By Christian Mullins

This morning I read on CU Tomorrow a case for creating a national brand for credit unions.  As discussed by Jill in the post, the argument has typically been split between those who desire a national logo and those that wish to keep their full individuality.  I think the idea has true merit, as several industries have been able to accomplish this feat, though several monumental questions remain, including who will pay for this and which credit unions or industry groups will influence the initial, then continued direction of the branding?

After deciding those questions are better left answered to those who would devote more than a few minutes to their answer, I shifted my focus to current national efforts.  Various state credit union leagues create advertisements for their credit unions, but the only national attempt I could find was The Little Guy, which was created ‘to illustrate the key differences and provide our members with a BIG voice on the (Capitol) Hill’.  Technically, this is more of a lobbyist effort, but an effort to educate (or influence) Congress is, in my opinion, considered national.

A lot of people like The Little Guy, but I have to admit that a combination of Charlie Brown and (Family Guy’s) Stewie, sporting Little Orphan Annie’s eyes no less, is not my first choice for industry or member representation.

And therein lies the problem with creating a national brand.  No matter how well thought out, beneficial, or original the idea may be, a solid portion of the industry won’t like it, whether it’s for economic, philosophical, aesthetic, or selfish reasons.  On the flip side, conforming to the majority may water down the message so much that it hurts rather than helps the cause.

It’s a difficult topic and I look forward to reading additional articles and posts on the subject.

By Christian Mullins

What do the numbers $36,000, $41,000, $48,000, $900,000, and $1,500,000 have in common? They’re amounts (allegedly) stolen by credit union employees in pending or resolved cases of embezzlement since the end of May. With internal auditing procedures in place, staff to enforce them, a Supervisory Committee to enforce them, and state and federal auditors to ensure the credit union’s general ledgers (among other things) are in order, embezzlement is still very real, and more common than most would like to admit.

Mentioning embezzlement is akin to blurting out a four letter word in most credit unions, because one misspoken word may inadvertently cause the rank and file to believe they are unfairly being targeted, thereby creating trust issues.  However, it should be included as part of a larger discussion regarding adherence to internal procedures, which is (hopefully) happening on a regular basis. A good discussion a few times each year may help deter a desperate employee (with any title, including CEO) from making a life altering decision, and may even expose any potential loopholes that staff has discovered in their daily routines.

Regardless of a few (potential) uncomfortable moments, it’s always better to discuss it as a preventative measure than spend time explaining to your members how it happened after the fact. But if you feel uncomfortable mentioning the ‘E’ word, take a few moments to click on the hyperlinks, see how they did it (allegedly), and make sure your credit union isn’t vulnerable to those types of fraud.

By Christian Mullins

I had never thought much of privilege pay overdraft protection, or courtesy pay, or whatever fancy name a bank or credit union uses to describe allowing an account to go negative, paying the item (a check, an electronic payment, etc) and charging $18-$36 for it. It isn’t that I didn’t think about it; it’s that I didn’t think highly of it. It seemed like a disingenuous way of making easy money off of those that were either irresponsible or just plain bad at math, all while saying, “we’re doing this for your convenience”. Apparently, I wasn’t the only one who thought this way.

It turns out the Arkansans for Responsible Payday Lending and Center for Responsible Lending (that’s two organizations, not one) don’t think much of it either. They’re lobbying for the Federal Reserve to consider those fees as interest, subjecting it to the same limits payday lenders now face. While I think it’s a bit of a stretch consider those fees as interest, financial institutions have deftly found a way to increase their revenue by telling their customers and members that it’s alright for them to ‘bounce’ checks and charges, because we’ll let your account go negative for a fee, as long as you bring your account positive within a reasonable amount of time.

Some people may feel that this is unethical, but it isn’t. It is, however, enabling those same individuals that were likely to use a payday lender to let their account go negative instead. After all, not only is their FI ‘looking out’ for them, but they’re spared the indignity of going in and out of a payday lender.

Is this predatory lending? Not in the strictest sense, but it’s long been known in financial circles that instituting this program would result in much higher overall fee revenue. And in certain circumstances, it can be more profitable than payday lending. Check/debit card purchases are becoming more prevalent, and $10.00 purchases on the card are now the norm. If someone incurs three charges on their account over three $10 purchases, they’re likely facing at least $50 in fees, and a $50 return on a $30 short term investment is something payday lenders could only dream of.

Proponents of privilege pay would argue that charging a fee and paying the item is preferable to simply charging the fee, and I would tend to agree to a point. For those individuals who simply made a mathematical error in their checkbook, privilege pay is the preferred solution. But many (probably too many) individuals are using checking privilege programs as part of their budget, and they’re either unable or unwilling to make the necessary changes to get out of their financial bind. And that’s where consumer advocacy groups take issue.

The ultimate blame falls on the individual customer or member, and that should be remembered. After all, they were the ones who overdrew their account, not their financial institution. But if there’s one truth that’s been proven time and time again, it’s that individuals must sometimes be saved from themselves. Two recent examples are sub-prime mortgages and payday lending. With each of those coming under regulatory control, privilege pay finds itself as the next public outcry. Or to put it another way, privilege pay is the trans fats to payday lending’s second hand smoke.

My advice to any small bank or credit union that offers privilege pay is this: If it looks like it’ll be restricted in any way, adjust your policy ahead of the curve. Large banks can and have weathered decades of bad press, but it isn’t as easy for credit unions. It’s hard to be an ‘alternative to banking’ when your services are being dragged through the same mud as theirs.

By Christian Mullins

Many of you probably know that the ubiquitous coffee shop Starbucks is closing 600 stores throughout the United States. While there are several reasons aside from Starbucks’ official statement that ‘close proximity of our stores has caused Starbucks to compete with itself’ for the closures, I read an interesting article at Business Week Online theorizing that Starbucks grew too rapidly for its own good, destroying their brand value. Their quick expansion took away from the ‘experience’ of each visit, degrading Starbucks’ neighborhood feel to a mere chain store. Coupled with an ever expanding menu, customers were herded through as quickly as possible, forcing Starbucks to subsist solely on the quality of their coffee with the predictable result: many Starbucks customers looked for, and found, more appealing options.

Many credit unions are heading down the same path. Unfortunately, many conversations I’ve had with employees and members of larger credit unions confirm the inevitable: once a credit union reaches a certain size, they stop feeling like the credit union they remember and feel like (dare I say it) a bank.

Let’s be clear. Growth is neither bad nor undesirable; in fact, it’s lack of growth that creates long term trouble for CUs, but the real issue is how that growth is handled. Some credit unions fight tooth and nail to maintain their ‘credit union’ feel, but many do not. Lack of training (continued or otherwise), regular turnover, and a fundamental shift in priorities are the main culprits afflicting credit unions these days, and to their peril. While some members don’t notice or don’t care, others do, and more often than not CUs don’t realize their shortcomings until too many members close their accounts.

Fortunately, it’s never too late to remedy a credit union’s apathy towards their quality of service (or quality of employee). Dedicated training (not necessarily including a dedicated trainer) is a must and effective employee retention plans can be found all over the internet. While improving the quality of existing employees may have an impact on the bottom line, the cost of regularly hiring new employees may be higher still.

Very few members expect their credit union to operate the same way it did when it was a one employee shop open four hours a day, but whether members experience your credit union face to face, on the telephone, or online, they do expect to receive quality service, answers to their questions, and quick resolution to any problems that may arise. If they can no longer expect minimum service standards (and those are minimum standards), it’s only a matter of time until your members find another financial institution that meets their needs, credit union or otherwise.

By Christian Mullins

Time.com has released their list of the 50 best websites of 2008. I took a look at their list and, though I was a little annoyed (sorry Time) with the ‘one site per page’ format, my perseverance (or stubbornness) was rewarded with a few gems. While I had seen some of the websites before, one I hadn’t been aware of captured my attention. Not because it was the best site out there (it’s still in the testing phase), but because it represented the next logical step in web search engines.

When you type a query into Google, Yahoo, or the search engine of your choice, you’re typically given a series of lists in text format. Sometimes there’s a photo accompanying the listed site, sometimes not. However, Searchme has made text a secondary (and minimized) feature. They supply web surfers with one screen grab for each site listed. For you Firefox enthusiasts, think of the PicLens and Cooliris Previews applications combined. Mac users, it’s very similar to graphical file lists.

In short, it’s a visual search engine. Searchme stresses that their search engine is still in the developmental stage, and while they’re working out their quirks they’ve reduced their search capability to (only?) 1 billion pages. And if you like Searchme’s features but don’t want to flip through screen grabs, it’s easy to restore the list format. Clicking on the list takes you to the page’s screen grab, maintaining the surfer’s ability to see the page before going there.

For some credit unions, this is great news. But for others, it may be time to think about a redesign of your website. For potential members that are visually oriented or prefer a nice combination of style and substance, the look of your homepage may be a determining factor in whether or not they join your credit union.

Testing Searchme out, I typed in the name of a large city west of the Mississippi River followed by the words ‘credit union’. Typical of software in beta testing, I was greeted with a hodge podge of information, some of which had nothing to do with credit unions. However, visually comparing the first 10 or so credit union website screen grabs to cross my path, it was obvious that not all websites are created equal. While a poorly designed website won’t turn a potential member away from your credit union, it certainly won’t drive business to your doorstep if (when) this search format catches on.

While search engine algorithms have improved immensely in recent years, search results (text) have remained mostly unchanged in the last 10-15 years. If Searchme continues to improve on their software, and recent history is any judge of future trends, this is an innovation that is not only here to stay, but will be quickly embraced by the same population demographics credit unions are desperately trying to penetrate. In response, credit unions should ensure that their website has, at the very least, a clean, modern look to it. Anything else may give the feel of an antiquated internet that Searchme surfers are looking to leave behind.

By Christian Mullins

Three months ago, House Judiciary Committee Chairman John Conyers (D-MI) and Representative Chris Cannon (R-UT) introduced HR 5546, bipartisan legislation titled the Credit Card Fair Fee Act (CCFFA). The bill seeks to ‘ensure competitive market-based rates and terms for merchants’ access to electronic payment systems’. Proponents of the bill include retailers, merchant associations, and small business associations. Opponents count credit card companies, banking associations, and credit union trade associations like Credit Union National Association (CUNA) among their ranks.

All about the money

At issue is the $40+ billion expected to be collected this year in interchange income. Proponents of CCFFA have seen interchange fee percentage rise as the number of electronic transactions has also increased, resulting in healthy profits for both Visa and MasterCard. In response, they argue that the money is needed for additional infrastructure domestically and worldwide. While that statement is true, reports of MasterCard, Inc’s expected net income increase of 20%-30% over the next three years suggests the interchange fee percentage, currently less than 2% of the purchase price, could trend downward without affecting growth.

The Credit Union Dilemma

When a member makes a purchase with their credit union debit or credit card, their credit union receives a small percentage of the cash transaction. Over the years, many credit unions have come to rely on this revenue to support their ‘plastic’ programs, especially as insurance costs, protecting against fraud and identity theft, has skyrocketed. Every credit union with a plastic program will likely be negatively affected by any rate cuts, assuming Visa and MasterCard ‘pass the charge’. In the end, the burden of rate cuts will affect credit union members in the form of lower savings and higher loan rates.

CUNA has already expressed their displeasure at CCFFA, but this potentially places credit unions on the wrong side of public opinion. For the casual observer, if credit unions line up against ‘Mom and Pop Shops’ or other small businesses, they could upset the delicate distinction between credit unions and banks they’ve worked so hard to cultivate, with the public disregarding ‘people helping people’ as they experience ‘credit unions for credit unions’.

In the end…

This is an election year issue. At a time when every Congressional Representative is facing November elections, attaching themselves to legislation that will resonate with Joe and Jill America is of paramount importance. With legislation titled the Credit Cardholders Bill of Rights in motion, and Federal Reserve rule changes aimed at making fees and statements more transparent, Credit Card Fair Fee Act seems inevitable at this time. During an election year, with the average citizen more in tune with what’s happening in Washington, credit unions find themselves in a rare position: they can either lose interchange fee revenue or the public opinion battle.  Neither option is very appealing.

By Christian Mullins

The companion blog to CU Potential, CU Executive Summary provides a daily look at news affecting credit unions, both directly and indirectly. Friday’s edition includes the following:

• $100,000 theft from a credit union vault
• MasterCard’s amazing profit potential
• A weekly look at the nation’s mortgage rates
• Banks dwindling (sort of) profit margins
• Alberta’s ‘three credit union mega merger’
• Stealing from the elderly
• and, the unfortunate but popular credit union embezzlement

Not every day is ‘action packed’, but the advantage of Executive Summary is we wade through the fluff for you, leaving you with a lean, high (quality) content news brief. Best of all, it’s in Executive Summary format, summarizing each article in less than 100 words, providing links to the original source(s).

Thank you for indulging our shameless plug.

By Christian Mullins

In October 2007, America’s first baby boomer filed for early retirement Social Security benefits, leading to a plethora of news stories that focused on the 80 million or so ‘boomers’ and what their retirement would mean to the U.S. economy. This also marked the first time I personally heard the term ’silver tsunami’ (first coined in 2003), which gives anyone with a little imagination a vivid picture of future struggles regarding the economy, workforce, and Social Security Program. I won’t get into all of the doom and gloom scenarios, as this FOXNews article does a nice job laying it out, but people have been retiring in America for a long time, and this just didn’t seem very significant to me.

In fact, it seemed to me that many Americans approaching retirement age would work later into their 60’s and even 70’s. I believed that more Americans enjoyed their later working years (the largest paychecks usually come at the end) but, more importantly, many Americans approaching retirement can’t afford to do so.

Last week, BusinessWeek ran an article that seemed to put any remaining concerns regarding those ‘tsunami-ing boomers’ at ease. Using four separate government sources, The Coyne Partnership, Inc., a strategic consulting firm, is the first company known to have actually analyzed, then published, the retirement numbers. Here’s what they found:

If the trend to work longer stops today (it been increasing since 1994), the number of ‘true retirees’, which excludes those that were never in the workforce, will reach 46 million in 2017. Assuming that trend doesn’t change significantly, the number of true retirees will only be 36 million. Today, there are 35 million true retirees, essentially making retirees a zero growth market. If older Americans that have never worked are factored in, the number will only increase about 3 million (14 million now vs. 17 million in 2017). At its best, the number of retirees will increase less than 1%. Their worst projections place the year to year increase at 3%. Hardly worth the concern it’s been receiving.

While there are 78 million boomers, 15% of them never entered the workforce. Considering that another 18% never had more than part time careers, this averages to about 2.6 million possible retirees per year. Accounting for the trend towards working past 65, Coyne writes, the number of retirees may be significantly lower in any given year.

What does this all mean for the credit union industry? Any fears you may have regarding Boomers retiring in droves are likely overblown, unless you credit union spent vast sums of money preparing products for a retirement market that won’t significantly change. Cold weather credit unions can brace themselves for any Boomer exodus by investing in shared branching. Warm weather credit unions will benefit from increased membership if a relocated member’s credit union doesn’t offer it.

Money will continue to shift between accounts, but that should benefit credit unions. Most financial planners suggest that the closer you are to retirement, the safer your funds should be. This should move quite a bit of money out of the stock market (that’s another issue) and into more secure holdings, increasing the demand for a credit union’s share certificate and other guaranteed products.

With Generation X reaching their peak as borrowers and Generation Y borrowing earlier, combined with the Boomers retiring at a rate that won’t significantly disrupt the workforce, it looks to be business as usual for the foreseeable future.

By Christian Mullins

In this week’s shameless plug, a new Executive Summary International has been posted for the week ending April 30th.  This week’s collection of seven articles were compiled from Australia, Canada, and Ireland.  Some are favorable to the movement, and some… well, not so much.  I would suggest reading the article on the state of Ireland’s data security problems.

If international CU news isn’t your cup of tea, there’s always the American version that runs Monday thru Friday each week.  Bringing both national and regional stories into focus, all in Executive Summary (short) format, for your convenience.

End shameless plug.

By Christian Mullins

It’s spring again! Time to clean out the garage, open the windows, and scare your local refuse collector with the amount of junk you accumulated, then threw out, over a period of 12 months.

Since you’re already in a cleaning mode, here’s a few quick tips to get your credit union’s website back in peak condition:

Clean Out The Garage:

Believe it or not, your homepage is a lot like your garage; it’s the gateway into your world. If you take care of your garage, it looks clean and organized. If you don’t, it looks like, well, a garage, and it needs to be cleaned out.

Not every deal, special, or announcement needs to be on your homepage, just the most important ones. Aren’t sure what should stay and what should go? Take a look at your web reports and bury the links and ads members don’t use.

Mow The Lawn:

There’s nothing like the sight of a freshly cut lawn. It’s even and tight, and it feels nice just to stand on it (ok, maybe that’s just me). The same can be said for your homepage.

Much like your garage, this is about getting rid of excess. There’s a theory that your homepage should fit inside your member’s monitor. No scrolling. While I don’t know if that’s realistic, try to keep your site’s homepage as close to one screen as possible. It’ll look nice, and members might even see what the bottom of your page looks like before clicking on their desired link.

Clean Out Your Refrigerator:

There’s nothing more vile than a refrigerator with its own ecosystem, so it’s time to toss the cottage cheese that went bad in 2006. And when your fruit pulses, it’s time to don some rubber gloves and do some dirty work. It’s thankless, but it saves the embarrassment of someone drinking three week old milk.

Double checking every… single… hyperlink on your website is no glory job either, but it has to be done. External links change all the time, and some of the internal links may have as well. Once it’s been done once, you can hand the job off to someone else to do monthly. By that time, it’ll be more like dusting (no one notices when it’s been done, but everyone knows when it hasn’t) than fridge duty.

Tend Your Whole Garden:

There’s more than one vegetable in the garden, but if you only weed around the carrots, your tomatoes will suffer. Likewise, there’s more than one web browser out there.

The top three web browsers in the world today are Firefox (37.0%), Internet Explorer 6 (30.1%), and Internet Explorer 7 (21.9%). Your website may look pristine on one browser but look a little messy on another. If your website looks good on both Firefox and Internet Explorer (6 or above) you’re in good shape.

Reevaluate Your Wall Art:

Much like music, art is in the eye of the beholder. However, most would agree that a movie poster held up with thumbtacks will draw the kind of attention you don’t want.

Clip Art is along the same vein. In the early days of the Internet, clip art was as good as it got; it didn’t use a lot of memory and dial-up surfers weren’t left behind. With most of America on DSL or better, it’s time to upgrade to photos. It looks nicer and won’t give your site that antiquated feel.

Invite Some People Over:

Now that you’ve cleaned, invite some neighbors over. If you don’t, they may glance over when they drive by, but since they already know where they’re going, they probably won’t notice.

If your credit union offers online banking, make sure the only way your members can access it is through an embedded link on your homepage. Otherwise, they may have bookmarked the link rather than your homepage and they’ll never know what you have to offer.