McGarvey's Words: Journalist…Podcaster..Speaker

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.

Like what you are hearing? Find out how you can help sponsor this podcast here. Very affordable sponsorship packages are available. Email rjmcgarvey@gmail.com

And like this podcast on whatever service you use to stream it. That matters.

 

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.

Listen up to this new podcast here.

Like what you are hearing? Find out how you can help sponsor this podcast here. Very affordable sponsorship packages are available. Email rjmcgarvey@gmail.com

And like this podcast on whatever service you use to stream it. That matters.

By Robert McGarvey

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.

Listen here.

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.

Like what you are hearing? Find out how you can help sponsor this podcast here. Very affordable sponsorship packages are available. Email rjmcgarvey@gmail.com

And like this podcast on whatever service you use to stream it. That matters.

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

by Robert McGarvey

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.

Bank Transfer Day 2020, Bigger and Better?

By Robert McGarvey

You remember Bank Transfer day, that 2011 movement that brought in perhaps one million new credit union members, possibly more.

Something a lot bigger may be about to happen.

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.”

Hear the Bruyn podcast here.

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.

Like what you are hearing? Find out how you can help sponsor this podcast here. Very affordable sponsorship packages are available. Email rjmcgarvey@gmail.com

And like this podcast on whatever service you use to stream it. That matters.

By Robert McGarvey

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.

Continued at CU2.0

by Robert McGarvey

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.

by Robert McGarvey

Bad times are coming at you. A recent Credit Union Times headline screamed: Preparing for COVID Loan Losses. The subhead multiplied the miseries: CUs are preparing for a wave of COVID-related loan losses, delinquencies, and bankruptcies.

Many credit unions will find their own futures in doubt. Some experts say 20% will close in the next few years.

You need new, sharp thoughts. Help!

What you need just may be a mastermind group.

Motivational writer Napoleon Hill spelled out why a mastermind group works magic in his book, Think and Grow Rich: “Analyze the record of any man who has accumulated a great fortune, and many of those who have accumulated modest fortunes, and you will find that they have either consciously, or unconsciously employed the ‘Master Mind’ principle.”

Wrote Hill: “It is a well-known fact that a group of electric batteries will provide more energy than a single battery. It is also a well-known fact that an individual battery will provide energy in proportion to the number and capacity of the cells it contains.”

Continued at CU2.0

by Robert McGarvey

“What could we do to make our members’ lives better?” That question, said Mark Shuiling, vice president of technology at $900 million Wildfire Credit Union in Saginaw, MI, is what set the institution on a quest to bring its members a unified, omnichannel banking experience. The quest began maybe five years ago.

It is now coming to fruition, with help from digital platform developer Backbase.

Here is the story of an institution that decided that digital was its future – if only because it is what the Millennials and Gen Z members of any credit union crave.  These are people who grew up with personal computers at their sides and the younger ones cannot remember a time when they did not have an iPhone or Android phone in their hands.

When the COVID-19 pandemic hit, the wisdom of Wildfire’s decision became all the sharper, said Schuiling – it was suddenly obvious that digital is the future for all of us, simple as that. 

Understand, Wildfire is just now beginning to roll out its new unified banking platform and it will do it deliberately, carefully, said Schuiling.

Know too that Wildfire is way ahead of most credit unions in its digital journey. Sure, just about every credit union executive pays lipservice to the idea of digital banking, but the stark reality is that few have climbed aboard this movement. That’s why Vince Bezemer, head of strategy for Backbase, which also has worked with Navy Federal, Schools First, and State Employees’ Credit Union of North Carolina, estimates that maybe 10% of financial institutions really get what it means to be digital.

And 90% don’t.

Which side are you on?

Continued at CUInsight.com

by Robert McGarvey

No more cookie cutter solutions.  And put a branch in the member’s hands with mobile tools that allow the member to do pretty much anything he/she could do in a branch.

When Wildfire, a $900 million credit union in Saginaw Michigan, set out on its omnichannel journey four or five years ago it dreamed big, says Mark Schuiling, VP of technology.  

A lot of the process was doing hard thinking about what the institution wanted to be and what it wanted to provide members. From the start, however, Wildfire knew its future would be digital and it also wanted to provide members with a unified consumer experience, not the fragmented experience many credit unions offer because they have pasted together solutions provided by third party vendors.

At $900 million, however, and with only three programmers, Wildfire also knew it had to carefully pick a vendor and a tool that would suit its budget and its internal skills.

About a year ago, the process turned serious and Wildfire went all in on its digital transformation, working with Backbase as its technology partner.

Listen up to the Backbase podcast, number 110 in this series. 

This Wildfire podcast tells the story from the institution’s perspective and Wildfire candidly tells about its hopes, its challenge, and also why it now is going slow in the roll out of its omnichannel solutions to members (because it wants members to want the solution and to know they want it).

Listen up here.

Like what you are hearing? Find out how you can help sponsor this podcast here. Very affordable sponsorship packages are available. Email rjmcgarvey@gmail.com

And like this podcast on whatever service you use to stream it. That matters.