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USA…A, USA…A

Well that’s so fitting.  The US Women’s Team pulls off a victory in one of the most exciting World Cup games ever and USAA is the #1 Place to Work in IT.  It’s nice to see a financial institution is on top just when you thought the financial services environment was lagging.  What’s even more surprising is they’re #1 for the second year running.

USAA has long been considered an innovator in financial services.  The fact that they are also an awesome place to work is no surprise.  If you give techies an environment where they can continually learn and try out new ideas, great things can happen.  USAA seems to have it figured out.  If you take care of your employees, they will in turn take care of your customers.

In an environment where we hear of banks and credits closing every week, USAA is giving 18% performance bonuses to all 22,500 of their full-time employees.  Notice, it’s not just the executives and top salespeople that are being rewarded.  USAA recognizes that every one plays a part in making the company successful.

They must be doing something right, because every USAA customer that I know is very satisfied with the company.  They also have had accounts there for a number of years.

Typically, you hear executives talk about being like Bank of America, Wells Fargo, or Citi.  USAA, on the other hand, has been laser focused with taking care of the financial needs of our armed forces personnel.  They go to great lengths to make the experience as easy and painless as possible.

USAA understands that this is a service business.  It’s also reflected in how they treat their employees. Hopefully other bank and credit union executives will begin to look at USAA as a model to emulate.

Photo from Denver Post

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Are You Winning?

Lately I’ve seen a lot of posts bemoaning the lack of innovation in the bank and credit union industries.  I do agree that companies such as industry outsiders Apple, Google, Square and BankSimple seem to be leading the industry disruptions.  But there are companies, such as Ally, TD Bank and USAA, that are also innovation driven.

One thing that I’ve noticed about these three companies is, they all seem to be customer-centric.  While every bank and credit union talks about their great service, these three seem to back it up.  USAA and TD Bank especially seem to offer products that allow their customers to bank the way that is most comfortable to them.  Unlike their peers, these institutions don’t follow the crowd.  They lead the crowd and let everyone else pay catch up.

This follow the crowd mentality has always been something that has bothered me.  Especially when you realize that following everyone else is what brought us to this crisis in our industry.  But I think there are other issues at play here.  In the past, bankers were the ones that controlled the flow of money.  Without much work on their part, bankers could just wait for customers to come to them with requests.  Now, with disruptive technology, one does not have to rely on a bank to get access to capital.

I believe this “wait and see” approach is one reason there has been a lack of innovation in banking.  Here’s one example: everyone tends to agree that mobile banking will play an integral part in the future of banking.  But I’ve seen comments on blogs where executives were reluctant to offer mobile alerts because it will reduce NSF fees, so they were just holding off on mobile altogether.  Not very customer-centric is it?  Never mind that offering mobile alerts could drive up customer acquisitions and increase income.  They’re more focused on the “potential” loss of fee income.  But as competitors begin to offer mobile, they reluctantly look to add the service.

Now, the biggest reason for the lack of innovation?  That would be fear.  Particularly, the fear of losing entrenched power.  If you think about it, most bank and credit union executives view IT as a cost center.  Therefore, they don’t look at it as a competitive advantage.  Also, they don’t understand it, and really don’t want to understand it either.

Over the last few years, there have been articles about the purpose of physical branches changing.  Branch traffic has been steadily declining for years.  This means that the opportunities for cross-selling have gone down also.  But online usage is trending up.  Which means online account openings, bill pay, mobile, and other online services are also trending up.  Also, customer acquisitions are cheaper online.

So in order to survive, the people that currently have the power have to deal with those IT people.  Which means they’d have to give up power.  But more importantly, if the branch isn’t as important and online is, what will their future purpose be?  They don’t know that much about online banking, but they know a whole lot about branch banking.  Better to keep their head in ground and ignore the change that is happening around them.  Just maintain the status quo at all costs.

We all know that people that ignore change and try to stay the same are just spectators.  Spectators aren’t in the game.  If you’re not in the game, that means you can’t possibly be winning.  Which means you’re losing.

Andera Launches SDK

January 20, 2011 1 comment

We were one of Andera’s first customers for their online account opening product. So far, the experience has been really good. They’ve always been open to suggestions and have a pretty quick turnaround. Well now they’ve released a SDK for their web services. While listening to the presentation, I could just imagine the potential uses.

A few that they mentioned dealt with verification of identity, credit and funding sources. This functionality could open doors for even better loan and account applications. With mobile becoming a bigger priority, being able to tie into these services could be a boon.

Some other examples they gave dealt with the gaming and travel industries. You could tell that they’ve put a lot of thought into this. The GUI for service looked really cool also.

I’m looking forward to working even closer with Andera in the future.

The Elephant (Banker) In The Room

November 3, 2010 6 comments

Last week I had the opportunity to attend the CU Water Cooler Symposium. When Matt Davis invited me, I was very hesitant. “You actually want a banker to attend?”, I asked.  “Sure, why not?”, was the response. “You can bring a different perspective.”

So off to Fishers, IN I went. Let me tell you, this had to be the best conference I’ve ever attended. There were two days of great speakers and a wealth of information. As someone commented, if you didn’t get a ticket because you thought it would just be about social media, bad mistake.

The tweets from the event are only a sample of a information we received. You can find an archive here.

While the symposium as a whole was great, I’d just like to highlight a few sessions:

Robbie Wright, from CU Innovators, spoke about using social media to discuss the hard topics.  He said that instead of just talking about marketing fluff, we should try solving the hard problems.  Credit unions need to focus on the non-sexy to stand out for their customers.  At the end of the day, credit unions are a business, not a charity.  They can’t just focus on “being on Twitter and Facebook”. Social media needs to add value to customers and the credit union.  You should build a business case to use these tools and income is a good thing.

Rebecca Corliss, from Hubspot, gave a presentation on inbound marketing.  I’m a big fan of Hubspot and have always wanted to meet someone from the company. Hubspot really helps you leverage your online presence to generate leads. Old school marketing is interruption based while the new school is permission based.  Some advice Rebecca gave was to think of inbound marketing as an ecosystem, not a cubicle.  You need to target your keywords in order to build your rank.  Inbound marketing is an investment and can build down the cost of leads.  Another piece of advice was to have more than one “contact” form.  The forms on your website should have a “call to action”, not just ask for generic information.

Ed Brett, from Westminster Savings, would probably get the vote for best speaker.  No slides, just straight talk.  Ed explained that although his credit union was much smaller than the competition, they were able to compete because they take advantage of their small size.  Smaller companies are able to be much more agile so there are less levels to go through to get to a decision.  At larger companies, there are more politics, agendas, and decision makers.  Also, credit unions need to be better bankers than the bankers.  This is a business and they need to help people do their banking better.  There should be less emphasis on social media and more on simplifying banking.  If you want to be agile, you should partner with agile vendors.  At the end of the day, you need to bring value to your members.  Ed also gave three statements that really stood out to me:

1. I challenge you to find other industries that are seeking to model their service after credit unions (banks).
2. The only innovation in financial services over the last 50 years has been in ‘access’
3. Your job is not to use technology, but to apply it.

Maya Bourdeau, from Attune, spoke about Psychology in Marketing.  She talked about how her company discovered that small sample sizes gave as good results as large pools of participants.  But, of course you have to be very discriminate in selecting your small sample.  Another thing they discovered through their marketing development was credit unions need to show two times the value to get members to switch from a bank.  They also said to keep it simple and explain the personal benefit.  For example, instead of saying “we helped people save over $7 billion”, say “we can help YOU save $200”.

In addition, I had the opportunity to be on the expert panel about credit union branding.  One recurring theme was credit unions really need to sit down and decide what they want to be.  I mentioned that credit unions need to play to their strengths and explain how they’re different from banks.  Most people don’t know what the difference between the two is.  I also stated that “credit unions can’t out bank a bank, we’ve got that down”.

All in all, this was a great conference and I’m looking forward to going back next year.  One question I was continually asked was, “why don’t you work for a credit union?”.  My response was, “I believe I’m a credit union person trapped in a banker’s body.”  As Morriss Partee said, that statement is “an instant classic”.

You can find more summaries here:
CU Times
unCUlturers
Committed to Memory
Currency Marketing
The 2020 Vision of Marketing
Video of Presentations

First ODP, Next Interchange

October 19, 2010 1 comment

Brett King, of Bank 2.0 fame, has a post over on Finextra titled The iPhone 5 Debit Card – coming soon.  In the article he discusses the potential impact of Apple’s iPhone 5.0 that will most likely be released next fall.  One highly anticipated feature is contactless payments, which is something I wrote about here.

Brett poses a question of “how will banks compete against Apple, Google, Microsoft and the carriers in the credit card space?”  Apple already has customers that setup their credit cards to use for iTunes.  You can bet that Google and Microsoft will do the same.  Google is better positioned than Microsoft, with their Google Checkout.  But I think Brett missed one important area.

For most banks and credit unions, credit cards aren’t a huge revenue source.  I’m willing to bet that those interchange fees they get from debit transactions has way more income.  I happen to use PayPal for a lot of online transactions.  One thing I recently noticed was, my PayPal account currently has $0 in it.  However, PayPal is able to directly transfer from my checking account to pay for any transactions.  This means that PayPal gets a percentage, but my bank gets nothing.  As far as my bank is concerned, it’s just an ACH transfer.

So, when mobile payments finally take off, it won’t necessarily be banks and credit unions that benefit.  With electronic transactions being the dominate form factor for payments, losing the credit card market isn’t what should keep executives up at night.  It’s losing the debit card transaction market.

We Don’t Need No Stinkin’ Cash

September 6, 2010 Leave a comment

I am SO looking forward to the day when I no longer need to carry cash around.  With the advancement of smart phones, mobile payments and companies like Square, the day may be here sooner than we think.  Somaliland, a small country in the horn of Africa, just may be leading the way.

Somaliland could very well become the world’s first cashless society.  Given the fact that cash pretty much doesn’t work there (17,000 shillings = $1 US and the highest denomination is 500 Shillings) and the advancement of their mobile banking industry, getting away from cash is becoming a necessity.  Carrying wheelbarrows of money around isn’t that feasible.  However, using such services as Dahabshiil is.

Now, who thought that a small African nation would be the catalyst in changing the world to a pure electronic format?

You can read more over at TechCrunch.

FIs Are About To Be Blindsided…Again

May 13, 2010 5 comments


I’m not sure if you heard, but this little tech company out in California has a couple of neat devices called the iPhone and iPad.  So far, banks and credit unions have been holding back from jumping into the mobile banking space.  But I believe momentum will grow exponentially over the next two years.

The problem is it might just be too late.  One of the main reason FIs haven’t jumped into the mobile space is because there is no clear ROI.  Instead, they mostly hear about the cost savings in other areas like the call center.  No one is charging for mobile banking in the United States.  And until Bank of America, Wells Fargo or Citibank does, I don’t think anyone will.

One idea I have heard floated for income is charging commercial customers.  The reason being companies are typically charged for using cash management services.  Another one is getting transaction income from mobile payments. Make no mistake, mobile is the biggest growth area for financial services.  I believe that within five years, customers will access their account information mostly from a mobile device.  The iPad and other “tablet” computers will only accelerate this growth.

Fiserv’s iPad demo at Finovate Spring 2010 is just a sample of what’s to come.  But what no one is noticing are the companies that are going around banks and credit unions.  Square’s apps for the iPhone and iPad will take away from those lucrative merchant accounts that customers normally get through their FI.

The biggest threat is the new Transaction app that Apple is working on.  Basically, Apple will turn your iPhone into a credit card by using NFC.  So just like PayPal became the standard for online transactions, it looks like Apple could become the standard for mobile transactions.  And if everything is going mobile, where exactly does that leave your FI?