In a world that battles competition ruthlessly, every single day, the philosophy guiding credit unions comes as a whiff of fresh air. It isn’t a profit-centric mentality that guides this industry but an all-inclusive “for the benefit of members” approach. This sense of community is extremely inspiring in the day and age we live in. But how can credit unions make sure that they can keep this philosophy alive and stay relevant amidst such hectic digitization? On top of that, how can credit unions guarantee member loyalty and growth?
The secret lies in managing the member experience. Member experience takes into account all the feedback from members and puts it into perspective in order for credit unions to address issues and tackle them. By working on member feedback, you convey to your members that “sense of community” is not merely a trending phrase but a sacrosanct philosophy which you respect and value. Managing member experience, however, doesn’t end with collecting feedback. It starts there and culminates in loop closure.
Ideally, managing member feedback should involve the following stages:
- Collecting Feedback from Members across all touchpoints
- Collating feedback data on a single dashboard
- Analyzing feedback to gather insights
- Taking action on issues reported
- Closing the loop with members
There has been a flurry of news articles and opinion pieces about what a credit union should disclose to its members when members are asked to vote on a merger of their credit union. It is a worthwhile question to ask but there are legitimate privacy interests of credit union management that we should be mindful of and respect. The key is to determine where the line is. If a Merger Information Disclosure was created, it might have the seven questions below. The first three questions are of obvious concern to members and need no explanation. I will comment on the others.
- What will be the impact of the merger upon the types of products and services offered to members?
- What will be the impact of the merger upon the cost of products and services offered to members?
- What will be the impact of the merger upon the branches and electronic access available to members?
- What will happen to the credit union’s capital as a result of the merger?
In most cases, the capital of the merging credit union will be merged with the continuing credit union for the benefit of all the members. In some cases there is a special dividend to the members of the merging credit union. This question gives the merging credit union the opportunity to disclose a special dividend without drawing attention to the possibility if that is not being done.
The regulatory expectations surrounding the banking of money service businesses (MSBs) are a frequent source of confusion for financial institutions. Many financial institutions are surprised to receive deficiencies and matters requiring attention in examinations, even though they believe they have followed the regulatory guidance. Because of this confusion, the National Credit Union Administration (NCUA) has announced that it intends to make providing services to MSBs or other types of high-risk businesses a supervisory priority this year, with field staff tasked with targeting this area. This article will discuss potential problem areas for credit unions with MSB customers.
MSBs and regulation
MSBs are defined generally as businesses transacting largely with cash: currency dealers, check cashers, issuers and redeemers of traveler’s checks, money orders, stored value, money transmitters, and the U.S. Postal Service. MSBs are regulated by the Internal Revenue Service, and with just a few exceptions, all MSBs must register with the Department of the Treasury. In addition to the IRS, most states have Money Transmitter requirements regulated by their DFIs (Department of Financial Institutions) that certain types of MSBs are subject to follow.
The FFIEC guidance regarding MSBs clearly states that the Bank Secrecy Act (BSA) does not require, and neither FinCEN nor the federal banking agencies expect, financial institutions to serve as the de facto regulator of their MSB customers. Specifically, the guidance states:
“While banks are expected to manage risk associated with all accounts, including MSB accounts, banks will not be held responsible for the MSB’s BSA/AML program.”
How many of you remember the fight of the century? It was Haagen-Dazs v. Ben & Jerry’s in 1984. Okay, maybe not Ali vs. Liston, but in the business world it was comparable.
It was a classic David vs. Goliath tale. In 1978, two young hippies, Ben and Jerry, started an ice-cream shop in a renovated gas station in Vermont. By 1980, the popularity of their ice cream made them dream bigger and by 1984, they had grown the business to $4 million in sales. Independent ice cream distributors started selling Ben & Jerry’s in big grocery stores in Boston. And that’s how the fight started.
“That year, Haagen-Dazs, owned at the time by Pillsbury, had enough of our upstart small business,” said Ben Cohen, co-founder in a special CNN story in 2011. “Did they try to promote their ice cream harder, develop some new flavors or cut prices to competitively beat us?
No. Their game plan was to try to stop our distributors from carrying our ice cream. Pillsbury, a $4 billion corporation back then, was a major source of income for these distributors and they were told, in no uncertain terms, not to do business with Ben & Jerry’s.”
By Michael Cochrum, Vice President of Analytics and Advisory Services, CU Direct
Since the beginning of time, lenders have sought a way to accurately measure and predict risk in their loan portfolios. Understanding risk allows lenders to make sound credit decisions and properly price loans. Ideally, lenders need to make, at the very least, a high enough return on loans to cover the principle and any costs, including losses, associated with the loan. Unfortunately, the inability to properly measure, manage and predict risk appropriately has been the ruin of many lenders. Putting one’s finger on the cause and effect of the multitude of factors that can influence a borrower’s desire to originate a loan and ability to repay can be a time consuming endeavor. Most lenders, like myself, were trained to read a credit report and consider each loan request independently. We never really looked beyond that individual credit application or borrower. Considering aggregate trends in a portfolio, and even market performance, can be helpful to gaining a greater insight into future performance.
Let’s take a close look at how external factors influenced consumers’ behavior during the most recent recession cycle. One might assume that inflation and fuel costs would have had a role to play in consumer demand for new vehicles. Yet, more than any other factor, since 2010, the unemployment rate had a direct, inverse correlation to auto sales. Auto sales decreased as the unemployment rate rose, and increased as the unemployment fell. Therefore, it would be reasonable, based on recent trends, to predict auto loan growth based on unemployment forecasts.
Linda Bodie, CU CEO and Warrior
As part of “CUES on CUSO’s” month-long focus on credit union service organizations, they featured Linda Bodie, CEO and chief innovator at Element Federal Credit Union on their weekly podcast. Linda works with several CUSOs to make her small credit union act big. CUES will learn more about CUSO’s, their impact on the industry and what partnering can mean for your CU by publishing a series of articles, offering two webinars taught by our own Guy Messick and Denise Wymore and feature coverage of the Next Big Idea Competition next week at the NACUSO Network Conference.
Click here to listen to the podcast.
Read this NACUSO Spotlight article we featured on our blog earlier this year to learn more about the many CUSOs Linda’s credit union uses to compete with the big boys.
ProMedica FCU takes its card program to the forefront of its business
Over the past five years, the payments landscape has rapidly evolved and many credit unions are now taking advantage of various initiatives and solutions to remain relevant and improve their business portfolios. One credit union in particular has experienced significant growth in business after partnering with CSCU. ProMedica Federal Credit Union’s Marketing/Business Development Director, Chris Tarsha, shares the experience of being a part of CSCU’s Optimize Program. He and his team used the Portfolio Growth Solutions (PGS) product with expert guidance from their CSCU portfolio consultant.
There may be challenges but opportunities abound
ProMedica Hospital & Health Care is the largest employer in northwest Ohio and southeast Michigan with over 17,000 employees, 2,300 physicians and more than 800 healthcare providers employed by ProMedica Physicians. Additionally, it offers a health plan, which serves over 300,000 members.
With Promedica Hospital’s system extending to such a large network, there is an opportunity for ProMedica Federal Credit Union (PFCU), which aims to serve ProMedica Hospital & Health Care employees, their immediate family and affiliates.
Consumer demand for convenience is impacting the customer experience like never before. As one credit union representative put it in this short video, “technology has spoiled us completely. Everything’s about accessibility, being convenient.”
With January’s credit union trends report projecting loan growth in 2017 to exceed 10 percent, credit unions have a huge opportunity ahead of them.1 Your success this year and beyond may well depend on how convenient it is for members to do business with you.
Your Competition Gets It
Competitors realize that consumers increasingly prefer conducting business when and where it suits them, not around office hours or locations. It’s no surprise that 71 percent of financial institutions said improving the customer’s digital experience was their top priority for 2017.2