credit union

 

By Robert McGarvey

For Credit Union 2.0

 

Should your credit union offer payday loans?  Don’t rush to say no. In North Carolina, and spiraling out of there, Self-Help Credit Union and its offshoots such as the Center for Responsible Lending have documented that there is good to be done, and even some money to be made, by offering payday loans.

Technology, by the way, may be the magic that lets this flourish.  Read on.

Start with Pew Charitable Trusts’  blockbuster report that says credit unions should look hard at plunging into payday lending.

Some credit unions already are doing it.  Like Technicolor FCU.  Unify FCU.  Horizon FCU.  Banner FCU. There are others.

But there could be more.

Understand: according to Self-Help’s CRL, the average rate for a payday loan is 391%.

In bygone days, when the Mafia offered street lending at shipyards and factories in north Jersey and New York City the typical term was “five for six.”  Borrow $5 on Tuesday and when payday came on Friday the borrower owed $6. If he couldn’t pay in full, he could pay $1 to stay current. Many borrowers did exactly that, forever paying interest on a principal that long before was spent.

Everybody knew those loansharks were evil.

But – and this is the point that often is missed – they thrived because they lent money when others said no, and there weren’t that many others anyway. Banks and credit unions had no interest in small dollar, unsecured personal loans. There were no consumer credit vehicles in mass distribution (a la Visa and Mastercard).  Mainly there were relatives and friends and when they said no, borrowers turned to loansharks.

An estimated 10 to 12 million of us want payday loans every year today.

Everybody knows these loans, too, are evil.  

The market continues to thrive however. People need these loans, to feed their families, to keep the lights on, to stop an eviction.

So why aren’t more traditional lenders wading into these waters? Regulators are dragging their feet in enabling small dollar loans and many institutions just don’t like the smell of them, said Pew.  “Because regulators have not yet issued guidance for how banks and credit unions should offer small-dollar installment loans, or granted specific regulatory approvals for offering a high volume of such loans, these programs have not achieved a scale to rival the 100 million or so payday loans issued annually.”

The Center for Responsible Lending has campaigned to cap interest rates on small dollar loans at 36% – enough, said CRL, for a smart institution to make some money but not so much as to bury the borrower in a spiral of indebtedness.  According to CRL, 15 states plus the District of Columbia have enacted caps of 36% or less.

Payday loans to members of the military already are capped at 36% APR.

What needs to happen to get more credit unions making small dollar, personal loans? Said Pew: “banks and credit unions will need to develop small-loan products, and their primary regulators—the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board of Governors, the Federal Deposit Insurance Corp. (FDIC), and the National Credit Union Administration (NCUA)—will need to approve the products.”

The NCUA has given a green light of sorts to credit unions to proceed, cautiously: “NCUA is aware that an increasing number of FCUs are interested in establishing short- term loan programs that are more advantageous to their members than programs available from traditional payday lenders and pawn shops. NCUA believes a well-run loan program can be an opportunity for an FCU to improve the lives of its members by providing low cost, small loans.”

Just offering such loans isn’t enough. Pew stressed that credit unions would have to get the word out that they in fact offer low interest payday loans.  Just as cucially, noted Pew, “banks and credit unions would need to compete with nonbank lenders on speed, likelihood of approval, and ease of application.”

Pew did note that credit unions entering payday lending could do so with a lot of advantages: “banks and credit unions would also enter the market with large comparative advantages over nonbank lenders, with their lower costs of doing business allowing them to offer loans profitably to many of the same borrowers at prices six times lower than those of payday and other similar lenders.”

Note: Pew, in its report, persuasively argues that credit unions have enormous cost advantages when it comes to issuing payday loans versus a standalone paycheck loan operator.  That can translate into much lower – but still profitable – interest rates.

Pew added: “The average payday loan customer borrows $375 over five months of the year and pays $520 in fees, while banks and credit unions could profitably offer that same $375 over five months for less than $100.”

A key to doing this profitably, said Pew, is to embrace automation: “The cost of manually processing applications is too high to offer small loans at scale. So, to keep the cost of origination low—and to compete with nonbank lenders on speed and ease—banks and credit unions will need to largely automate the lending process, including determining eligibility, establishing the maximum loan size, processing applications, and disbursing funds.”

What about provisions for losses? According to Pew, in pilots, charge offs have been comparatively few.  

A bottomline: many Americans want credit unions to make payday loans and they are willing to pay for them.  The regulators, admittedly slowly, have signaled support for cautious entry into payday lending. Smart, community focused credit unions will take the cue and get out the word that they are there to make loans to the very needy.

That’s a win in terms of community relations, it’s a win for the borrowers, and – according to the Pew and CRL data – it’s a win for the credit unions.

Auto loans, subprime borrowers, and your credit union – CUInsight http://bit.ly/2FFcZFc

By Robert McGarvey

 

For Credit Union 2.0

 

“We are not moving fast enough. We need to move 2x or 4x faster,” said John Janclaes, CEO of the $1 billion Partners Federal Credit Union headquartered in Burbank, CA.

In a wide ranging interview, Janclaes revealed exactly why he had put the credit union on what he describes as a journey of digital transformation – and he also talked about progress made.

You might think Partners is a blessed credit union. It has enough assets to compete and it has strong SEG ties – it essentially is the Disney credit union and pulls membership from the many Disney companies, from the theme parks to movies and ESPN.  It also has two very different geographical hubs – southern California and Orlando, FL. It has a lot going for it.

But three or four years ago, Janclaes looked at the competitive landscape and he had a worrisome thought: “Credit unions are in the crosshairs,” he said. He elaborated that the industry faces ever smarter, tougher competition from big banks and also fintechs and companies like Amazon.  “We need to keep up with that level of competition.”

Not that many decades ago, credit unions, he said, were a well balanced three legged stool that offered better rates, better service, and better convenience because many members could bank at work.

And then that happy bubble burst as consumers – increasingly – have demanded digital banking and many credit unions have faltered in the transformation from high personal touch and community based institutions.

“We recognized we need to keep changing to remain relevant to our members,” said Janclaes.

Fueling his thinking was a CO-OP funded study on digital transformation that found, in a survey of 221 credit union leaders, 88% said digital transformation is “extremely or quite important.”  And about half the respondents acknowledged their digital experience is “inferior” to top brands like Google and Apple.

Janclaes wanted more for Partners, he wanted to offer members a digital experience that in fact rivaled the best of breed because – face it – those are benchmarks members use to grade what they get from their financial services providers.

A big step was that he went outside to Kony and also the Boston Consulting Group to help Partners in its journey. “We wanted to work with trusted partners who are industry leaders,” said Janclaes.

“We have de-emphasized inhouse tech innovation,” said Janclaes and that is because – looked at frankly – few credit unions have the scale and environment to attract the top tech talent that is needed to create a thriving 21st century institution. “We are picking where we can win.”

What especially attracted him to Kony – which has done the bulk of the heavy digital lifting for Partners – is that it had a limited credit union background and also had had successes in very different industries such as retail and energy.

“We did not want a credit union incumbent with a credit union mentality,” said Janclaes.

Read that sentence again.  Credit union management orthodoxy is to vet potential vendors based on their resumes of past credit union hits.  

But Janclaes turned this thinking upside down.

He elaborated that “we are getting better at picking strategic partners.”

He also has taken an increasingly active role. “Ten years ago I was not involved with our tech partners. Now I am. I talk regularly with their CEOs.”

He said he had full support from his board which, he explained, is composed of Disney executives.

“Our sponsor sees us a value for the company and its cast members,” said Janclaes.

A challenge, he added, is coordinating the new digital credit union with the traditional brick and mortar credit union  He indicated that every measure says that in fact is happening as Partners has committed to offering an omnichannel presence that lets members pick how they want to interact. Most tasks – from account opening to joining the credit union – now can be done via any channel and that, believes Janclaes, is the future of credit unions that aim to thrive tomorrow.

Along the way, Janclaes has recognized that the traditional credit union way of updating digital functions via an annual or semi-annual upgrade just doesn’t work today. “We need to do this much faster, 3x, 4x.  We have started with 2x – that’s the business problem now in front of us.”

“We want to make incremental improvements at a rapid pace,” said Janclaes.

This, he said, represents a massive “mindset shift” in credit unions that, traditionally, have aimed for perfection and that has taken time.

Today calls for faster and that means, often, perfection won’t be there.

But what happens will nonetheless be good enough.

That of course is how all tech companies think.

“Our members are already ahead of us in thinking that way,” said Janclaes.

And now Janclaes is determined to bring Partners to that mindset too.

 

An 11 minute video on the Partners digital transformation is here.  It’s worth a view by any credit union manager, or board member, contemplating the next steps in their institution’s digital journey because that has become a ride no one can refuse.

 

What’s your CEO story? This column is looking for credit union CEOs – institutions may be any size – to share their transformation story.  Email rjmcgarvey@gmail.com

 

Should wearables be on your tech radar in 2018? – CUInsight http://bit.ly/2G7oq5c

 

By Robert McGarvey

 

For CU 2.0

 

New research out of Javelin, sponsored by identity specialist Jumio, makes plain multiple facts and the central one is that digital banking rules and it does so across generations.  It’s not just a Millennial thing anymore.

Another key takeaway: most financial institutions – eyes on you – stumble in many key places, particularly in deploying mobile banking. This is eroding member loyalty: they will sometimes simply flee to another institution.

And security concerns continue to be a bother for many users, according to the Javelin research. Despite the fact that generally a mobile banking session over a cellular network is much more secure than one over an online network.  No matter. A lot of users remain very worried about safety and digital banking and the smart institutions are addressing these fears.

What all this means is that mobile banking – increasingly the channel that matters in banking – is where credit unions have to double down on efforts to compete with the money center banks and the fintechs that continue to nibble at the user base of smaller, legacy institutions (talking about you, Amazon).  

Al Pascual, SVP, Research Director and Head of Fraud & Security at Javelin Research elaborated: “To capitalize on the growing demand for mobile banking as millennials grow in spending power, financial institutions must simplify user experience and address ongoing concerns around security and fraud.”

Dive deeper into the report and the results can surprise.  For instance, although 76% of Millennials now regularly use digital banking, 77% of Boomers do – and, yep, that says Boomers have greater acceptance of the channel.

But Millennials are way ahead with mobile banking. 62% use it monthly, compared to 34% of Boomers.  Also, claimed Jumio, “Millennials report stronger satisfaction with nearly all aspects of mobile banking, compared to Generation X and Baby Boomers.”

Millennials definitely have fewer gripes about mobile banking.  25% of them express concerns with the channel, compared to 33% of Gen X and 35% of Boomers. What kinds of concerns? 28% grumble about “hidden fees,” while 53% complain about ease of use.

The study uncovered valuable findings when it focused on abandonment issues – why do we just close out when midway into a task in a digital banking session?  36% said they did so because “the process [was] taking too long.” 20% complained about authentication “being too time consuming.”

Waste a consumer’s time – and the consumer is the judge of this, not a cautious credit union manager – and they will blow you off.  Just that fast.

Here’s the kick in the head: “One-third of consumers respond negatively to their FI after abandoning a mobile banking activity,” reported Jumio. Understand: 7% decided to open an account at another financial institution.  And 13% shared their grumble about the experience with family and friends.

That’s word of mouth you don’t need.

In this regard, the Javelin research shows that account opening tools must cater to Millennials, mainly because they are the leading cohort when it comes to adding new accounts and services. Their chief complaint: it takes too long.  The antidote: speed it up.

And make it easy to complete the tasks on a mobile device. That is becoming a crucial battleground.

When it comes to authentication, Millennials in particular prefer biometrics, especially eye scans and facial recognition, according to the Javelin data.  Farther down the list are legacy modes such as QR codes. Very probably institutions that want to stay on the cutting edge of Millennial acceptance need to roll out multiple biometric modalities.

Another, key piece of advice from the research is: “Put security first (and make sure your customers know it).”  

“But… weave security into the customer experience in smooth, fast, intuitive ways.”

Don’t make security into hurdles members have to jump – how many routinely forget passwords? – but do let members know that security protocols are always there, always protecting them. They want that reassurance even if they don’t want the hassles of dealing with in your face security challenges (what street did your father live on at age 6?).  

Sift through the Javelin findings and there is much to cheer credit union leaders. There is no way they can compete with money center banks in terms of branches – but they don’t need to.  What a credit union needs is top grade digital experiences, online and mobile, that include easy account opening and build in seamless security that will protect members.

None of that is easy.

But it all is doable at credit unions that embrace the digital mandate.

 

By Robert McGarvey

For Credit Union 2.0

 

Rob Taylor, CEO of Idaho State Credit Union in Pocatello, Idaho, wants you to know his enemies aren’t big banks – it’s other credit unions.

That’s the provocative point of an op-ed he recently penned for American Banker.

I doubt Taylor will soon get a congratulation bouquet from CUNA, but he just may have a point that many of us ignore the reality that credit unions today are arch competitors with each other.

Wrote Taylor: “The problem with our movement is most of us have been indoctrinated to believe our common enemy are bankers… when in fact the real threat to our future lies within our own industry.”

Believe this: Chase does not care if you thrive.  No big bank does.  In fact big banks are glad credit unions exist because it lets them say that they welcome small, local institutions. When credit unions move into underserved neighborhoods, probably big banks break out the private reserve brandy to toast their bravery because those banks do not want to be pressured to move back into urban and rural communities they have abandoned. If credit unions are serving those people, hoorah! And pass the brandy.

Sure, community banks – in many cases – actively dislike credit unions and vice versa but they are both squabbling over table scraps that have fallen to the floor.

While the big banks get bigger.

Back up a step. What’s the most competitive vertical in the credit union business? The clear winner are the military themed credit unions and in that sector there are two of the nation’s very biggest credit unions. I count four in the top 20.  But a few years ago I tried, and failed, to get on the record sources to talk about competition amongst military credit unions for a proposed story for Credit Union Times. The official line is that they don’t compete.

Oorah.

Maybe they even believe it. But myth it is.

Wrote Taylor: “[S]ince HR 1151 was signed into law by President Clinton in 1998, large, multiple common bond credit unions have continued to get larger by expanding their fields of membership, sometimes overlapping in predatory ways to the detriment to smaller credit unions that have stayed true to their original fields of membership.”

Years ago, FOMs were well defined and narrow. A credit union served only New York Times employees, or maybe only employees of AT&T.  I personally belong to that former AT&T credit union – Affinity Federal – and its field of membership is far broader than it once was. Indeed, Affinity on its website headlines: “Almost anyone can join.” That’s because dozens of organizations are in its FOM and if that’s not good enough, Affinity notes: “Don’t see your organization? No worries! You can become a member of the New Jersey Coalition for Financial Education by making a $5 donation when you fill out your online application.”

I’m not dissing Affinity. I’m a happy member. But the broadening of FOMs leads – pretty much instantly – to competition among credit unions for those among us who are fans of the credit union model.  

In Arizona, where I now live, Desert Financial – nee Desert Schools – proclaims that anyone who lives, works, worships, or goes to school in Maricopa, Gila, or Pinal counties can join. Maricopa – Phoenix – has around 4 million people, more than half the state’s total population. That credit union is in sharp competition with every other credit union in Phoenix and that is fact.  

Back to Taylor.  He wrote that his institution just does not compete with Idaho’s biggest banks. As far as competition with credit unions, it’s a different story. Taylor elaborated: “The largest bank headquartered in… Idaho holds $1.3 billion in assets, which is less than half the size of the largest credit union based here. This bank has never been in direct competition with my credit union for consumer loans or deposits, even though we have branches in the same cities.”

He went on: “However, every day we compete vigorously with the aforementioned credit union for consumer deposits and loans from overlapping members.”

Then Taylor tossed out his spitball: “Now, here is where it’s going to get ugly for me and where I lose friends. I agree with Sen. Hatch that many larger credit unions operate in the same manner as taxable banks, and I believe it’s time for them to convert to bank charters and be taxed like the ‘big boys,’ because the credit union movement doesn’t need them. We stopped being a movement and became an industry when HR 1151 was signed into law. “

Wow.

Agree with Taylor or not, he deserves a round of applause. He has put on the table the topic nobody wants to discuss. Do credit unions compete with each other? Of course they do. Is this hurting small credit unions? Of course it does.

Discussing just these topics needs to happen and soon. Because just maybe we have seen the enemy and he is us.

 

By Robert McGarvey

For Credit Union 2.0

 

The press release headline had me at go: “D3 Banking Technology Survey Finds More than Two-Thirds of American Digital Banking Users are Frust.”

Nah, I didn’t know what “frust” means either.  The Internet tells me a secondary slang meaning is frustrated.  

And, you bet, I too am frustrated with credit union mobile and online banking – and I’m not alone, per D3, and that should definitely worry credit union execs.

I have accounts at two credit unions. Digital products at both are inferior to Chase, where I also have an account.  If I could have only one account – and if I weren’t a big believer in the credit union movement – it would be with Chase.  I hate to say that. But it’s true and, thankfully, I am not limited to just one account.

Chase is forever improving its digital products. My credit unions aren’t (and, yes, I know they are locked into their vendors’ upgrade cycles – but why accept that?).  

Five years ago just having mobile banking was good enough.  20 years ago just having online banking, however feeble, was cause for a celebratory press release. In 2018 that definitely is not enough.

Not even close.

D3 proves that with its Harris poll that surveyed 1600 digital banking users (who had used it in the past 12 months) and they were quick to vent. Two in three – 68% – expressed frustration with their digital banking experience.

Count me among them. Yesterday I logged in to change the PIN of my debit card.  No can do in my credit union’s mobile banking app.  I eventually called an automated line and accomplished the task and how 1985 is that?

Why can’t I do a simple, mechanical task like changing a PIN on a mobile phone – and, really, do you think call centers do a better job of screening out fraudsters? Ask Microsoft co-founder Paul Allen about that.  

Nor is there evidence to suggest doing this via online or mobile banking is inherently riskier than via a telephone call.

So why can’t I do it?

A bottomline reality is that in 2018 an increasing number of consumers want – indeed demand – that their mobile banking app and online banking let them do anything they could do in a branch visit.

D3/Harris did find that there are age differences in expectations about mobile banking – but the differences aren’t as big as you might have hoped for. Said D3: “The survey revealed that digital banking users ages 18-34 are more likely than those ages 55+ to be frustrated with their digital banking experience, as 73% of the younger group indicated that they have been frustrated with their digital banking experience over the past year, compared to only 61% of adults ages 55+.”

Even tho credit union members skew older, it is safe to assume 6 in 10 of them are dissatisfied with their mobile banking experience.

For sure, too, members demand a feature rich digital banking experience: “The survey also found that more than half of digital banking users feel it is important for financial institutions to provide mobile deposit (70%), P2P services (66%) and mobile account opening (51%) as part of their digital banking offerings,” relayed D3.

Here’s the frightening kicker: “32% of digital banking users report that they are willing to leave their current bank or credit union for a better digital experience.”

That is blunt: one in three members who use digital services say they just may shift financial institutions to get better services.

Mark Vipond, CEO of D3, observed that that’s the real issue here is “the number of American digital banking users – 32 percent as found in our survey – who are willing to leave their current banking relationship for a better digital experience. As new types of technology continue to be introduced, financial institutions are going to need a strategy built on technology that allows them to innovate and introduce new features and functionality faster than they have to date.”

That’s the reality. Today consumers benchmark your app and website against Amazon, Netflix, Google and the other top digital services – and, sadly, at all but a handful of financial institutions the digital products are mediocre at best.

What’s the solution: commit, today, to improving your digital offerings just about daily, certainly weekly.  Word of advice: smart credit unions are committing to continuous improvement of their digital offerings.  The era of a once or twice a year update is over.  

The path to credit union extinction is paved with complacency.

Particularly with Millennials, credit unions have key positive attributes – they are local, they are community-minded, they generally are intimate scale, and they aren’t “big business.” All good. But will Millennials suffer a poor digital experience to do business with a credit union with bad online and mobile offerings?

Most credit unions seem to be betting that indeed Millennials will.

I don’t think they will.

Do you?

 

By Robert McGarvey

 

For Credit Union 2.0

When it comes to account openings, credit unions increasingly find themselves caught between the proverbial Scylla and Charybdis, the fancy Greek mythology way to say between a rock and a hard place. In either direction lies complete devastation.

That’s because on one side, where credit union account opening barriers are high to prevent bogus accounts opened by crooks, big banks clean up by opening a lot more accounts.  Credit unions too often simply drive new business away.

On the other hand, when barriers are lowered, sometimes criminals pile on – like sharks sensing blood in troubled waters – and they get busy defrauding a credit union.

Indications are plentiful that criminals, increasingly, are honing in on account opening fraud. A lot of their activity is shifting into that realm.  

Credit unions, seeing that data, have doubled down on erecting barriers to fraud at account opening.

The upshots: potential members are frustrated when account opening barriers are too high and credit unions, too, are frustrated because they know they aren’t opening enough accounts.

There is a big data driven escape hatch that can save credit unions. But lots remain clueless.

They will suffer because what they are presently doing just isn’t current grade.

Personally, I know about the difficulties involved in opening a new account. It took me some weeks, of sheer tedious frustration, to open a new account at a credit union two blocks from my house in Phoenix.  If I hadn’t been a credit union fan, and if I weren’t something of a student of credit union practices, I would have walked long before I succeeded in opening the account.  Always it seemed another “proof” was required.  

My drivers license had a different address than my present address and that was the hitch.

But five years earlier, soon after I had moved to Arizona, I had opened an account at Chase with a driver’s license from another state and, in the bargain, Chase gave me a check for $300, just for opening a checking account.  The process was accomplished online. It took a couple days, max.

With the credit union, I eventually surrendered and visited the branch.  How 20th century. I did get the account open but the process left a bad taste of obsolescence.

Think about that. Chase paid me to open an account, the credit union inflicted aggravations upon me to do so.

Where will most potential customers wind up?

By now you may be saying, what should the credit union have done differently? What could it have done differently given government insistence on KYC?

Lots.

It could start by joining the 21st century.

Start by reading a very short ebook from Feedzai, a data science company with roots back to Carnegie Mellon University.  

It puts forth a lot of frightening ideas. For instance: criminals, increasingly, are opening crooked accounts but leaving them sleeping for some time – typically until a financial institution has stopped watching it as a worrisome new account. Think about that sophistication. The FI eyeballs a new account, crooks discover that, so they wait out the FI.

It gets worse.

Criminals know financial institutions love rules and so they learn them, they obey them – until the FI’s anxieties pass. Then they strike.

Machine learning can still give a credit union the edge, said Feedzai. “Banks can begin to keep pace with fraudsters with hypergranular, continuously updated profiles that pinpoint and connect fraud signals. There can be thousands of fraud indicators that alone aren’t enough to make a conclusive decision of fraud, but which a machine can thread into a complete view and an accurate decision.”

What Feedzai is using is very big data – but that’s how to thwart crooks. It’s found oddities that correlate with criminality.  For instance:  “Feedzai has found that devices with high battery power are correlated with high fraud. Fraud is three to four percentage points above the average fraud rate when emails have two to four consecutive digits. Certain email domains are more correlated with fraud behavior, including public domains. And when a device name is unknown or null, the likelihood of fraud is 78%.”

Machines can also hunt for data across multiple channels to support, or deny, a new account opening.  In a matter of minutes, a machine can make a thin file fat and take a lot of worry out of an account opening.

In assessing a new account, a smart machine looks at both traditional sources (credit bureaus for instance) but also non traditional sources such as social media channels.  A full picture results, quickly.

That’s the thing. Many institutions continue to use only a small, limited data set in opening new accounts. Smart, contemporary institutions are using an array of 21st century data and, despite the volume, it is swiftly processed when machines do the heavy lifting.

How does this work in practice? Feedzai pointed to a case study – involving a large bank – where the institution had been approving only 40% of new account applications. With machine learning and big data on the case, it upped that number by 74% – with no increase in fraud. None. And the process itself was streamlined.

Can you say similar about your account onboarding?  Talk with any of a growing number of companies such as Feedzai that are targeting account opening fraud and how to do the screening better, faster and smarter. Many companies – mainly small, very tech in orientation – are now in this space. Talk with a few.

If you can’t open accounts as well as big competitors, you won’t long stay in business.

Put the machines on your side and stay in the game.

 

 

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.