Call this the best of times for digital member service company Glia and that is because, in the pandemic era, credit unions’ traditional member service tools have fallen out of favor and meantime just about all of us have become significantly more digital, said Dan Michaeli, Glia CEO and co-founder.
Just a couple years ago, many credit unions looked at digital customer service tools as a “nice to have.” That’s changed for many and, suddenly, these tools are must haves.
Especially at credit unions, says Michaeli and that’s because credit unions have always had a member centric attitude. And digital tools just may be the best tools around.
Here is what Glia says it does: “Glia creates digital-first moments that simplify and transform conversations between institutions and their customers using Messaging, Video, Voice, CoBrowsing, and Artificial Intelligence.”
Even better, as service switches from channel to channel – as often happens – the context and history are retained. No more maddening moments for a member who just spent 10 minutes explaining a problem to a rep and now is asked by a new rep to tell about the problem. From scratch. How frustrating is that?
Right now, we are in a shift from telephone based member service into a variety of digital channels, including oldfashioned voice, but with text, AI and more claiming ever larger roles.
An upshot is that members may find themselves experiencing better service and now they will be able to pick their own channel.
Are these tools that mainly will abound at only the biggest financial institutions? Michaeli believes otherwise. He in fact believes that this technology levels the playing field and a $100 million credit union just may have member service tools that rivals that of a big five money center bank.
How cool is that?
You want to know – indeed, in the Covid era you need to know – about digital member service and that’s why this half-hour is a must listen.
The Aspen Institute throws out a startling number of how many evictions we may see when the CDC’s eviction ban expires at year-end. Says the think tank, “According to the latest analysis of weekly US Census data, as federal, state, and local protections and resources expire and in the absence of robust and swift intervention, an estimated 30–40 million people in America could be at risk of eviction in the next several months.”
30 to 40 million people! 10% of us.
Credit unions just may have a savior’s role to play in this and it’s a role that would define credit unions in starkly different terms than their banker competitors. Banks are fueling evictions, where credit unions can throw a lifeline to renters.
That’s the idea of Jake Schlachter, CEO of Madison WI based We Own It, an organization formed to shake up cooperatives. Schlachter now has his eye on credit unions and he has thrown out a huge idea: credit unions could harness their excess excess capital (many have significantly more than the amount required by regulators) to create loan funds for tenants facing eviction.
Ian Schrager (The Edition, The Public Hotel, et. al.) unquestionably is a hotel innovator but I will tell you this: His crystal ball is broken and he doesn’t know what is happening, or not happening, in tomorrow’s travel.
What triggers this is that I have recently been bombarded with emails and calls from friends and colleagues telling me I am wrong in my predictions that our travel lives after Covid-19 will be very different from what we had before. I am no pessimist – indeed I think great times are ahead, starting probably in 2022. But they will be different.
Where Schrager comes into the frame is in a speech he gave at the 2020 Boutique Lifestyle Digital Summit where he said that when the hospitality industry recovers it will return to “not a new normal, but the same normal we’ve always had.”
He added: “I don’t believe in paradigm shifts.”
An odd comment because the world of 20th century travel is a world of paradigm shifts, where the car made it possible to travel hundreds of miles, quickly and in comfort, the plane extended the range, the jet made intercontinental travel accessible and reasonably comfortable, and mass market hotels (think Holiday Inn) redefined who would stay in hotels, for what reasons.
I understand why my hospitality industry friends take comfort in Schrager’s viewpoint – a comfort zone is a frightening place to exit – but to my eyes those in hospitality who cling to old paradigms will perish. And some who recognize that things are different today just may find a path to a new prosperity.
Covid-19 has unquestionably triggered what will be enormous paradigm shifts in travel.
Three legs of a stool of change say this will be so and they are all coming together at the same time.
The duration of the Covid-19 crisis. It takes time to form new habits, new attitudes. We have that time with Covid-19. People are still dying. World Bank forecasts show 2.5 million dead globally by January 1, 2021. That’s more than double today’s 1 million death toll.
Yes, there are those in Washington DC who insist we will have vaccines available before year end (by all means, take mine; I won’t, not this year when the process has been tainted by toxic politics). No rational person thinks we will have any significant distribution in the US of a vaccine until mid 2021 at the soonest.
And then there is the rest of the world to vaccinate. When will that happen? And know that the US has said it will not participate in a WHO effort to distribute a vaccine globally – leaving that up to, I don’t know, maybe imaginary beings?
But if the rest of the world is sick, we will never be healthy. Not in today’s interconnected society.
Count me as saying Covid-19 will continue to hold back travel through 2021 and into 2022. Meaning we will have two years of training how to live a Covid-19 lifestyle and most of us already have adjusted to it. We may grumble but we wear masks, we don’t go to movie theaters, we don’t eat in restaurants (we do love take-out), we don’t fly in planes (especially not internationally) and we don’t stay in hotels. You know what, this “new normal” isn’t so bad and I know few people who really, truly want to get back to how travel was.
The Revenge of the Beancounter. Corporate bookkeepers have always hated business travel, which they have seen as a giant boondoggle that paid for golf, booze, steaks and to what end? Covid-19 just may have given them the ammo they need to dramatically lower travel budgets longterm.
That’s because most companies are learning that they can continue to make sales and develop relationships without travel and face to face meetings. For how many decades have I heard that if we don’t travel we can’t close deals? And yet deals are getting done even with what amounts to a near total ban on travel in many companies.
This has not gone unnoticed by the beancounters.
Face it, some business travel has indeed been important, maybe essential. But a lot happened because we always have done it.
The business world hasn’t ended even though a lot of travel has stopped.
There also is a simultaneous generational change. Baby Boomers may have grumbled about business travel but in our guts we kind of liked it and we prided ourselves on being “road warriors,” a label that glamorized bone crushing monotony and somehow made airline food seem, well, edible.
Don’t think Millennials and Gen Z are on board with this. They aren’t. They see much business travel for the drab, uninspiring slog that it is. Of course they will travel when there is a reason. But a lot of business travel has happened without reason and, as for these younger generations, hell no, they won’t go.
Sustainability and climate change. The elephant in the room when talking about travel is the negative impact it has on the environment, especially the impact of air travel. The era of flight shaming will only grow in volume and intensity as the economy heals and Covid-19 retreats.
The reality of climate change is undeniable, as is the damage and destruction it is bringing.
Millennials and Gen Z are especially concerned about longterm environmental impacts, understandably so. They will question the need and desirability of air travel and these will not be generations that hop on a plane to weekend in Paris or for a lunch meeting with a prospect in Tulsa.
Add up duration, frugality, and climate change and it’s a trifecta for change in how we travel. The new normal will be different. Very different indeed, and I applaud the Millennials and Gen Z who are creating this reality because they will have to live in it.
Call this Part 2 of our smarter lending for credit unions. The recent episode, #113, explored small business lending with Capiform’s Sherif Hassan. Listen here. This week it’s time for something entirely different.
Happy with your car loan portfolio?
Many credit unions are anything but and this has become a crucial issue as most are awash in deposits and now are hunting for profitable places to put that cash to work.
Car loans could be it. But indirect lending…not so much.
Enter Nicholas Hinrichsen, an online car sales veteran who co-founded an online used car marketplace in 2015 when he raised $10 million in venture capital. They sold that business in 2017 to Carvana, which by now has grown into one of the nation’s biggest used car retailers.
After logging three years at Carvana he is again starting up a new company, with $5 million in venture funding, where the aim is to help credit unions better sell car loans to their members.
Hinrichsen knows car loans and he also knows about credit union dissatisfaction with indirect loans. He has a better idea: helping members refinance existing car loans issued by third parties, converting them into credit union owned loans.
Credit unions can win that fight, said Hinichsen, because usually their loans are better, at lower interest rates.
Most credit unions, he admits, do “spray and pray” marketing, sending out mailers to all pre-qualified members. In this podcast he tells a smarter, more cost effective way to contact the right members, ones who just might be prospects for car refinance.
Keep listening because he has an idea for tools that will essentially pre-populate a loan app for a member, using data the credit union already has. So filling out a loan application literally takes seconds.
And another – intriguing – idea he has is about how to profitably make sub-prime loans to existing members and, in the process, to create a path for them to get lower interest rates going forward. Just that may be a core credit union mission, especially as more members deal with economic pains of the pandemic.
You know you want to issue more and more profitable auto loans. This is a podcast you have to hear.
Contact Hinrichsen here. The company is named Clutch
Listen up here.
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Call this Part 1 of our smarter lending duet. Part 2, posting tomorrow in podcast 114, is on smarter car loans with Nicholas Hinrichsen. You don’t want to miss that one.
PPP loans just may have awakened credit unions to the immense opportunity there is in small business lending. That’s what Sherif Hassan, CEO of fintech Capiform, believes. The opportunity is there.
But to win that business credit unions need to speed up their lending process, said Hassan, and they also need to create a more efficient process that cuts costs.
Automation – smart technology – is the key. At many credit unions, the typical cost for funding a small business loan is around $3600, said Hassan. Capiform’s tools get that cost down to maybe $360.
At that cost, suddenly making smaller loans – maybe $50,000 or $75,000, loans that often are what small businesses want – is realistic.
Community banks have long had a lead in small business lending, but CU2.0 Podcast listeners recently heard Steve Bruyn of Foresight Research say that his data shows a huge drop in customer satisfaction at community banks. That’s an opportunity for credit unions.
Add in the comfort many credit unions gained in the PPP program – where they learned they could successfully deal with small businesses and also with the federal government – and the path to more loans for credit unions is clear.
It comes at an ideal time. Many credit unions are drowning in deposits. Small business loans are a profitable path to safety.
Don’t many fintech lenders want that same market? They do. But credit unions – with their community focus – have a fast track to succeeding in that battle. Listen up as Hassan tells why.
You may have heard Hassan’s earlier podcast. Here’s a link.
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Now just may be the worst of times but it also is an opportunity for credit unions to reinvent themselves, by reimagining their roles and taking an active part in helping to limit what many experts see as a coming eviction crisis, as renters who have suffered enormous economic hardships in the Covid-19 pandemic are put out on the streets.
What if credit unions made available emergency loan funds to help renters avoid that outcome?
That’s the question Jake Schlachter, executive director of We Own It, an organization devoted to reinvigorating the cooperative movement, asks.
A starting point is that many credit unions have more set aside than the 7 to 8% excess capital required by the regulator. What if those institutions used some of that money to help renters avoid eviction. What if….
Credit unions just might be seen as community heroes.
Suddenly, many would know exactly the difference between banks and credit unions.
Schlacter has sent out a letter to the CEOs of 1430 credit unions with assets above $100 million and significant excess capital. Here’s a link to the letter.
Now what happens? Listen to the podcast. You will hear Schlachter’s hopes and dreams.
This is a challenge to just about every credit union. But the need is real and the possible payoffs are also real.
Want to hear more Schlachter? Here’s a podcast I did with him for a different series a year ago. This one focuses on cooperatives in general with minimal direct references to credit unions.
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Find out more about CU2.0 and the digital transformation of credit unions here. It’s a journey every credit union needs to take. Pronto
New medical research published in Emerging Infectious Diseases, issued by the CDC, starkly shows just how risky long haul international travel is and know this: the warning applies to front of the plane passengers too.
What the paper explores in detail is a 10 hour Vietnam Air flight from London to Hanoi (VN54) that resulted in 15 ill passengers and crew in addition to the virus carrier (referred to as case 1) who boarded the plane ill.
The authors detail how most passengers and crew, 217 in total, were successfully contacted post flight, once it became clear that this journey was in fact a “super spreader.”
15 out of 217, big deal? So you may think. But drill deeper into the facts. This was a disease outbreak largely limited to business class where case 1 sat: “Of the 15 persons with flight-associated cases, 12 (80%) had traveled in business class with case 1, and 2 travelers (cases 14 and 15) and 1 flight attendant (case 16) had been in economy class. Among persons in business class, the attack rate was 62% (13/21). Among passengers seated within 2 meters from case 1, which we approximated in business class to be <2 seats away, 11 (92%) were SARS-CoV-2–positive compared with 1 (13%) located >2 seats away. Of the 12 additional cases in business class, symptoms subsequently developed in 8 (67%); median symptom onset was 8.8 days (interquartile range 5.8–13.5) after arrival. None of the additional cases showed COVID-19 symptoms while on board VN54.”
If you were in business class on that flight you had a two in three chance of landing with Covid-19. If you were actually near case 1, you almost certainly were going to get Covid-19. That is fact. That also is a grim prospect.
In business class!
How did the disease spread? Aerosol or droplet transmission, said the authors.
As for the disease carrier, she is a 27-year-old businesswoman from Vietnam, who had traveled from her London base to Italy with her sister in February. The sister was later confirmed to be positive for the virus. She later traveled with that sister back to Italy and also to Paris for Fashion Week. On February 29, she had a sore throat and cough. On March 1, she boarded VN54. She was ill throughout the flight. After landing, the disease progressed and on March 5 she sought treatment at a Hanoi hospital.
The study authors challenge the safety protocols advocated by international aviation carriers. Right now, the international flight experts say the risk of inflight transmission is very low and the only safety measure they recommend is a face mask. They explicitly do not endorse blocking middle seats. The paper says hogwash. “Our findings challenge these recommendations. Transmission on flight VN54 was clustered in business class, where seats are already more widely spaced than in economy class, and infection spread much further than the existing 2-row (36) or 2 meters (37) rule recommended for COVID-19 prevention on airplanes and other public transport would have captured.”
Meantime, airports, from LAX to Honolulu, have been testing and/or busily installing thermal cameras – but what if they simply do not provide useful information? The authors wrote: “thermal imaging and self-declaration of symptoms have clear limitations, as demonstrated by case 1, who boarded the flight with symptoms and did not declare them before or after the flight.”
And with many passengers who became ill it took eight days for symptoms to show. So much for checks on incoming passengers at airports.
Just maybe long flights are simply dangerous. Wrote the authors, “long flights…can provide conditions for superspreader events. It has been hypothesized that a combination of environmental factors on airplanes (humidity, temperature, air flow) can prolong the presence of SARS-CoV-2 in flight cabins.”
What do we need to do to stay safer in the air? There is no silver bullet. The study authors offer three prescriptions: wear face masks and wash your hands often. Lastly, maintain physical distance before and after boarding. Do those three things and, suggest the authors, we are doing what we can.
But very probably the safest course is step number 4, do not fly long haul unless it is absolutely necessary.
That’s the opinion of Steve Bruyn, CEO of Foresight Research who, writing in The Financial Brand, said that its extensive polling had found nearly a doubling of the number of consumers who say they intend to change financial institutions. Now 22% say they are heading to the exit of their present financial institution, per Foresight Research.
Foresight Research elaborated: “We have surveyed almost 11,000 banking customers and credit union members in 44 markets to find out what is really going on in the world of banking from the customer/member’s point of view. Then we added another survey of almost 700 customers and members to find out what the pandemic had changed in the banking industry. We found a hot spot of churn. Churn increased from 12% (over two years) to 22% expected churn in the next year or two.”
The news gets sweeter still: “Of the people who intend to leave their financial institution almost 3 out of 4 are Gen Z or Millennials – the very block of business that drives the future of your financial institution,” said Foresight Research.
Foresight Research added: “So, what drove the high churn? Even though satisfaction declined greatly (except at credit unions) that was not the culprit. Customers and members were generally empathetic, likely thinking ‘we are all in this together’. It was all about financial issues like interest rates and fees. The switchers while forgiving also are looking to reduce cost or increase interest on items like money market accounts, CDs, etc.”
This makes sense. The economy is the worst it has been since the Great Depression. Millions of us are unemployed and millions more are underemployed (working fewer hours). It’s tough to balance the household budget when less money is coming in so a shrewd step is to slash unnecessary outgo.
Bank fees are prime to be trimmed. And that is a potential bonanza for credit unions.
Ask yourself this: where can credit unions beat banks, consistently? The answer is and has long been on pricing of everything, from account fees to NSF fees and loan interest rates. Credit unions are member owned, they have no shareholders who demand dividends. Most have unpaid boards of directors. Most pay their employees fairly but rarely lavishly – and here’s a CNN round up of bank c-suite compensation and note that the CEO of Bank of America had total compensation of $24.8 million but he was by no means the highest paid in the group.
Big salaries, big dividends to shareholders, and bloated, inefficient branch networks add up to huge expenses on the books and that means customers have to pay through the nose for the privilege of having a bank account.
According to Bankrate.com, 72% of credit unions offer free checking accounts with no minimum balance requirement. Just 38% of banks do.
Want a checking account at Chase? The barebones Total Checking has a $12 monthly fee unless a $1500 minimum balance is maintained. That’s typical at most banks.
A free credit union sharedraft account offers every bit as much, for free.
When it comes to NSF charges, many credit unions charge around $25, per Nerdwallet. Banks generally charge upwards of $35. (Yes, NSF charges should be zero but that’s a different column.)
For auto loans, an institution that often is rated best is Consumers Credit Union. PenFed similarly scores high. Digital only banks (Ally for instance) are very competitive. But rarely making the rankings of best auto loan sources are mainstream banks. It’s just a fact. Any consumer shopping for a car loan is throwing money away if they don’t compare at a credit union.
Credit unions offer more consumer friendly terms across the board. That means they are well positioned to win in the coming financial institution reshuffle.
The credit union key: embark, now, on an aggressive marketing campaign, especially via Facebook and Instagram and possibly TikTok, that stresses the message: we are a financial institution owned by and designed for consumers. Better rates, lower fees, more money in your pocket.
The WalMart tagline is an allstar: “Save money. Live better.”
Similar messaging is what credit unions should aim for to win their share of consumers switching financial institutions in search of relationships that leave more money in their pockets.
Turn up the volume. And shout it out.
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What a difference a pandemic makes. Just six months ago when contactless payments came up, credit union c-suiters, most of them, yawned and dismissed it as a nice to have that hadn’t vaulted up to must have status – and, besides, many hundreds of credit unions are signed up for Apple Pay which gives users a version of contactless. Who needs more?
More specifically: who needs a credit union contactless enabled debit or credit card? Most credit unions, just six months ago, thought the right answer was not us.
That was then, this is now and now, in a in a pandemic, the consumer’s cry is getting loud: give us contactless and give it to us now.
The Chicago Sun-Times headline grabbed my attention: “Palmer House foreclosure points to industry’s trouble.” The last big conference I attended was there, the Finastra Community Markets fintech show in October 2019, and I had marveled at the hugeness of Chicago’s second biggest hotel (1641 guest rooms and with public spaces to spare). And now the pandemic may be shutting its doors.
It’s not alone. Other big names are teetering. In Manhattan it took a judge to stop a foreclosure proceeding against The Mark Hotel on the Upper East Side.
And it’s not just storied hotels. In Miami Beach the 68 key Variety Hotel just went on the market for $37.5 million, in response to a lawsuit filed by a holder of a $25 million loan. The lienholder said there had been no payments since April.
There will be many more foreclosures. The American Hotel & Lodging Association says one in four hotels is behind on its mortgage payments and, honestly, there is no happy news in the near future. Nobody sees a quick rebound in business travel and leisure travel, to the extent its showing some life, seems to gravitate towards small motels (no elevators! No public spaces of any size!).
Financial reporter Michael Taylor, writing in the Beaumont Enterprise newspaper, said “This is nothing short of catastrophic. Nobody knows how long the travel and tourism industry will suffer, so nobody knows how much worse hotel mortgage delinquencies will get. Without massive government intervention, we will see an extraordinary number of hotel foreclosures in the coming year.”
Even putatively well-heeled hotel owners are looking at a slide into financial doom. Reported the New York Times: “Thomas J. Barrack Jr., the billionaire investor and major donor to President Trump, has run into an unexpected patch of red ink thanks to the pandemic: He has struggled to keep up with payments on $1.97 billion in Wall Street debt he used to buy a collection of more than 160 hotels.”
Monty Bennett, another plunger, has reportedly stopped paying on the $2.6 billion in debt he took on as he built out his Ashford collection of hotels.
Many others are in similar, dire financial shape and that has triggered an intense lobbying campaign to seek to pry many billions in federal aid out of Washington, D.C. The White House has not found a path for it to offer direct assistance and what also is clear is that the enabling legislation is not coming out of Congress without a huge quid pro quo that would put substantial monies into small businesses and the pockets of middle and lower income Americans. It is hard to see that legislation coming out of Washington DC in this election year.
Hotel employee labor union UNITE Here is unenthusiastic about a federal bail out. It said: “We are concerned that a bailout of hotel CMBS [commercial mortgage backed security] borrowers would mainly benefit large private equity companies and real estate investment trusts, and would have absolutely no effect on hotel employment levels.”
Face facts: there just are way too many hotels, for this year, the next, and the one after that. It’s just time to hunt for alternative uses and there are many. In Maricopa County in Arizona, some hotels already have been put to use as homeless shelters. Many more should be. The collapsed economy has put millions more on the streets and empty hotels are a solution.
There are other, creative uses for hotels.
Some colleges and universities are buying out hotels to use to expand their pools of dorm rooms in a socially distant era. That too is smart.
Some resorts could be adapted to serve as nursing homes.
Let your imagination fly. Accept that maybe one in four hotels are superfluous and should be put to alternative uses by owners who cannot make a go of it as hoteliers. The structures don’t have to be – shouldn’t be – torn down. But it is a waste of money to put federal funds to use propping up enterprises that are zombies, that is, hotels and resorts that are unlikely to become going concerns in any foreseeable future.
That is the proverbial good money after bad. Let’s shut them as hotels – and give them new life where they are needed.
