By Robert McGarvey

 

For CU2.0

 

A new report from RemoteDepositCapture.com makes plain that mRDC now is a must for credit unions.  Declared the report: “mRDC is no longer a competitive differentiator, but instead a ‘must-have’ offering Financial Institutions need simply to remain competitive.”

Without mRDC you just may not be competitive. That’s a stinging reality.

This claim, incidentally, is underscored by a separate report, led by the Federal Reserve of Boston, that claimed 73% of the institutions it surveyed already offer mRDC and another 18% “plan to offer.”  Just 9% don’t have mRDC on their dance cards.

Small credit unions are very much included among the adopters. Said the Fed: “ Even among the smallest respondents, 78 percent support or plan to support mRDC within two years “ It defined “smallest respondents” as < $100M in assets. And just 22% of them have no plans to offer mRDC.

Big institutions are all aboard. Among institutions with assets >$1 billion, the Fed said 92% already offer mRDC and only 3% have no plans to follow.

mRDC has become a must have.  That’s a key reality in today’s new reality where we have entered the era of mRDC 2.0. Now the focus is on new uses, more usage by members, and there also is a wholly new kind of thinking around mRDC fraud and how to combat it.

A lot has happened to mRDC since 2009 when USAA debuted mRDC.  A handful more joined the chase in 2009-2010. But by 2011 the race was on at full speed inside most CUs to offer mRDC.

Initially many credit unions grumbled about the fees associated with mRDC – fees charged by third party processors – but, by now, most larger institutions have simply decided to suck up the added costs, which incidentally usually are much, much lower than the costs associated with a paper check deposited at a branch.

That’s a fact: mRDC saves a credit union money.  While expanding the convenience and utility of the account to members who now can make deposits while dressed in their PJs and sitting at the breakfast table.  That is cool and it ultimately is why mRDC usage will remain popular as long as paper checks circulate and these days about 17 billion of them get written in the US annually.  That number continues to slip down but it will be years before checks vanish (and aren’t we all waiting for the long predicted death of cash?).

Face it: checks are hanging around and so will mRDC because it just is so much better than driving to a branch or to an ATM.

John Leekley, CEO of RemoteDepositCapture.com, said many institutions have gotten increasingly more skilled at their mRDC offerings.

A plus: Leekley pointed to data that shows a 35% year over year increase in mRDC transactions which means more checks are getting deposited this way.

Are more fraudulent checks also getting deposited? Roll back the clock and that was a huge fear among many credit union execs, some of whom stalled when it came to rolling out mRDC.  

Today’s take is very different, said Leekley, who indicated that his survey found that “the vast majority (74%) of respondents indicated they had no losses directly attributable to mRDC.”

That means zip.

The big fear still revolves around duplicate deposits – depositing the same paper at multiple institutions – but the numbers don’t show there is a threat of any real magnitude. Leekley’s report goes on: “Exclusive to RemoteDepositCapture.com, the industry’s mRDC Duplicate Loss Rate in 2016 was just 0.035%, or 3.5 in every 10,000 items. To put this in perspective, according to the Federal Reserve, the industry’s overall return item rate was 0.4%, or approximately 40 out of every 10,000 checks deposit.”

What’s next for mRDC? Most credit unions now appear to want to get more consumers depositing more items with mRDC.

Leekley also indicated many institutions are giving a re-think to mRDC deposit limits. Traditionally, some institutions set very low limits, to manage exposure to fraud. But, said Leekley, more effective and more consumer friendly approaches involving smart use of big data are taking hold.  

Many institutions also are looking to increase business use of mRDC, added Leekley.  Exactly how will be a huge topic of discussion and exploration this year but know this: now is the time for you to begin to seek to push mRDC usage into new arenas.

It’s a good tool, it works. Let its success fuel your institution’s.

 

By Robert McGarvey

 

For CU 2.0

 

Wake up to a frightening reality: very probably your credit union is falling behind in the race for digital talent and that just may be a sound of impending doom.

Consulting firm CapGemini, working with LinkedIn, recently issued a report on The Digital Talent Gap and the takeaways for credit union executives have to be frightening.

According to CapGemini, six in ten banking executives acknowledge they face a widening talent gap. The report pinpoints banking as a sector where that gap is especially high.

The money center banks, almost certainly, are not pointing to themselves. They are busily hiring top digital talent as they chart their paths into a 21st century where digital is seen as the core of banking.  They see that future and they are preparing for it.

Down a checklist, CapGemini sees less skill than is needed in a range of digital activities that are central to banking today. Included on the list are cybersecurity, mobile apps (where a big skill deficit is cited), data science, and big data (another huge deficit).

A lot of what has become core in delivering financial services is now emerging as areas where many, many credit unions and community banks are just not keeping up because they don’t have the talent to stay in the game.

Employees know these realities. According to the survey data, 30% of banking employees believe their skills will be redundant in one to two years. 44% believe their skills will be redundant in four or five years.

That suggests a frightened, anxious workforce.

Employees also express dissatisfaction with trainings offered them by their organization.  45% say they are not helping them attain new skills.  42% say the trainings they attend are “useless and boring.”

Ouch.

Question: does your credit union leadership know their own employees fear their institution is lagging in the race for digital competence – and that they despair over the viability of their own skills?

It gets worse. You just may lose the digital talent you presently have. The CapGemini survey found that “over half of digital talent (55%) say they are willing to move to another organization if they feel their digital skills are stagnating.”

The good news: CapGemini offered concrete suggestions about what organizations need to do to remain players in the race for digital talent.

A suggestion not on the list is blunt: credit unions often will need to find their digital talent through third party vendors and CUSOs.  No shame in that.  At a certain institutional size, the savvy survival strategy is to know where to go outside to help chart the credit union’s digital path.  There still needs be digital skills internally – especially a sharp sensitivity to what matters digitally inside the c-suite.  But a lot of the digital heavy lifting can and should happen through third parties at all but the very largest credit unions.

But the biggest credit unions need to be sure they are nurturing internal digital talent. And smaller institutions need to know what they can do with the talent they have and they also need to stay watchful of their third party vendors and their talent development efforts.

Just because a CUSO was spot on technologically in 2010 doesn’t mean it has a clue today. Things move very fast in this world.

That’s where the CapGemini suggestions about how to develop digital talent come in.

And step one is Attract Digital Talent where CapGemini points a finger at the institution’s leadership.  Specifically: “Align leadership on a talent strategy and the unique needs of digital talent.”

How does your credit union measure up there?

Does your leadership see the ultimate importance of digital in charting the institution’s future?

The next steps are no easier: “create an environment that prioritizes and rewards learning” and “align leadership on a talent strategy and the unique needs of digital talent.”

Digital warriors go where they are loved and wanted.  It’s that simple.

One more step: “Give digital talent the power to implement change.”

This doesn’t sound easy?

Nope. It all is very hard, especially for small and mid size credit unions.

But the alternative just may be planning to go out of business.

That makes the choice easy.

 

 

By Robert McGarvey

Recent data from Certify, the corporate expense management company, underlines a reality I have known for decades – as have you, probably – but it is one unknown to many of our friends and even co-workers who don’t do much business travel.

You know what I mean. Non travelers always think that business travel means luxury. It is comfort squared.  They seem sure that I regularly bunk down in Ritz Carltons – I remember doing that exactly once on a business trip and indeed I was impressed. That I fly in first class (never but even business class is ever more uncommon today).  That I eat in Michelin starred gourmet restaurants (sometimes but only on my own nickel and never for business).

My travel reality is much more Spartan – but the Certify results say that yours are too.

Certify breaks out results by restaurant, hotel, airline.

We travel much more modestly than many believe.

Big news – a sea change in how we get around – also is in the recent Certify data.  Certify noted that use of ride hailing services by business travelers has exploded.  “Review of the past four quarters compared to 2016 data shows an accelerated shift in corporate travel expenses to ride-hailing services, underscoring the industry disruption and change in business traveler preference. Ride hailing picked up 68% of the overall ground transportation category last year led by Uber and rival Lyft, respectively with 56% and 12% of the total. Uber also claimed 9% of all expenses and receipts processed by Certify in 2017.”

Certify indicated that so far services such as Airbnb have not caught on in a major way with business travelers, in contrast to our embrace of Uber and its ilk: “alternative accommodations with Airbnb have nearly doubled each year in the Certify data since 2014, yet it still represents just under .5% of the lodging category overall today.”  I’m with this. I remain unpersuaded that Airbnb is a business travel accommodation that will be liked by many of us.  

But this is prelude. What really intrigues me is where we eat and sleep, be it ever so humble.

Here are the most expensed restaurants, showing percent of the category captured:

Starbucks: 5.22%, averaging $12.94

McDonald’s: 2.91%, averaging $9.34

Panera Bread: 1.71%, averaging $44.35

Chick-Fil-A: 1.41%, averaging $26.63

Subway: 1.4%, averaging $20.26

 

Our favorite restaurants are these, on a five star scale:

Chick-Fil-A: 4.4

Jimmy John’s: 4.3

Panera Bread: 4.3

Starbucks: 4.3

Chipotle: 4.3

Personally I am all in with Starbucks and Subway, I’m okay with Panera and Chipotle, and, yep, this is about the category and prices of restaurants I expense.  Some of these totals, obviously, have to be meals for several people (you can’t spend $20.26 on a meal for one at Subway, I don’t believe; I spend half that).  

As for lodgings, here is where Certify says we stay:

Hampton Inn: 8.95% of total lodgings, averaging $240.59

Marriott: 8.48%, averaging $272.15

Courtyard by Marriott: 7.4%, averaging $193.11

Holiday Inn Express: 4.63%, averaging $234.64

Hilton Garden Inn: 4.47%, averaging $227.87

Again, yep.  Personally, as I seek to duck early cancellation fees, I have been looking outside the big name brands.  

I don’t recall spending over $300 on a hotel room in the past four years.  So the Certify prices seem right on.

Here, by the way, are our top rated hotels (on a 5 point scale):

Hyatt 4.4
Marriott: 4.4
Westin: 4.4
Hilton Garden Inn: 4.3
Homewood Suites 4.3

No real complaints about those scores on my end.

Note what’s missing from these lists: Ritz Carlton, Kimpton, all the boutique brands.  We just usually sleep in plain jane, mid priced digs.

With airlines, this is what we fly:

Delta: 20.32% of flights, averaging $396.66

American: 18.68%, averaging $316.55

United: 14.44%, averaging $369.67

Southwest: 11.42%, averaging $274.32

Alaska Airlines: 1.6%, averaging $253.14

 

Your faves aren’t on the top five lists? Here are more extensive results.  

Add all this up and we are flying in coach, staying in one and two star hotels, and we are eating in fast food joints.

Sound glamorous to you?

Of course not.  But next time a friend or family member expresses jealousy about your high flying lifestyle just point them to the Certify data.

Personally I have no gripes about bunking at a Hampton Inn and grabbing dinner at a Subway but luxe they aren’t.

 

 

By Robert McGarvey

 

It was 10 years ago that you probably first experienced inflight WiFi and if you are like me you remember that moment with delight.  GoGo rolled out WiFi to a handful of flights on a handful of carriers (American Airlines, Virgin America, Delta, Air Canada, Air Tran Airways and United) in 2009 and, pretty soon, I was picking flights based upon my guess about WiFi availability.

How cool was it to email at 30,000 feet? Very. And, honestly, the speeds just didn’t seem slow back then – in part because users were few.

Meantime, think about today where there’s WiFi in coffee shops, homes, fast food restaurants and – you know what? – it is pretty much ubiquitous. In Phoenix there’s even free WiFi on the lightrail ($4 to ride all day), just about every coffee shop offers it, and so do apartment house lobbies, doctors waiting rooms, and I could on on.

Where we are, WiFi is.

Except on airplanes.

Let’s put aside the issue of how bad – slow, overpriced, unreliable – inflight WiFi has become. There also very real issues around security (or lack thereof), where everybody from crooks to government agencies may be eavesdropping on your keystrokes. We’ll get to that momentarily.

For now what grabs me is that WiFi is very far from ubiquitous inflight – indeed odds are that any given seat will not have WiFi, according to a report from Routehappy. That report says that 43%
of available seat miles (ASMs) worldwide have at least a chance of Wi-Fi on board. Note that hedge – at least a chance. That’s because many planes claim WiFi but it may not in fact be actually working.

That 43% is up from 39% last year – which highlights the slow pace of upgrades.

This means 57% of seats have zero chance of providing WiFi.

US carriers are better than the rest, per Routehappy: “U.S. airlines offer at least a chance of Wi-Fi on 86% of their ASMs, with 85% of ASMs fully rolled out.”  It added: “Non-U.S. airlines offer at least a chance of Wi-Fi on 32% of their ASMs, up by 14% from the 2017 report.”

Now chew on this: “Three carriers now offer Wi-Fi on 100% of their flights: Icelandair, Southwest, and Virgin Atlantic.”  That means many, many dozens don’t. By Routehappy’s count, 82 airlines globally offer WiFi, so that means 79 don’t offer it on all flights.

A morsel of good news is that “13 airlines globally offer Wi-Fi on 100% of long-haul flights: Air Europa, Delta, Emirates, Etihad, Eurowings, EVA Air, Iberia, Kuwait, Lufthansa, SAS, Scoot, United, and Virgin Atlantic.”

Another morsel: “While passengers have come to expect Wi-Fi on large global airlines, many smaller airlines have now begun offering Wi-Fi as well. Air Astana from Kazakhstan, Air Côte d’Ivoire from Ivory Coast, and Air Mauritius from Mauritius are just a few of the numerous smaller airlines that began offering Wi-Fi in 2017.”

Nonetheless, the bad news is that when flying overseas, you have a better than even chance of not having WiFi access.

Despite the rising global ubiquity of WiFi.

Routehappy, by the way, holds out hope for the disgruntled passengers – myself often among them – who no longer even try to use inflight WiFi.  My usual preference is to read a book on my iPad – and I carefully insure the books I want to access are downloaded before I leave for the airport.

At most I will do a fast email session inflight.  But not usually.

But there are glimmers of hope that our increasingly loud kvetching about WiFi quality will be dealt with by the carriers. Said Routehappy: “Best Wi-Fi is now available on 16% of ASMs worldwide, representing a staggering 129% increase from the 2017 report.”  

It defines “Best WiFi” this way: “Fastest Wi-Fi systems currently available, capable of advanced media streaming (whether allowed by airline or not); comparable to a home connection.”

That is good news on first glance but on second what it says is 84% of ASMs don’t have “best WiFi.”

In the 2017 Routehappy report, by the way, it noted that 6% of flights offered “best WiFi.”

There has been progress in bringing “best WiFi” to more passengers globally – but not a lot, not really.

And airlines plan to get us viewing movies and such on this “Best” WiFi – and how good is your cable connection at home when you try to stream a movie on Friday night?

Right.

Don’t expect better even from “Best” WiFi on long, packed flights.  I know I’m not. I saw the drop in inflight quality circa 2012 as more of us discovered it and started using it. Similar will befall “Best” WiFi and it will surely deteriorate.

That’s why for now I’ll stick with my plan to read books on my iPad, maybe make notes in my paper calendar-planner.

How 1999.

But has anything really changed?

 

By Robert McGarvey

For CU2.0

 

Think very – that’s the question’s answer. But maybe you already have in hand the exact weapons you need to defend your position.  Surprised?

Read on.

Triggering this discussion is a recent Snarketing post by Cornerstone Advisors’ Ron Shevlin that  offered hard data about Amazon’s potential popularity as a consumer bank. 

Cornerstone had surveyed 2015 consumers – with both a bank account and a smart phone – and asked two questions: would you bank with Amazon for a free checking account?  Would you pay, $5 or $10 monthly, for a premium checking account that bundled in perhaps cell phone damage protection or roadside assistance?

Before guessing the answers – they will surprise you – feast on this recent headline from the Evening Standard newspaper in London: Is data the new oil? How information became the fuel of the future.

That question is deeply intertwined with Amazon’s possible banking play.

Ask yourself: what US company knows an incredible amount about you, probably more than any other?  Hint: it’s a company that sells just about everything, much of it delivered free within two days.

Amazon, very quietly, has emerged as a real king of the data mountain.  Google may know what interests you, Facebook may know who your friends (and enemies!) are, and Apple knows what tech bling you will splurge on, but Amazon – in many households – knows everything you buy, from groceries to clothes.

In 2017 Amazon tells me I placed 107 orders. Many were for multiple items.  From cat food to an Echo Look.  

Think how well that data resource positions Amazon to pounce into banking.  It knows its many millions of customers, it’s already providing credit cards and purchase credit to millions of them, and CEO Jeff Bezos has never shied away from offering discounts if he believes doing so will produce longterm profits.

Will Bezos take the plunge into the slow moving financial services world? Do we – consumers – want him to?

A free Amazon account just might seem to be a threat to a credit union sweet spot. According to Bankrate.com, 84% of credit union checking accounts have no monthly maintenance fee, up from 72% a couple years earlier. For many credit unions, this is a key marketing difference.

And yet Cornerstone’s research found something interesting.  Asked if they wanted a free Amazon checking account, 42% of consumers said nope.  Just 26% said they would open it.  Another 32% said they would consider it.

Matters get more intriguing when Cornerstone asked if they wanted a premium, bundled account with a small monthly fee of $5 or $10.  Only 34% said no thanks – that’s sharply down from the 42% who rejected the free account.

And 29% said they would open it, up from the 26% who said they would open a free account.

Does free carry less weight than you thought?

Is it maybe time to rethink using free as the centerpiece of the institution’s marketing?

Shevlin stressed that, at least superficially, the institutions that would be most impacted by an Amazon entry into banking would be the money center banks, mainly because they are courting millennials who, Cornerstone said, are the ones most attracted to the Amazon potential products.

But Shevlin tossed out this poisoned dart:  “The smaller financial institutions are already challenged in attracting younger consumers to their institutions. An Amazon entrance into banking will only make it harder for them.”

And remember this: Amazon may well know your members better than you do.

Frightening? You bet.  But there is that solution that already is in your hands.  The solution is to fight back by diving ever deeper into member data.  The data will tell you your next steps – if you learn to listen to it.

Plenty of credit union focused big data experts are adamant that credit unions can fight back against the Amazons.

Fight data with data.

You have lots of data, from sharedraft accounts, credit and debit cards, maybe car loans and home mortgages. Use the data you have to prepared a battle plan.

You will need it because, whether Amazon takes the plunge into consumer banking or not, other non banks will.  They already are circling this pond and they act as though they smell blood in the water.  

You have the data. It’s the only weapon you need.

And remember that in the 21st century data is indeed the new oil. Let it power your institutional growth.

 

By Robert McGarvey

It’s the season. The downtown Phoenix Convention Center is rocking, the daytime high today will be low 60s (the low was 38 – Phoenix rarely freezes), and suddenly downtown Phoenix is abloom with conventioneers, Arizona State students (there’s a huge downtown campus, a satellite to the main Tempe campus), and the arts venues are throbbing.

Now is the time to discover downtown Phoenix. As recently as 10 years ago it was a lot of dirt. This morning there were, count ‘em, four cranes at work.  Every speck of dirt is filling in, generally nowadays with apartments and condos.

Used to be Phoenix and meetings meant in fact Scottsdale, a separate city.  Scottsdale still hosts meetings (I used to live next to the Fairmont Princess in Scottsdale, a place that is always busy with meetings).  

But my advice is this: cajole your meeting planners to meet downtown.

It’s just so much more fun and, in downtown, you are witnessing the rebirth of an area that had died. There is life downtown, plus extremely good food – Beard award winning – as well as good arts. And you can walk everywhere.

It starts with getting there. Hop the light rail at Sky Harbor, the fare is $2.  Yep. Two dollars.  Or buy an all day pass for $4. Downtown is maybe 15 minutes west of the airport. You could take a cab but why? It’s no faster.

Where to stay? If yours is a convention center meeting you have plenty of choices. A Kimpton, Hyatt (probably the closest), Renaissance, Hilton Garden Inn (in an old bank building), the FoundRe, Sheraton Grand (also very close), Westin, Hotel San Carlos (a historic hotel – read TripAdvisor before booking, comments are very mixed), and a lot more. Whatever you want is downtown.  Well, maybe not a real five diamond property, but there are plenty of choices anyway.  

Was me, I’d stay at the Sheraton Grand – Arizona’s largest hotel with 1000 rooms – mainly because of the convenience. But note: the shopping center across the street is an active construction zone. I walk by it just about daily, can’t say it’s especially noisy, but some might complain nonetheless.  

Where to eat? The must go is Beard award winning Chris Bianco’s Pizzeria,  Eat the Wise Guy pizza ($19), fennel sausage and housemade mozz.  Drink a nice Italian red.  Reservations are not accepted. Singles are readily accommodated at the bar. If the wait is too long, you can also get food in Bar Bianco next door.

Bianco’s eatery is in Phoenix’s Heritage Square, a collection of very old houses a few short blocks from the convention center. Bianco’s neighbor in Heritage Square is Nobuo, where the chef is also a Beard award winner. The food is Japanese and it is clever, delightful.  The tasting menu is $80, for around seven courses.

Next eat at Barrio Cafe Gran Reserva, to me Phoenix’s best Mexican food, from Chef Silvana Salcido Esparza. Go with the set tasting menu (there’s a vegan option that is simply outstanding). You’ll eat authentic Mexican foods that will dazzle you with their originality.  Taco Bell this isn’t. The tasting menu – 5 or 6 courses – is $42.  A wine pairing – Mexican pours of course – is around $20.  Technically, this is well within downtown but my advice is to Uber there and back.  Grand Street – where the restaurants is – is a street where many get lost.  

What to do? I’ll tell you my three favorite haunts.

Many weekends in season I am at the Phoenix Symphony (nextdoor to the convention center) where the fare usually is classical music. This weekend for instance it’s Sibelius and Debussy. A night of Mozart and Beethoven is coming up.  Pops are mixed in – a few Sundays ago I saw a Harry Potter film accompanied by the orchestra.  Tickets often are available same day. Prices range from around $45 to a tick over $100. 

The only disadvantage: most concerts play weekends only.

But you still have choices during the business week.  There’s the Heard Museum ($18), probably the nation’s best Native American fine arts museum – with kitschy, wonderful stuff like Barry Goldwater’s kachina collection.  The Heard is open just about every day from 9:30am to 5 p.m.  Go and you will see art that surprises.  

The Heard, by the way, is in “midtown,” adjacent to downtown. It’s an easy 30 minute walk or take the lightrail west to Encanto.  The museum is across the street.

Also go to the Phoenix Art Museum ($18 admission), where I go maybe a few dozen times a year. Closed Mondays. There’s a rotating mix of special exhibits – I loved the Warhol show and was very impressed with a recent exhibition of contemporary Brazilian art.  It’s a manageable museum. You can see a lot in an afternoon.

The Phoenix Art Museum also is on the light rail. Get off at McDowell; it’s right there. It’s maybe a 20 minute walk from downtown.

You want more? Stop in at Bitter & Twisted for craft cocktails.  Step into St. Mary’s Basilica, the oldest Catholic church in Phoenix (across the street from the convention center).  See a play at the Herberger.  See a show at the magnificent, restored Orpheum.  

The list goes on. There just is so much to do in central Phoenix.  And in the winter there is no better city for walking.  

 

By Robert McGarvey

 

For Cu2.0

 

A credit union leader has to break out in a cold sweat reading Aite Group’s new report on the top 10 trends transforming retail banking.

Here’s trend 1: Tech Firms Become Banks.

Trend 2 is blunter: Banks become tech firms.

That latter trend ends with this prediction: “Going forward, the banks that quickly adapt and recognize this shift will stay relevant to their customers and even gain a stronger foothold in the market. Those that do not will struggle to acquire and retain customers, and to survive.”

Read that again. What Aite is saying is that credit unions that don’t climb aboard the tech express are doomed.

Does that mean you?

I’m not aware of an exact count but I would be surprised if at least half of today’s credit unions aren’t hopelessly mired in a Luddite world of anti technology.  So many want to blather on about how great their branches are and what wonders their employees are, as though either matters in a 21st century technology world.

But back up.  Look at the threat. Increasingly, tech companies from Quicken Loans to PayPal are gobbling up traditional bank and credit union business.

Non banks are on track to very soon have more than 50% of the home mortgage business. PayPal and Venmo, meantime, are feasting on p2p payments, a niche many credit union executives saw as theirs just five years ago but between bad tools and bad marketing, credit unions are increasingly irrelevant in a sector that looms as one of the key financial tools used by Millennials,

Amazon, maintime, has made more than $1 billion in small business loans – how many bankers and credit union execs even know they are in that business?  Credit unions may want to up their business lending operations, but do they have a market that craves their offerings?

Non banks also are zeroing in on car loans.

Some techs may even unfurl official banking colors. Aite’s Julie Conroy, in an email, wrote this: “Square already has a bank charter application in progress, and I don’t think it’s beyond the realm of possibility that Amazon would set up a wholly owned sub to do something similar.”  

Amazon and PayPal both have been meeting with bank regulators.  Nobody knows exactly why but a good guess is that both are interested in expanding their bank-like activities (with or without bank charters).  

Conroy, in the report, also warns that banks – this also means you, credit unions – are increasingly becoming what she calls an ingredient brand to whom the consumer has little or no loyalty. The consumer uses Apple Pay, does he/she remember what financial institution it is connected through? Ditto PayPal. Android Pay. Etc.  They all run on financial institution rails but few consumers really care what card is connected. They see themselves as Apple Pay loyalists, period.

And she points to Asia where Alibaba and Tencent “have made substantial inroads” into banking.

There are no good reasons to think similar won’t happen here.

David Albertazzi, writing in the Aite report, offered this warning: “FIs need to change entering 2018. They need to fundamentally shift their mindset, business model, and operating model. They must be equipped to fight for the modern consumer—who, because of technology, has a whole new set of expectations. The modern consumer doesn’t want a traditional branch bank. They want their transactions to happen on their mobile devices in real time and on-demand. This is why FIs must become tech companies and provide elegant, nimble, and technologically sophisticated solutions to their customers.”

He also advised a “sharp increase in digital transformation.”  So right. It’s hard to find a credit union that doesn’t have a digital transformation committee. But it’s harder to find a credit union where that committee has any say beyond what doughnuts to serve at the next meeting.  It just is time to get very serious about digital transformation.

That’s because your institutional life depends on it.

Wrote Conroy in her email to me: “Effective use of technology will be increasingly important to competition for FIs of all sizes.  Those FIs that don’t invest (either in their own tech stack, or by finding progressive processing partners) and are constrained by legacy technology will increasingly be marginalized.”

What do you need to do now?  Commit to going digital – really – in the next year or two.  Poll members on what digital tools they want and offer them.  Keep hunting for powerful digital tools your members will want.

And ask yourself this: if I didn’t have to use my institution’s technology, would I?

If you wouldn’t, why are you offering it to members?

Do better.

Read the Aite report.  It’s short. But it will give you sleepless nights.

And that is good for you as you face a crossroads in consumer banking where those who take the wrong fork are heading towards extinction.

Take the other fork.

 

 

By Robert McGarvey

 

Delta Airlines is betting big that you will dig into your own pocket to pay to upgrade your seat – and they say they took in $80 million last year after they allowed customers to upgrade after purchase.  

They also say they will begin allowing passengers to pay for upgrades with miles.

Are you on board with this?

The problem of course is that many employers and clients simply refuse to pay for upgraded air.  When I began in the workplace 40 years ago, the standard policy – at two of my first employers – was that if a flight was over 2 hours, they would pay for first class (business class had not yet caught on).

But now I have exactly no clients who will pay for upgraded air. To anywhere. That means if I’m flying from Phx to Sin, it’s in coach.  For maybe 21 hours.  Ouch.

If I want upgraded comfort, it comes out of my pocket.

Same for you probably.

Delta insists we are opening our own wallets.  

Are you?

I cannot recall ever paying my own money to upgrade air seating.  Never. I do recall many cases where I used miles to buy upgrades but I rationalized it with the thought that client X had in a way bought the miles because I earned them on flights paid for by X and if I used them on another flight for X, all was right with the world.

I am not sure I am entirely correct about that. But it’s how my brain worked.

And mine is a brain schooled in travel by hardened 1970s road warriors who were sure it was a sin to spend one’s own money on a business travel.

Thus my deep hesitation to pay for a better airplane seat.

Indeed, I still cannot wrap my mind around paying actual cash, from my pocket, for a better seat.  I just will not do it.

Will you?

Skift, by the way, reports that Delta will generate two receipts.  One for the base fare, one for the upgrade. The idea is to hand in for reimbursement the base fare receipt and thus dodge any hassles from bean counters.

Skift also quoted Delta’s president this way: “the goal is to avoid ‘driving to the bottom’ by selling an airline seat as a ‘commodity.’ Instead, it wants to attract “people who are discerning who want to buy premiums and products and services.”

But wait. Airline seats on US carriers are “commodities” and are fungible.  Telling me they aren’t is presupposing massive gullibility on my part.

Interesting, however, is that per Delta’s CEO – as quoted by Skift – the carrier a few years ago sold 15% of its domestic first class seats (the rest were given out to folks like me, typically for no payment at all). Now Delta sells about 50% of its upfront seats and it wants to sell more.

CEO Ed Bastian added this: “One of the reasons why we moved into the paid upgrade opportunity, not only does it allow customers to provide certainty by being able to buy the experience, but we also have a very good product in our Comfort+, which we didn’t have in the past, so that for many of our loyal customers that were unable to upgrade, they now have a place where they can actually have an enhanced experience, versus prior years where you’d be in the main cabin.”

I’m still not in.  I long ago decided I could handle the six hour discomfort of flying from LAX to EWR in coach – it’s not that bad.  Really. I don’t eat the food upfront, I don’t drink alcohol on business flights, and I don’t want to sleep on domestic flights. I don’t do any of that in coach either, but so what?

So I can get what I want, at a cheap price, from coach.

Why would I spend my money to get a slightly upgraded experience upfront?

My answer is that I won’t.

What’s yours?

When I see subheads like this – from CNBC – “Passengers are opening their wallets” what I smell is airline spin. Say it’s so loud enough and often enough and it just may be believed.

But not here.

 

By Robert McGarvey

 

For Credit Union 2.0

 

You already know that non banks are fast in a race to seize a majority of home mortgages but the far, far worse news is that non banks may soon be grabbing your sharedraft business.

Credit unions have options. They can win this. But that will involve big changes in mindset.

Here’s a nudge towards that new reality: in November, the acting Comptroller of the Currency, Keith Noreika, said he believed it was time for a fresh debate on the role of non banks in traditional banking. Implied was an endorsement of a possible role for companies like WalMart in banking.

The current Comptroller of the Currency, Joseph Otting, has been on record supporting similar.

One more reason to worry: evidence mounts that a sizable slice of the population, mainly but not exclusively millennials, has been moving money out of banks and into other parking places. They are finding that just maybe they can get along fine without banks and credit unions.

Don’t assume a credit union future is a given. Ten years ago how many book and record stores realized they were at the end of the line?  How about consumer electronics stores? Now even grocery stores seem on life support, as WalMart on the one hand and Amazon-Whole Foods on the other seem primed to devour the market.

Banking services are very much in play.

Probably the most cogent arguing on this issue is from Ron Shevlin, now with Cornerstone Advisors. In a Snarketing post Shevlin points out that “the percentage of US households without a checking account dropped from 8.2% in 2011 to 7% in 201, and since 2000, deposits at banks have tripled.”

So,that means things are good? Nope. Shevlin continued: “there is a longer-term trend that will hamper financial institutions’ efforts to keep up the recent pace of growth. I have a name for this trend: deposit displacement.”

His point: huge volumes of money are shifting out of traditional checking and sharedraft accounts and into new vehicles such as health savings accounts, P2P tools such as PayPal, retailer mobile apps (think Starbucks, whose customers are believed to have multiple billions of dollars parked in their apps), also robo-advisors.

I’d add to the list the rise of prepaid debit cards which a growing number of consumers are using as a replacement for both credit cards and sharedraft accounts. Many billions of dollars already are funneled quarterly through the popular Visa and Mastercard prepaid debit card channels.

Personally I’ve had a Bluebird card, via Amex, for some years. It even comes with a checkbook option. 

I also use PayPal multiple times monthly, to pay some recurring charges (Netflix, NYTimes) and to put money in the hands of relatives and friends.

An advantage of options such as prepaid debit cards and P2P tools: most involve no credit check. Set up is nearly instant. The friction has been removed from the system.

Go ahead and attempt to open a new sharedraft account at a credit union near you where you have no present relationship. Word of warning: it won’t be easy. And it may be impossible to do it online. Just sayin’.

Why is money moving out of checking accounts? Simple: there often is no benefit to the member in keeping money in that account. And many accounts involve all manner of fees deemed sneaky by many consumers.

Try to use a prepaid debit card to buy groceries at Safeway and if the attempted charge is over the balance, there’s only a little embarrassment as the checker says the card has been declined. Try to pay with a checking account and there is maybe an overdraft fee of perhaps $35. For what? A few bits and bytes burping in the matrix?

Warned Shevlin: “Deposit gathering for all financial institutions will become more difficult over the next five years, as this trend toward deposit displacement accelerates. Combating deposit displacement means reinventing checking accounts.”

Read that again. It’s time to re-invent checking and sharedraft accounts. Burn the fees. Banish the friction. Make the accounts easy to use, easy to initiate, easy to predict the costs involved. Create incentives for use of the sharedraft account.  

Does your credit union offer a prepaid debit card option? Few do. But many, many big banks do, from Chase to Wells Fargo.

Navy Federal wins kudos for offering a prepaid debit card. How many other credit unions do?

Best advice: urgently slate a meeting to reinvent your sharedraft account. That’s just about the only way to stop the displacement of funds that Shevlin warns about. It will happen unless you take prompt steps to stop it.

 

5 New Year’s resolutions for credit union marketers – CUInsight http://bit.ly/2FlMcJV