Things To Think About!

Hey, It’s members…not assets!

Somebody said the other day: “I see everything you do is gauged to the number of members a CU has, rather than how large it is asset-wise.” Right on! How reassuring to see this point picked up. We’ve been pushing this particular boulder uphill for such a long time…in the face of an apparent cast-in-concrete tendency within the industry to count assets first and foremost.

But think about it. Credit unions are, by definition, member-centric entities. Tell me how many members you are doing good things for, rather than how many dollars you’re sitting on.

For instance, two CUs both have $100 million in assets, but one has 20,000 members and the other only has 12,000— which one is worthy of praise and recognition? Yep, the second CU is getting its members to save…and that’s getting the CU job done!

This, at just a glance, is clearly the perspective that should be driving us, Yet, as a quick look at any of our trade journals will confirm, it’s the asset factor that prevails. And this is, if anything, driven by industry leadership— CUNA, Leagues, NCUA, etc. Shame on them for that!

To the extent that “the words we use often shape our thoughts”, what’s it going to take to get the national credit union community to start speaking to purpose? It’s members…not assets…that should be the prime focus of our attention!

See Who Is Making Money!

This is supposed to be a "wake-up" message! Every year we run the numbers to see who is doing more with/for members. And every year we see those who do more, generate more a wide margin. We thought a chart which showed the extreme difference in a dramatic way...might just have an impact. In fact, we hope it does! Is YOURS a "HP" credit union. If not, it should be. Click on (The "HP" List) to learn more.

New “HP” List Posted— Is Your CU On It?

The new “HP” list is up! And it shows a nice jump in the number of “High Performance” credit unions this time, even in the face of the hit everyone has taken as a result of the NCUA special assessments. The good news is that the critical metric— CUs with 2.5 or more accounts-per-member— was significantly higher, as were checking account connections (critical) and checking balances (very meaningful). Let’s just hope the general trend continues. Thoughts anyone?

Pay Attention To The Market

Eye Barf!

"Let's not make any changes… only improvements!"

The Best Advice For Credit Unions, Too!

Best Way To Use Incentives

If you want your people to work harder, you should pay on the basis of individual performance, right? Not so. A recent study suggests it’s best to motivate groups, not individuals. Set organizational (or branch) goals…and reward everybody when the group achieves its goals.

Why do groups magnify individual performance? In another study-- of relay swimmers during the 2008 Summer Olympics-- swimmers on the first leg of a relay did about as well as they did when swimming in individual events. But swimmers on the later legs outperformed their individual event times. In the heat of a competition, it seems, later swimmers feel indispensible to their team’s success and are more motivated than when swimming just for themselves.

In still another study, researchers found that people in the groups that did particularly well were good at reading each other’s emotions and took turns when speaking. Everyone participated in group conversations. There was no overbearing leader dominating everything.
Thanks to David Brooks of the New York Times for these bits of social science insight!

Right Down The Street From Us!

The bold headline in our local Puget Sound Business Journal said “BofA Closes 2 Seattle Branches”. One is just a block away from us. Bank of America, the largest bank in the US, may close as many as 10% of its branches throughout the country over the next several years. "It's all part of the bank’s strategic vision", the article said. The explanation given— “We’re constantly reevaluating our retail network and want to make sure we’re evolving to customer demand.” The report continued "customers are moving toward online and mobile banking and so the need for physical locations has lessened."

Wal-Mart Isn’t A Bank. Yet!

NEWS RELEASE: When Wal-Mart applied for a bank charter to take deposits and make loans a few years ago, regulators said no. But that hasn’t stopped the company from significantly expanding its financial offerings.

Sam’s Club, a division of Wal-Mart, will work with Superior Financial Group, a federally regulated lender, to offer loans of up to $25,000 to small businesses. Sam’s Club, a membership-based warehouse store like Costco, will promote the loans, and members will get a discount on the application fee and on the interest rate. Sam’s Club makes about half of its money from small businesses.

Wal-Mart is also expanding its retail finance offerings. It plans to open 400 new “MoneyCenters” in U.S. stores this year to offer bill pay and check cashing services. The company recently took a minority stake in Green Dot, a finance company that manages the pre-paid debit cards sold at Wal-Mart, generally used by people without a traditional bank account.

“We’re not necessarily trying to be a bank, we’re just trying to bring to customers, much as we do with products, the things they need,” a Sam’s Club exec told the NYTimes.

New Study: CUs provide the most satisfying online experience!

A hot-off-the-press market study* provides some fresh insights into the increased use of online banking. The emphasis is on “Customer Satisfaction” and the results show that more customers doing more banking online (besides now being dramatically on the increase!) does indeed build wallet share and increase customer loyalty. Findings show that the online experience satisfaction factor (while down two points from 2009) far surpasses respondents' banking satisfaction overall, and...that satisfied online customers are more likely to purchase additional banking services.

The highlight finding (for us, certainly) was that credit unions currently provide the most satisfying online experience.

Factors identified as needing the most attention are the convenience of online banking, the simplicity of the website, the usefulness of the site (compared to going to a branch), the look/feel of the site (its visual appeal, the balance of graphics and text, the readability of the copy), navigation—intuitiveness of the site layout, how easy it is for customers to find what they are looking for, and self-directed activities— transactions, online applications, the process of completing tasks (and getting verification).
* The survey was done in April among nearly 3,000 respondents by “ForeSee Results", an Ann Arbor, MI reserch firm, in partnership with Forbes Media. The purpose of the study was to identify those improvements to banking websites that will return the greatest ROI. For a .pdf copy of their report, visit and click on “Research & White Papers" > "Financial Services".

Online Banking: Already Fifteen Years Old!

How quickly time passes. It was May, 1995 when Wells Fargo gave customers the option of using the Internet to check balances in checking, savings, line-of-credit and credit card accounts. It was the first such “high-tech” service of its kind, and it was free. Today WF has 17 million online customers reviewing accounts, transferring funds, paying mortgage, credit card, and other bills, applying for student loans, managing their budgets, and more. Four million use Bill Pay, and three million use mobile banking.

Five years ago, WF was also first banking system to launch a free online money management program—“My Spending Report”— to help customers create budgets and monitor spending. The objective, obviously— build deeper full-service relationships with customers. The company makes no bones about it...telling customers up front that using WF credit/debit cards or WF bill-pay, will help the My Spending Report program “more accurately track your spending” for budgeting managing purposes.

More recent additions to WF’s online resources include a “Smarter Credit Center” that provides information/guidance to help customers use credit more effectively. They have also added a faster, easier credit card app process.

So goes the way of our world! Internet-based technology is literally changing how consumers do things. Certainly it's changing everything about retail banking. The essence of this change centers on the theme of self-reliance—by empowering consumers to play a more direct role in fulfilling their financial service needs, and providing them with the tools and necessary information for doing so. This, of course, has always been the base purpose of credit unions. Question is—are we moving fast enough to keep up, let alone stay ahead of the competition?

What do you think? Let us know!

The “Power of the Internet” is Not a Cliché

A recent article in “Gonzo Banker” (one of our favorite industry newsletters) had some pointed things to say about going (more) “virtual”. Here are some of them:

“Get used to the idea that the Internet will be the delivery channel of the future.” The bank that puts off building its Web delivery infrastructure will always be a follower. The comeback that branches are necessary to acquire customers doesn’t hold much water, as evidenced by the rapid growth of ING Direct and USAA.

While the Internet grows in importance as a delivery channel, most smaller to mid-size institutions don’t pay enough attention to their Web sites. “We spend $2 million for a new location with drive-up tellers but choke at spending $200,000 in upgraded online functionality.” What kind of short-sighted thinking is that?

Keep the bank’s Web site engaging and interactive and its functionality up to speed with market leaders. Encourage staffers to communicate with customers online. Provide a channel for customers to post comments and concerns related to the bank’s products, pricing and service experience, and get involved in the conversation.

CEOs should become bloggers. They’ll get to know their customers better. Those who think they don’t have time to interact with customers won’t understand their behaviors or needs well enough to retain them until they get profitable.

The article (by Ted Thames, April 16, 2010) had much more to say about the CEO’s involvement with the marketing function. Lots of good points. You can read it all here!

The Other Guys

We know we’re having a rough time of it, but how are the banks doing? Well, net income was (gulp!) $12.5 billion for the year, three times what it was in 2008-- but still just a fraction of 2007’s $100 billion. Almost 30% reported negative net income for the year. Average ROA was 0.09%.

Smaller lenders, in particular, are struggling. Many remain in fragile condition. The actual number of banks fell to 8,012. Mergers absorbed 179, and 140 failed. Analysts think the troubles may get worse in the coming months and expect several hundred more to collapse over the next few years.

FDIC’s “Problem List” rose from 252 (year-end ‘08), to 702, “putting enormous strain on the government-administered insurance fund that protects customer deposits.” The fund ended 2009 with a $20.9 billion deficit. FDIC can access an emergency line of credit from the Treasury Department if conditions worsen, though officials are reluctant to do so as such a move would run the risk of unnerving consumers.

So says the press report. Anything sound slightly familiar here?

Business Growth

Yesterday we talked about market share. Today it's about how things are going business-wise. The difference between the two is the difference between “selling goods” and “making money”! The correlation, however, is direct— if our people are not buying from US, we’re not making money. And sadly, that proves to be the case. As you can see in the Industry Overview charts (check the “HP List” section), the number of credit unions that lost money from 2009 operations more than doubled…to one-out-of-every-two in operation today. In actual dollars, net income for the year was down 36% (from 2008-- almost a $1 billion drop!).

On the reserves side of things, most CUs are still relatively strong, equity-wise. But operating costs continue to go up. Total it all out, the overall ROA for all credit unions in 2009 was 0.17%. Remember back when it was at least five times that? Things certainly aren’t getting any easier!

Market Growth

How are we doing, competitively-speaking? Meaning, how are credit unions doing in terms of growing our share of market. Answer: Not great. But not too bad, either. Deposits show a solid gain (as they have over the past several years…but this time it’s higher!). The number of CD accounts is down, but MMAs are up. Even IRAs showed a slight increase in number. New car loans were down, but used car loans show a nice increase. Auto loans now represent only 30% of our collective credit portfolio (we know from our member research that at least 40% of our members have auto loans, but only 17% have them with their credit unions).

The good news comes from the checking account department. The number of these accounts increased by 1.7 million over the year, a 4.2% gain. This is where we always want to look first for growth. More checking accounts with more members will mean more primary banking relationships. And therein lies our long range hope!

When taken on an accounts-per-member basis, we don’t see the gains we want to see. Leaving out share accounts (since every member is required to have one, and it’s not all that uncommon for some to have two), a look at other types of accounts tells us that almost half of our members have checking with us (good…but keep pushing on this!), but in all other account categories the portion of members using is less than 20%! And in almost every case the portion of members using has hardly changed over the past seven years. Ouch!

Starting All Over Again

That’s right. We’ve redone the entire website! Since we’ve started designing websites for credit unions, we figured our own ought to be “state-of-the-art”. So, all the same parts and pieces, but a totally fresh approach. Hope you find what you’re looking for…and hope you find it all useful. As in the past, we’ll continue to load this one up with helpful market-based information. And as in the past, we’ll continue to look forward to questions, suggestions, ideas, debates(?) from you.


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