow with a bid.
- Prism effect. A friend’s endorsements via partially funding a loan reflects negatively (i.e., becomes a “prism”) on the value of the loan to a third party.
What the study shows is that the volume and patterns of lending and borrowing are influenced by, and strengthened by, the extent of the relationship between participating borrowers and lenders.
My take: Credit unions (and community banks) should interpret these findings to find ways of introducing P2P lending-type practices into their lending processes.
The 2013 Financial Brand survey of marketers found that — not surprisingly — lending is at the top of the list of marketing priorities for the near future.
How are credit unions and community unions going to compete for the borrowing business that’s out there? If it’s going to be by berating big banks, pointing to the results of bogus customer experience surveys, and going on and on about how great their customer service is…then I’m not sure the results will be all that much better than they’ve been in the past.
Which is to say, not very successful.
What the results of the academic study suggests to me is that a credit union or community bank could improve its market share of the lending business in an area by creating a community of lenders and borrowers to redirect and/or insulate the flow of funds away from other sources and destinations to the CU or community bank.
I’m not suggesting that a credit union or community bank try to recreate a Prosper or Lending Club. Those firms have gone through a regulatory rigamaroll that no CU or bank wants to go through.
But I can’t help but think that are ways to avoid that regulatory nightmare and still achieve some of the feel of the P2P lending platform.
On a P2P platform like Prosper, a lender (or multiple lenders) — OK, wait. Let’s call them for what they really are: Investors. On a P2P platform, an investor or investors lend(s) money to a borrower. The platform isn’t really an intermediary, it’s simply an enabler — i.e., enabling two or more parties to find each other and execute a transaction.
What does a bank/CU do? It finds depositors, takes their money, and promises something in return (where that something may or may not be financial). It then takes those deposits and lends some portion of it out to borrowers it deems worthy of receiving those funds.
The bank/CU is an intermediary. Depositors have no idea who gets the money, nor do they have any say in who gets the money or at what rate. There is no relationship or connection between depositors and borrowers.
But what if there was a relationship or connection? The academic study implies that the “platform” — in this case, the bank or CU — would benefit because lenders (in this case, depositors) and borrowers would be more likely to transact with each other.
In other words, one way for credit unions and community banks to gain market share in the lending market is to create a mechanism for depositors (lenders) and borrowers to create and strengthen a relationship.
That “relationship” doesn’t necessarily have to be a one-to-one, named connection. A bank or CU depositor could provide input into determining who receives their deposits (or some percentage of it) by some dimension that characterized a borrower. For example, the depositor could indicate that they would like their funds lent to someone buying their first home, or to a small business owner who needs funds to grow their business, or to someone looking to pay off debts. They wouldn’t necessarily get to direct 100% of their deposits, but by giving depositors an ability to direct some percentage of the funds, it would approximate what’s happening on a P2P lending platform.
By making the elections of funds deployment public, other community members would see where their peers are looking to direct funds, and — as the study implies — become more likely to elect that their funds go to the same places. With publicly available information about where depositors would like to direct their funds, potential borrowers who fit the description(s) would become more likely to turn to the bank/CU for a loan, knowing that the FI is looking for borrowers like them.
The deposit nature of the relationship wouldn’t be changed — that is, the deposits would not become investments in the sense that they are on a P2P lending platform. The bank/CU is still an intermediary determining the creditworthiness of a borrower and the rate at which that borrower qualifies for a loan. But the depositor gets to provide some input into who gets the money (or some percentage of it).
I realize I haven’t thought through this completely, and, for all I know, there’s some regulatory issue that stops this in its tracks. I’m just thinking about how smaller FIs are going to compete with the big ones for the coveted lending market.
Remember when you were a kid — or maybe more recently with your own kids — and played tic-tac-toe?
You started by drawing two vertical lines and two horizontal lines, which combined to create a nine-square grid. You then put your shape (X or O) in a box to claim it, alternating with your competitor to “own” the grid (and win the game) by securing three boxes in a row.
In some ways, that’s exactly what marketing is.
A credit union contacted us recently and asked us how they could better understand the consumer landscape in their footprint to help them win more lending business. I proposed that they play tic-tac-toe. We’d start by drawing a tic-tac-toe board, and go one step further and label the rows and columns:
On our board, the three rows correspond to the timing of consumers’ borrowing needs: Immediate, intermediate, and longer-term (not length of loan, but how immediate the need for a loan is). The columns correspond to consumers’ propensity to consider a credit union for their borrowing needs: Low propensity (or likelihood), moderate propensity, and high propensity.
Through consumer research, we would segment the consumer population using this tic-tac-toe board, and help the CMO organization understand:
- The market opportunity each segment represents by estimating the allocation of consumers to each segment.
- The demographics, channel behaviors, and financial services-related attitudes of consumers who belong to each segment.
- The marketing challenges each segment represents (e.g., what holds consumers back from considering a credit union).
- The marketing tactics required to capture the borrowing-related business from consumers in each segment.
Generalizing the board a bit, another firm might not capture “propensity to borrow from a credit union” but “propensity to consider XYZ.”
But much as a tic-tac-toe player must weigh the consequences of capturing a particular cell on the board, marketers must determine the costs, benefits, and competitive consequences of going after consumers in any particular segment.
If the majority of consumers are in the upper right hand bucket, you might want head down to the bar for an early beer. If the majority of consumers are in the lower left hand bucket, you might get sent down to the bar for an early beer.
If the majority of consumers are in the seven other buckets, you’ve got some marketing decisions to make.
The art is in determining how to allocate consumers to segments.
It’s not enough to just ask consumers “will you consider XYZ for your next purchase?” but to derive the likelihood by looking at past behavior. Same with product timing. A consumer may say that she or he has a longer-term need for a product, but good predictive modeling may indicate that certain behaviors, attitudes, and purchases indicate that the need may be more immediate than the consumer thinks or is willing to say.
I started working at Forrester Research in 1997. In retrospect, I think I got hired not because I demonstrated great potential to be an analyst, but because my boss and colleague needed a sucker to join the team and write a report that nobody else wanted to write.
So I joined Forrester and wrote my first report on the hot topic of the day: Knowledge Management (it was a terrible, terrible report).
I interviewed executives from about 50 companies about what they were doing about knowledge management. What I heard was confusing. For the most part, what these companies were doing with IT and data was pretty much what they had been doing for the prior 10 years.
What was different (in 1997), was that now these initiatives were called “knowledge management initiatives.”
There were two key success factors (or barriers) critical to the success of knowledge management initiatives: 1) employees with the right skills in knowledge management, and 2) management support and commitment.
After all, sucking the “knowledge” out of people’s heads and making it available to everyone else in the organization wasn’t easy, and wouldn’t be successful if management didn’t sufficiently invest in it.
Roll the clock ahead 16 years and you’ll find that nothing has changed. Except the labels.
In a creditunions.com article titled Big Data At A Growing Credit Union, an interview with a credit union executive went like this:
Q: Can you define Big Data?
A: Not really. But in a way, Big Data is what people have been doing all along — looking at and analyzing data. I don’t know the tipping point where a credit union moves from generally looking at data and is suddenly in Big Data.
Q; Can’t data also overwhelm and slow decisions?
A: It can unless you achieve the balance of talent and training. If you put the right data in the wrong hands you can be swimming in that data forever. You’ve got to get people to the point where they understand what’s relevant and what’s not, and that takes time.
Q: What do you feel is critical to success with Big Data?
A: You have to have directors and senior managers who are supportive and understand there are revelations this data can provide.
You’ll pardon me if I can’t help but think that this all sounds vaguely familiar.
If you can’t define Big Data — other than saying it’s what “people have been doing all along” — you are not going to get management support for the efforts.
If you think Big Data represents a different way of managing your business, but you can’t articulate that difference to your employees, you will not get broad employee support for the efforts.
Management is usually willing to fund some initiatives to try something promising. Employees, on the other hand, are generally loathe to change unless the pain of the existing is too much to bear. You might argue that they’re willing to change if the potential upside is appealing enough, but I’m not so sure about that.
Jumping on the management fad bandwagon is a prescription for failure. It trains employees to put everything they want to get funding for under the fad banner, and diminishes whatever potential value really lies in the core of the new concept.
My take: You won’t find anyone more supportive of using data to make business decisions than me. But the path to becoming more data-driven doesn’t mean managing like it’s 1999 and jumping on the fad bandwagon.
A report published by Filene Research contained the following passage: “Americans’ rising prosperity, coupled with traditional banks’ exclusive focus on corporations and the wealthy, led to the emergence of American credit unions focused on serving the underserved…Today’s credit unions, then, grew by addressing an unmet need: providing financial services to previously underserved working Americans.” I … Continue reading
I got a call recently from a reporter doing a story on free checking. He wanted to know why credit unions were, for the most part, sticking with free checking when so many big banks were dropping it. I told him it was driven by two reasons:
- Credit unions are looking to maintain a point of differentiation from the big banks, especially when it comes to fees.
- The board of directors at many CUs won’t let the CU charge for checking. I’ve had a number of conversations with CU CEOs and CMOs who have expressed interest in finding ways to add fees to their checking accounts (yeah, I know: shock! horror!), but have run into roadblocks by BODs who won’t approve the fees.
I didn’t give this much more thought until I read Mark Arnold’s blog post titled Staying Relevant: One Credit Union CEO’s Insight. In an interview with Angie Owens, CEO of American Airlines Federal Credit Union, Mark asked “Why do credit unions struggle with being relevant today?” Her response included:
“One challenge in particular many credit unions face with relevancy is in working with boards that are happy with the status quo. While we always respect and value their volunteerism, expertise and time, boards must be willing to move forward and plot a brave new course into the future for their credit union.”
Honing in on the board as a major factor causing CUs to struggle with relevancy speaks volumes. It’s hard enough for CU execs to stay on top of changing consumers needs and preferences, changing technology developments, and an increasingly onerous regulatory and compliance environment. But having a board that stifles change is a burden no exec wants to deal with.
But there is one aspect of Ms. Owen’s comment that needs more discussion — specifically, the point regarding boards being willing to “plot a brave new course into the future.”
Whose responsibility is it to envision that brave new future and develop a realistic, coherent, and tangible plan for making it a reality? I’m not sure we can blame the board for not having that vision.
On the other hand, these seemingly endless cries for increased board participation by Gen Yers — who, according to those making the claims, represent the future of CUs — have little credence to them.
The board is not some focus group comprised of a representative sample of CU or community members. It’s a group that provides advice, direction, and guidance regarding the operation of a business entity. I don’t care how many Facebook posts, fans, or friends some 25-year old has made in the past five years. Knowing how to use social media, and being a member of a particular generation, does not qualify someone for being on the board of directors of a financial institution.
There are a lot of folks who believe that the credit unions who thrive in the future will be those that innovate the most. I’m not so sure. It might just be those that best manage their board of directors.
[Note: I can't decide if I'm serious about some of the recommendations included here or not. I'll decide after I get some feedback]
I’ve been an industry analyst for 13 of the past 15 years. During that time, I’ve sat through more vendor briefings than I could possibly count. Many of those sessions were with start-up firms, and many of those start-ups no longer exist.
A common question to vendors in those briefings was “Who do you compete with?”
I’m going to out on a limb here and assert that there is no better predictor of technology start-up failure than a “we don’t have any competition” answer from the start-up.
If you don’t have competition, then there is no market. If there is no market, you have no future.
Every firm needs competition, and knowing exactly who — or what — you’re competing against can be an incredibly focusing thing for firms.
Rolling the clock forward to 2012, and focusing the lens on the financial services industry:
Banks and credit unions don’t know who their primary competitor is.
It’s not the same for both type of financial institution.
Creditunionistas seem to believe that big banks are their primary competition. At a micro-market, tactical level, sure, that might be true. But associating with the Occupy Wall Street, MoveYourMoney, and Bank Transfer Day efforts will do little to produce sustainable, long-term gains in market awareness and new member growth.
Credit unions’ biggest enemy, or primary competitor, is: Apathy.
People just don’t care enough about their choice of financial providers to choose a credit union over a bank, and this apathy is often driven by the fact that — although money is really really important to us — managing money is a chore that many of us choose to spend as little time as possible on.
And as long as creditunionistas mis-focus their competitive energies bashing big banks, big banks have little to worry about (in the scheme of things) in terms of a competitive threat from credit unions.
So what is the big banks’ biggest competitor? In a word (OK, two): Public opinion.
Just as every firm has — and needs — competition (or an “enemy”), so do we as a society. We like to have a bad guy to blame stuff on.
The media, in particular, needs these “bad guys” because it helps to sell papers and attract viewers (or, at least, it used to).
Do you remember Gary Condit? He was accused of doing something evil to an intern of his. The story was in the news every day. Well, every day, until something else came along (which might have been 9/11, if my memory serves me correctly).
A couple of summers ago, BP was in the news every day because of the oil spill in the gulf. As far as people in the US were concerned, BP was the most evil corporation on the planet.
But, thank God (from the perspective of BP, that is), the financial crisis hit, and with it, a new enemy. A new”bad guy” to blame all of our woes and troubles on. The “TBTF” big banks.
It’s been a couple of years into this already, and I wouldn’t be surprised if bank execs think to themselves “Damn! Isn’t there someone or something else that can come along and be the Bad Guy for a while?”
Well, if something isn’t going to come along by itself, the banking industry needs to make it happen.
This might sound underhanded or sneaky, but the banking industry needs to launch a well-crafted PR campaign to create a new Enemy of the State, and pass the Bad Guy throne on to somebody else.
If I were crafting this campaign, I know exactly who I’d go after to put on the Bad Guy throne: Telcos.
It boggles my mind that people would complain that their bank eliminated a free checking account and wants to charge them $5 a month to provide all the services they get from that account….and not say Boo! about the bills they get from their wireless providers, which cost something closer to 20 times more than the $5 a month that banks want to charge.
And you think banks have “hidden fees”? They pale in comparison to the fees on my cell phone bill.
Sure, it might cost be $35 if I overdraw on my checking account. But do you know what it costs me if I go over my monthly minutes or data limits? Yeah, a LOT.
And while the process of switching banks might not be as smooth and easy as some people would like it to be, at least I don’t have a two-year contract (that somehow gets extended every time I do something) with my bank that would be cost me hundreds of dollars to get out of.
Look, I don’t have anything against the telcos. I’m just trying to give the banking industry some ideas on how to get out of the mess it’s in.
Yes, there are a lot of things from an internal policies, procedures, and pricing perspective that big banks could — and should — do to restore consumer trust.
I’m just saying that a well-crafted, well-executed PR campaign might speed things up a bit.
Many of us are still members of big banks and have hopes of moving to smaller, local ones or credit unions because we’re tired of annoying fees and restrictions. Personal finance blog Smart Money suggests that before you do, be sure to negotiate first. You may be able to put yourself in a better situation: More »
Credit Union Times recently reported that Bank Transfer Day (BTD) creator Kristen Christian “came in for sharp criticism from a Vermont Occupy contingent which made headlines this week by electing one of its own to the board of the $346 million Vermont Federal Credit Union of Burlington.” According to the article, Matt Cropp, the newly-elected board member claims that:
“Christian has taken undue credit away from the broader Occupy movement in starting BTD as well as ignoring the phenomenon’s umbrella mission of hitting hard on bank practices. Cropp accused Christian of promoting “a misleading and self-serving narrative of why BTD unfolded as it did, attributing its success to her marketing skills and understanding of Gen Y.”
Personally, I have no clue whether Cropp’s claims are accurate or not, nor do I care. The two questions that I’m more concerned with are: 1) Was Bank Transfer Day 2011 successful? and 2) Should CUs create a Bank Transfer Day 2012?
If it was a success, then regardless of who gets (or takes) credit for it, credit unions should figure out how to recreate the efforts again this year. If it wasn’t successful, then credit unions shouldn’t care less who gets the “credit” for what happened last year.
So, was BTD 2012 a success?
My take: The results are inconclusive.
Aite Group research found that 10% of banked consumers switched primary FIs in 2011. When asked what factors influenced their decision to switch, 8% cited BTD transfer day.
Taken by itself, that statistic isn’t very impressive.
But of those that switched primary providers, about half were Gen Yers. And of switching Gen Yers, 12% said that they were influenced by BTD (if you want to quantipulate, you could say that 12% is 50% higher than 8%).
Before dismissing BTD as…well, not as a failure, but as a “less-than-rousing success”….we should keep in mind that, for the most part, credit unions themselves did diddly-squat to create or promote BTD. Which means that their ROI on BTD with a 8% influence rate was huge. (It’s always a great marketing tactic when you can get someone else to do all the work while you reap the benefits).
If 10% of households switch primary FIs again this year, and if BTD 2012 influences 8% of them to switch to a credit union, is it worth CUs’ investment? We are talking about 1 million credit union members here.
But it seems highly unlikely that someone else is going to pick up the ball and tab for a BTD 2012. Credit unions will need to make a concerted, well-planned effort to pull off a BTD 2012.
Could CUs Pull Off a BTD 2012?
The credit union blogosphere has forever debated the merits of a national branding campaign for CUs, without coming to many conclusions, little agreement, and no action (I think). So how will they pull off a BTD 2012?
And is consumer sentiment the same in 2012 as it was in 2011? I don’t think so. That’s the problem with these “movements”: Short shelf-life.
We Americans like to have our villains to blame all the evils of society on, but those villains come and go. Are banks still the Satan-incarnate?
Maybe, but the hatred is winding down (as it always does. Anybody remember BP?) BTD 2011 needed a trigger, which it got in the form of new fees introduced by the big banks. This year hasn’t produced that trigger.
Bottom line: The parties involved can argue all they want over who gets credit for BTD 2011′s success. Credit union executives would be wise to focus on the future, and determine if a BTD 2012 is in their best interest.
As far as I’m concerned, BTD 2011 was a passing phenomenon. A one-time shot. The pieces came together at a moment in time in 2011, and those pieces aren’t there for 2012.