Filene Research Institute Articles

Are you interested in a Filene/Amazon.com pilot?

monicat@filene.org (Monica Titley) — Wed, 30 May 2012 00:00:00 -0400

Want to partner with Filene and Amazon.com in a pilot program? Learn more by clicking here.

International Cooperative Governance and Market Trends

benrogers@filene.org (Benjamin Rogers) — Fri, 25 May 2012 17:05:44 -0400

One of the international cooperative principles calls for cooperation among cooperatives. But we credit unions don’t always do a good job of practicing what we preach—for example, taking advantage of the combined knowledge and experience of our cooperative brethren.

For every challenge that an individual credit union has faced, the odds are good to excellent that another credit union or cooperative bank has faced, and overcome, something similar.

With this in mind, the Filene Research Institute and Credit Union Central of Canada brought together experts from the United States, Canada, and “across the pond” to share their experiences with a host of challenging issues, like consolidation, governance, and effi- ciency—issues that many of us have faced in the tumult of recent years.

Our discussions covered the changing face of credit union gover- nance, the threat of demutualization, and the importance of integrity in credit union efforts to differentiate in a crowded marketplace.

We also looked at a new cooperative paradigm that recognizes the powerful role loyalty plays in building long-term relationships, and we reached out to an expert in the field of behavioral economics to better understand something we see every day: consumers acting in not quite rational ways. With an eye toward regulation, we also re-examined the ever-popular “level playing field” in favor of a better sports metaphor: competitive balance.

A theme quickly surfaced: What we do must reflect a sincere effort to improve the well-being of our members. This means that we must have, as one presenter put it, “humility and sensitivity with respect to moments of truth,” and we must recognize that the best credit unions aren’t afraid to ask each other for help.

Blazing Trails and Taking Names

georgeh@filene.org (George Hofheimer) — Thu, 17 May 2012 00:00:00 -0400

The Filene Research Institute is so proud of our very own Matt Davis who was recently named by the Credit Union Times as one of their under 40 Trailblazers.

Please leave a note for Matt below congratulating him on this well deserved honor.

Get in the Game: How Credit Unions Can Engage Members, Solve Problems, and Improve Skills with Game Thinking

mattd@filene.org (Matt Davis) — Mon, 14 May 2012 00:00:00 -0400

Worldwide, three billion hours are spent playing video games each week. The five million “extreme” gamers in the United States play an average of 45 hours per week, more than the average worker spends earning a living. In contrast, consumers spend only 2.6 hours per month on financial planning and budgeting.

Why? Games are fun, while personal finances are boring or overwhelming. Games are engaging; personal finances are simply unwelcome chores. Games help people escape reality; personal finances force an outright confrontation with it.

As credit unions struggle to improve member financial behavior, skills, and capacity; engage audiences; and optimize organizational performance, a key question should be asked: Should we be thinking more like game designers?

The Filene Research Institute has spent considerable resources over the past decade studying, piloting, and researching ideas that leverage game thinking. Our work with Save to Win uses the appeal of lottery-type games to encourage low-wealth consumers to develop positive savings habits. The i3 Idea Savings Challenge took advantage of game dynamics to encourage families to reduce debt and increase savings. A 2012 pilot with Save to Win is studying how game thinking can encourage better financial behaviors.

This innovation brief puts the theory and practice of game thinking to work for credit unions. You will learn how game designers approach solving problems and engaging audiences, the psychology of game players, and practical examples that your credit union can implement right away.

Balancing Member Service with Organizational Efficiency

benrogers@filene.org (Benjamin Rogers) — Wed, 09 May 2012 00:00:00 -0400

The credit union business model may not be as simple as others. But the profitability principle is the same: Cut your own costs, or gently charge more.

This is the second in a four-part series that identifies and quantifies cost items at credit unions. The series does more than just identify the costs, however; it suggests measured approaches for minimizing costs by making informed decisions. The other briefs include treatment of item processing efficiency, branch staffing, and optimizing delivery channels. These reports provide specific cost metrics based on analysis from real credit unions and offer suggestions for how to better align the costs you do incur with your organization’s strategy.

The author questions the rarely questioned commitment of credit unions to provide cost-effective products along with the highest level of friendly, professional, and courteous service. Joseph Prunty does not endorse rudeness as an efficiency plan, but he does question how well the ideal of cost-effectiveness can operate alongside repeated, expensive investments in ever-more face-to-face service.

Far from arguing that credit unions should turn members away, jack up fees, or otherwise abandon member value, this report takes for granted that, “as cooperatives, credit unions should constantly strive to minimize operating expenses in order to return more economic value to member shareholders.”

In practical terms, that means measuring account maintenance costs, including core system costs, transaction costs, and even the costs of staff downtime. Tracking is the first step on the road to improving.

Commercial Lending During the Crisis: Credit Unions Vs. Banks

benrogers@filene.org (Benjamin Rogers) — Mon, 07 May 2012 00:00:00 -0400

At a time when the economy needs kindling from any corner, credit unions’ stable commercial lending history shows they may be a helpful source.

This report, from David Smith, an economist at Pepperdine University’s Graziadio School of Business and Management, seeks to quantify the performance of credit union commercial lending at a time when credit unions seek to widen their access to the business lending market. If the economy needs as much kindling as possible, shouldn’t credit unions be able to help? Opponents of the loosened standards argue that increasing credit unions’ ability to lend to businesses goes against their historical mandate and should threaten their tax-exempt status, arguments that are beyond the scope of this report. What this research does address is the argument, echoed as recently as June 2011, that “business lending is risky and raises serious safety and soundness concerns” (Wilson 2011).

This study builds on previous work by Smith and Stephen Woodbury from 2010, Withstanding a Financial Firestorm: Credit Unions vs. Banks (Madison, WI: Filene Research Institute). In it, the authors show that credit unions are surprisingly resilient to the downside of the business cycle, especially compared with commercial banks. According to that study, credit unions’ aggregate loan portfolios appear to be about 25% less sensitive to macroeconomic shocks than those of banks.

This report follows a similar methodology to examine business lending, a topic that has seen far less comparative research. Starting with high-level trends in lending, the analysis goes on to compare commercial lending delinquency and charge-off data from banks and credit unions, with special attention paid to how the two portfolios compare during unemployment spikes in the business cycle.

2012 i³ Application

georgeh@filene.org (George Hofheimer) — Tue, 01 May 2012 00:00:00 -0400

We are now accepting applications for the next group of i³ers. Do you have questions about the program? We’ve crafted a short description here and there. Click ‘more’ to start your application now.

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1. The general application

This portion will take approximately 30 minutes

General contact information

2 short essay questions

2 references (Name, Title, Company, Phone & Email required)

$75 application fee

Click here to complete the general application

2. The Wonderlic Entrepreneurial Profile

This portion will take approximately 20 minutes

100 True/False Questions

You will not receive confirmation the Wonderlic portion is complete, but Filene will.

Click here to complete the Wonderlic Entrepreneurial Profile

3. GRIT Scale Assessment

This portion will take approximately 10 minutes

12 Multiple Choice questions

Click here to complete the GRIT Questionnaire

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i³ Recruitment Timeline

May 1^st – May 31^st | Applications accepted

June 15^th – July 13^th | Interviews conducted (not all applicants will be interviewed)

Week of August 6^th | Results sent to all applicants

Research Pilot: Wallet Allocation Rule

benrogers@filene.org (Benjamin Rogers) — Tue, 24 Apr 2012 00:00:00 -0400

What factors influence the share of member deposits allocated with credit unions versus other financial institutions also used by credit union members? What member-level metrics should credit unions monitor to gauge their performance against competitors that will link strongly to members’ share of deposit allocations?

Join Filene in piloting the Wallet Allocation Rule to find out.

Download the Wallet Allocation Rule slides (PDF) here

If you are ready to participate in this research pilot, click here to enter your information.

Millions of Americans receive all or part of their financial services through credit unions, and consumer satisfaction with credit unions is significantly higher than with competing financial institutions. Even with consistently high satisfaction levels and a reasonably high market penetration rate, however, credit unions hold only 6.7 percent of household financial assets, a market share that hasn’t changed significantly in over 25 years.

These figures suggest that there is a significant opportunity for market share growth by increasing the share of deposits that members hold with their credit unions. This research will identify the drivers and barriers that impact individual members’ deposit allocation decisions so that managers can develop strategies designed to earn a greater share of wallet from their members.

For more details about the Wallet Allocation Rule, read Customer Loyalty Isn’t Enough; Grow Your Share of Wallet, Harvard Business Review, October 2011.

The Filene Research Institute is working with Prof. Lerzan Aksoy of Fordham University to pilot this research among credit unions. We are looking for partner credit unions across the United States to participate at no cost.

2012 GAC

marnier@filene.org (Marnie D. Renteria) — Mon, 16 Apr 2012 00:00:00 -0400

Thank you to those who attended the 2012 Filene Chair’s Breakfast. The Institute is truly grateful for your generous support and commitment to Filene’s research and innovation programs. The purpose of the breakfast is to honor and thank our special members/friends and provide a forum for a lively discussion. Filene Benefactors, Founding, Honorary, and Leadership Circle Members of the Institute are invited to this annual event.

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We would also like to extend a special thank you to Lerzan Aksoy at the Fordham School of Business for providing relevant and reliable information that will help consumers and credit unions navigate this competitive environment.

“Customers may be very satisfied with your brand and happily recommend it to others—but if they like your competitors just as much (or more), you’re losing sales.”

Customer Loyalty Isn’t Enough; Grow Your Share of Wallet, Harvard Business Review, October 2011

Wallet Allocation Rule Slides – Analyzing the Relationship between Net Promoter/Satisfaction and Share of Wallet

Feel free to contact Lerzan at aksoy@fordham.edu with questions.

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i³ Nominations

Have you thought of the perfect candidate for our i³ program?

Nominate them here.

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Want to be invited next year?

Contact our Director of Membership, Andrea Nilsen to find out how.

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Thank you again for your generous support of the Institute.

Announcing FinovateFall 2012

marnier@filene.org (Marnie D. Renteria) — Mon, 09 Apr 2012 00:00:00 -0400

Filene will head to New York on September 12^th and 13^th to take note of the best new innovations in financial and banking techonology.

Do you want to join us as we hear the latest in fintech innovation with over 1,000 other financial institution executives, venture capitalists and entrepreneurs? Finovate fuses sales demos, press conferences, trade shows and business development into one event. Whether you are looking for the most innovative technologies, best practices or simply wanting to know what other credit union executives are thinking; this is the event for you.

As of March, over 67 credit union executives are scheduled to attend FinovateSpring with Filene next month. Fill out the form below to be notified when Filene has promotional codes for this worthwhile event in September.

Credit Union Digital Branding Colloquium

benrogers@filene.org (Benjamin Rogers) — Wed, 04 Apr 2012 00:00:00 -0400

Digital branding and social strategies are becoming the necessary norm for all businesses, including credit unions. But there is a danger that managers, while acknowledging this new norm, can get in trouble by not approaching it strategically.

In November 2011, Filene convened a panel of expert researchers and practitioners in San Francisco to discuss and show how credit unions should think about their own branding and digital presence as marketing moves to an increasingly electronic format. We wanted to know what tools are out there (and what’s coming down the pike) along with what digital messages and channels resonate with today’s consumers.

The main takeaway: It is not enough to turn traditional collateral and messaging into digital collateral and messaging. Instead, credit unions need to capitalize on the deeper trend of social connections to make sure their marketing reaches the right audience in the first place and has its intended effect when it arrives. Mobile usage, more emphasis on design, and social marketing all came to the fore as trends that every credit union needs to consider, especially as it hunts for new members.

The colloquium included a cross-section of social media practitioners and researchers along with strategists from Google and Facebook. Each brought a different message, but the unspoken message—really, the needn’t-be-spoken message—was that digital marketing is becoming ever more important. Adopting it won’t be enough; embracing it is the only acceptable route.

This presentation tool is called a Prezi. It is offered in lieu of a traditional Filene report.

Credit Union Digital Branding Colloquium on Prezi

Above you’ll see short video clips from the presentations along with some of the most relevant slides. More in-depth videos are below, and the presenters’ full slide decks are also available for download once you log in.

Presentations

Hope Schau, University of Arizona, Watch Your Language: How Consumers Respond to Brands in Digital Media

Beth Austin, Crescendo Consulting and Filene researcher, The ROI of Social Media: Fact and Fiction in Credit Unions

Christine Trodella, Facebook, How credit unions will be better in a connected world

Maya Bourdeau, Attune, The Science of Gen Y Branding

Kristen Christian, Organizer, Bank Transfer Day, The Anatomy of Bank Transfer Day

Payton Dobbs, Google, Beyond Advertising: Engaging Your Online Audience

Expert Panel

Attributes and Skills of Highly Effective Credit Union Managers

benrogers@filene.org (Benjamin Rogers) — Mon, 02 Apr 2012 00:00:00 -0400

“At the end of the day, you bet on people, not strategies.” That, according to Larry Bossidy, the longtime CEO of Allied Signal (later Honeywell), is what drives a company and creates a culture.

Filene takes credit union leadership seriously and this report builds on years of analyzing not just the organizational performance of credit unions, but the human factors that make credit unions tick. From a 2005 inquiry linking team dynamics to financial performance, to a 2010 study that showed how best to move good ideas through an organization, to 2009 research that explored the motivators of under-30 credit union employees. Filene recognizes that examining the human side of credit unions is essential.

Employee performance expert Mike Neill has extended those findings in search of the common characteristics of 94 of the credit union system’s best middle managers. The anonymous participants in Neill’s survey were nominated for consistently performing in the top 20% of managers, receiving the highest possible performance evaluation, and earning the highest possible bonus if one was offered. Using statistically valid data that show what is typical for North American professionals, Neill’s research identifies the relevant instances where these high-performing credit union middle managers differ from the norm.

This report can be used as a tool for hiring and promoting in the middle management ranks. But whether you use a formal screening mechanism like the one outlined in this report or simply rely on interviewing and your own intuition, understanding these factors and how they play into effective credit union management will allow you to hire and promote more effectively.

Research Colloquium: From Financial Literacy to Financial Capability

benrogers@filene.org (Benjamin Rogers) — Tue, 27 Mar 2012 00:00:00 -0400

What is the difference between financial literacy and financial capability, and why should credit unions care? Where is financial capability lacking and what are the consequences of low financial literacy? What approaches and methods can better suppport credit unions’ efforts to promote financial literacy and capability? Which groups are the best targets for credit unions’s efforts?

From Financial Literacy to Financial Capability

Presented by the Filene Research Institute at George Washington University

Save the Date: Tuesday, May 22, 2012 | Washington DC

Register Here

Credit unions have long focused on financial literacy and capability as a key part of their mission. In many cases it has become the fulfillment of the original charge to “promote thrift.” But cultural changes around money management and the proliferation of educational tools and distribution channels mean that traditional methods may not be as effective. It’s essential that credit unions align their focus and their spending with ventures that strategically support credit unions’ mission. But it is equally important that efforts support effective service to members, effectively promote good behavior and simultaneously promote credit unions’ business goals.

Participating Experts

Annamaria Lusardi, George Washington University – Financial illiteracy is not only widespread, but particularly severe among some important and large demographic groups, such as middle income families, women, and the older population. There is a critical role credit unions can play in rebuilding household balance sheets. Helping families rebuild assets and manage debt will improve the financial conditions of families and also gain their trust. This session will show that, when discussing financial capability, it is important to take the long view. Most importantly, the sesssion will provide information on specific programs and best practices that have contributed to improve financial capability.
Jean Chatzky, author, Today Show contributor, and director of education at SavvyMoney – What Truly Changes Financial Behavior?
Lois Kitsch, National Credit Union Foundation – Credit unions have spent countless hours and dollars to provide financial education opportunities for members and consumers across our nation. In an effort to build both consumer capability and knowledge, credit unions are turning to experiential tools and resources to provide students and adults opportunities to learn by doing. Reality Fairs, Retirement Fairs, Learning Maps and Simulations are the new teaching tools that provide a rounded educational experience that many are calling “edu-tainment” where education and entertainment meet for a satisfying an educational experience.
Piyush Tantia & Alex Fiorillo, ideas42, Harvard University – How can we make financial literacy training more effective? Can we do more than financial literacy to help people make better financial decisions? This session will answer the first question by introducing the idea of “financial heuristics” as an improvement on traditional financial literacy curricula and sharing recent field test results. The speakers will also discuss psychologies that get in the way of financially beneficial actions, and share additional ideas stemming from behavioral economics that answer the second question.
Ron Borzekowski, Consumer Financial Protection Bureau – One of the CFPB’s lead economists details its research pipeline and answers questions about how the new bureau will measure progress in its mission to improve the nation’s financial capability.
Nick Maynard, Doorways to Dreams (D2D) Fund – Can vampire video games improve retirement security? Learn about the award winning financial capability innovation, financial entertainment and how cool, casual games mixed with effective social marketing strategies has reached over 350,000 players and generated over 95,000 hours of financial education. In addition, hear about the cutting edge work being done around game customization that links play to positive financial actions in the real world.

Costs:

Because of the generous support of CO-OP Financial Services and the National Credit Union Foundation, Filene is offering this colloquium free of charge.

If you would like to support the administrative and logistical costs of this colloquium and further the work of Filene, we would welcome a donation of any size ($250 recommended). You may make a donation on the registration form.

Because seating is limited, we ask that each Filene member registers only the CEO OR one senior-level executive. We also ask that your registration represent a firm commitment to attend.

Travel Plans:

The meeting is being held at:

George Washington University School of Business

Duques Hall | Room 651 | 2201 G Street NW

Washington, DC

Washington DC is served by all major airlines through Reagan National Airport (DCA) and Dulles International Airport (IAD). Filene is not establishing a room block, but a range of lodging options are available nearby.

Is Bank of America More Consumer-Friendly than Your Credit Union?

mattd@filene.org (Matt Davis) — Mon, 26 Mar 2012 00:00:00 -0400

Loan terms may not seem very hard to understand for people like you. Chances are you work in financial services. Lingo like points, APR, balloon, FHA, piggyback, PMI, and escrow rolls off of your tongue. You can compare mortgage offers quicker than Snooki can spray on a tan.

Want to know a secret? Most people can’t.

Want to know something else? It’s our fault.

Financial institutions in general offer way too many different loan products, confusing terms, and hard-to-understand (and inflexible) closing costs (don’t believe me? Check out the Filene Study on The Psychology of Choice Overload). The result is the opposite of what credit unions should be seeking to provide consumers: an easy and transparent way to compare and understand loan packages.

While Truth in Lending guidelines sought to remedy this problem, the reality is that finding the best mortgage deal is an exhausting, if not impossible, process. It’s easy to blame the lawyers, regulators, and GSEs for this, but we are all responsible. We’ve let legalese, industry jargon, and actuarial tables reign supreme over quality design.

Fortunately, some people are taking action. Maybe the most surprising reformer is Bank of America. While it is far from pretty, BofA’s Clarity Commitment Mortgage documents attempt to improve their customers’ understanding of loan options.

The Consumer Financial Protection Bureau (CFPB) is similarly trying to rethink the way mortgage documents are designed. The CFPB’s “Know Before You Owe” initiative has gone a long way toward making it easier to understand mortgage disclosures (see below).

This of course is only a start. I think it’s ridiculous that we are waiting for others to lead with better designed documents and disclosures. I’d expect innovation in consumer-friendly disclosures to come from credit unions….not Bank of America or a government agency.

The good news is that it’s not too late. There’s much work left to do. Start with your rate sheet. Next, look at the complexity of your offerings (do you need 25 different types of mortgage loans?). Last, but not least, watch as many consumers as possible hunt for a mortgage online…it’ll be eye-opening for sure.

Investor Education for Credit Union Employees: Survey Results for Wisconsin

benrogers@filene.org (Benjamin Rogers) — Fri, 23 Mar 2012 11:08:29 -0400

Ever since “promoting thrift” was codified as a core value in the Federal Credit Union Act of 1934, credit unions have been interested in ways to help members manage their money well. That task can extend from offering good and basic financial products all the way to offering complex financial advice and in-depth financial education.

In 2009 and 2010 researchers at the University of Wisconsin– Madison, in cooperation with the Wisconsin Credit Union League, administered a series of surveys followed by financial education modules to hundreds of employees at Wisconsin credit unions. The project is part of a larger experiment to see just how effective online education can be in improving financial knowledge and changing financial behavior. But not all financial education is created equal.

The researchers wanted to know whether a nine-part online education series—covering topics such as “Basics of Investing,” “Investing in Mutual Funds,” and “Working with Financial Advisors”—would lead to both sustained knowledge and changed behavior. Fifty‑four percent of respondents reported some college, and the typical employee had between 5 and 10 years of employment experience. Most were married, and, interestingly, only 17% were male, which reflects the high proportion of women employed by credit unions. And did the online education change knowledge and behavior? It did.

Filene Research Institute Articles

Are you interested in a Filene/Amazon.com pilot?

International Cooperative Governance and Market Trends

Blazing Trails and Taking Names

Get in the Game: How Credit Unions Can Engage Members, Solve Problems, and Improve Skills with Game Thinking

Balancing Member Service with Organizational Efficiency

Commercial Lending During the Crisis: Credit Unions Vs. Banks

2012 i3 Application

i3 Recruitment Timeline

Research Pilot: Wallet Allocation Rule

Download the Wallet Allocation Rule slides (PDF) here

If you are ready to participate in this research pilot, click here to enter your information.

2012 GAC

Announcing FinovateFall 2012

Credit Union Digital Branding Colloquium

This presentation tool is called a Prezi. It is offered in lieu of a traditional Filene report.

Presentations

Attributes and Skills of Highly Effective Credit Union Managers

Research Colloquium: From Financial Literacy to Financial Capability

From Financial Literacy to Financial Capability

Register Here

Participating Experts

Costs:

Travel Plans:

Is Bank of America More Consumer-Friendly than Your Credit Union?

Investor Education for Credit Union Employees: Survey Results for Wisconsin

2012 i³ Application

i³ Recruitment Timeline