Filene Research Institute Articles

How I Spent My Stimulus

benrogers@filene.org (Benjamin Rogers) — Wed, 23 Jul 2008 00:00:00 -0400

How much did you get? How much did you spend?

The Web site HowISpentMyStimulus makes the personal very public and delves even deeper than our quick 30 Under 30 survey here.

Besides the snarky political rants, what’s most noteworthy about the results from this grassroots research is the amount of people who are paying down debt (and here), just paying regular bills, and squirreling the cash away (and here).

Folks are clearly nervous, and a windfall in tough times makes for a little insurance.

And then, of course, some people spent on quirky things.

Welcome New i³ers!

kelseybalcaitis@filene.org (Kelsey Balcaitis) — Wed, 23 Jul 2008 00:00:00 -0400

The Filene Research Institute has selected 13 exceptional credit union executives to join the Institute’s i³ (Ideas, Innovation, Implementation) Group, which fosters the development of new ideas and innovations for credit unions.

Each member will serve a three-year term and participate in semi-annual meetings arranged by Filene. The next meeting will be held October 1-3 in Portland, Oregon.

“The Filene Research Institute is proud to welcome these creative and energetic professionals as new members of our i³ Group,” says Denise Gabel, Filene’s chief innovation officer.

Nearly 75 applications from qualified credit union executives were received from Canada and the United States. The selection process evaluated innovative aptitude, experience, and other key factors including present position, leadership abilities, motivation, geography, and type of credit union.

Congratulations to the following new i³ Group members:

Jenny Casselman, Greater Nevada Credit Union, NV
Jeanne Denton, Nikkei Credit Union, CA
Eric Dillon, Common Wealth Credit Union, Alberta
Linda Garboczi, AmeriCU, NY
Earl Hodgkins, Carter Federal Credit Union, LA
CJ Meyers, Teachers Federal Credit Union, NY
Bob Morgan, NorthCountry Federal Credit Union, VT
Kelley Parks, Call Credit Union, VA
Jason Peach, West Community Credit Union, MO
Jon Reske, UMass Five College Federal Credit Union, MA
Brandon Riechers, Royal Credit Union, WI
Charles Roberts, State Department Federal Credit Union, VA
Ginger Salt, Truliant Federal Credit Union, NC

“While some might shy away from even writing the number 13, I think this is exactly what we need,” says Denise. She continues, “I think we need to keep taking risks, collaborating, and asking why—or better yet, why not? These new members will join 39 current i³ members who are working in teams to develop innovative projects ranging from an airport oasis lounge for credit union members, to ideas for products to help encourage members save more money and make saving as easy—and fun—as spending.”

The most recent ideas from the group are highlighted in the Filene i³ Key Findings: Blueprints for Innovation, which details recent innovative projects available for implementation in credit unions across the nation.

Gabel explains that i³ will continue developing ideas and initiatives that address major issues facing credit unions; identify developments in other financial institutions that can be adopted by credit unions; and provide a forum for cooperation, collaboration, professional development, and industry succession planning.

For information on Filene Research Institute’s i3 Group and projects, please visit here.

Here’s to Innovation!

SEGs ... an untapped resource

benrogers@filene.org (Benjamin Rogers) — Mon, 21 Jul 2008 00:00:00 -0400

Erin Hamilton, 30 Under 30 member, NASA FCU

Would you rather your members write a check or (responsibly) use a credit card? I have attended numerous seminars in recent months where the emphasis and focus has been for financial institutions to increase their SBA Lending including their Business Card products. Because of of our relationships in the local community, I see a great opportunity for credit unions to enhance or implement an SBA program.

Business cards are the fastest growing payment cards in today’s market followed by debit cards and then credit. As of 2004, there were 25.4M small businesses in the U.S. with annual revenues of less than $25M. Their revenue segment ranged between $1-5M and comprises 35% of the small business spending. Even with lots of credit cards floating out there now, checks are still the leading competitor.

I recently came across this article where Citibank, Chase and US bank all bid on a $49 billion contract over 10 years to become the travel card for the Department of Defense and its many corresponding agencies. Citi won the bid.

This led me to question whether or not we are using our SEG’s to their greatest potential. I have attended numerous events with our Business Development team to help increase membership at our SEG’s. However, when I asked this group if they were also offering our business products to these specific SEG’s themselves, the answer was no. Who are they using as their current business account and why couldn’t it be NASA Fed? This could increase our deposits, help with their payroll direct deposit (especially if most of their employees are already current members) etc.

After all, regardless of the size and revenue of these small employee groups, they have purchasing needs as well. Why couldn’t it be a NASA Federal Business Visa Card that they use rather than a check when they purchase their pens and post-its?

Thoughts?

More Big Ideas at Mazuma CU

anngeocaris@filene.org (Ann B. Geocaris) — Thu, 17 Jul 2008 00:00:00 -0400

Mazuma Credit Union, Kansas City, MO recently announced that their “Big Idea” program has rewarded a local entrepreneur who’s experience in the health care industry encouraged her to start a home health assisted-living company. Click here for the press release on Mazuma’s program, and also be sure to check out complete information about Filene i³’s “What’s the Big Idea” innovation idea.

Lisa Renner, i³ member and president/CEO, CU Holding Company, LLC, an aggregation of Mazuma Credit Union CUSOs said, ”’What’s the Big Idea Challenge’ is an opportunity for credit unions to provide business-friendly services that promise significant rewards in future business deposit and lending services.

“It’s just one tool credit unions can use to attract entrepreneurs and provide services that contribute significantly to the bottom line,” Renner said.

Light at the end of the tunnel

benrogers@filene.org (Benjamin Rogers) — Wed, 16 Jul 2008 00:00:00 -0400

Christina Gaglione, 30 Under 30, Affinity Federal Credit Union

Ah, the credit union Board of Directors. Typically, a place where change (and youth) are as foreign as the Cambodian riel to the average American. How do you introduce young blood into the veins of the credit union board?

All kinds of ideas from getting a Gen Yer to actually sit on the board to creating a whole other Youth Advisory Board have been floating around, but will they work? There’s a lot of skepticism surrounding these ideas, but I’m offering you a story that will hopefully add a little optimism.

After my trip to Chicago with fellow 30 under 30 members, it was back to work as usual, until, that is, I was invited to meet the board. Every year our Board of Directors and Senior Leadership Team have an off-site strategic retreat, where they discuss (you guessed it) strategies for the company. ‘What a great opportunity’, I thought, ‘a real chance to hear what the board has to say and get some direct insight into how they operate.’ The only problem was I wasn’t being invited as a listener; I was being invited as a speaker. Bryan Sims, CEO of Brass Media, and I were invited to speak about Gen Y and the 30 under 30 group.

At first, I was confused. This went against everything I knew about our board of directors and what I had heard about other boards. They were seeking us out to find out about the youth?!

I wasn’t sure what to expect, but what happened wasn’t even close to a thought in my mind. The weekend was a huge success! It was two days of being poked and prodded by people twice my age like I was some alien species that they had never seen before. We made unbelievable progress, though. I was amazed at how open-minded they were and full of questions. Even at dinner, the questions didn’t stop. They would ask me about my ‘lifestyle’ and some were still confused about how 30 individuals spread across the US communicate almost daily, but they were totally on board! This was great! Of course, there were a few nay-sayers at first, but even they came around.

Since the weekend of the strategic retreat there has been the start of a Youth Advisory Board and I have high hopes about where this will lead.

The CEO Report Spotlights Prize-based Savings

anngeocaris@filene.org (Ann B. Geocaris) — Tue, 15 Jul 2008 00:00:00 -0400

In its current issue, The CEO Report spotlights Filene i³’s Prize-based Savings project, an idea that helps consumers actually want to save, rather than play the lottery. The article highlights the successes a number of credit unions are having with the idea, and offers details on the Center for Financial Services Innovations’ recent grant awarded to D2D and the Filene Research Institute. This grant will fund a multiple-CU pilot in Michigan where Filene and D2D hope to involve at least six CUs in a single Prize-based Savings Program. Click here for additional information on Prize-based Savings.

Seeing stars

benrogers@filene.org (Benjamin Rogers) — Mon, 14 Jul 2008 00:00:00 -0400

So, Jeff Bezos and Rick Craig walked into a bar … Rick who? You know, the CEO of America First Credit Union in Utah. OK, he may not be a drinking buddy of Amazon founder Jeff Bezos, but his credit union has taken a page from the the retail pioneer’s play book.

America First follows Amazon, Apple and a growing cohort of Internet-based retailers in letting members comment about its products. Not many financial institutions have the chutzpah to let customers critique so publicly. “We were nervous,” says electronic services VP Rich Syme in a CEO Report article (subscription required) where I first read about it.

Don’t be nervous, Rich, the feedback is looking good. Double kudos for letting members share demographic info and for allowing visitors to share reviews on Digg and Facebook. Several obscure categories, like Health Savings Accounts and Student Loans don’t have reviews yet, but staples like checking and auto loans are getting raves. Check it out here.

Even if things had started badly, this is a short-term pain, long-term gain approach. Nothing motivates improvement quite like public criticism.

Credit unions always say they have happy members. This is how you prove it.

Where membership means more

benrogers@filene.org (Benjamin Rogers) — Fri, 11 Jul 2008 00:00:00 -0400

Matt Davis, 30 Under 30 member, Members Credit Union

Credit Unions could learn a ton from Costco. A 2007 story by Barron’s attributed the company’s success (they are currently the world’s fourth largest retailer) to four things: keeping expenses and prices low, treating employees well, making discount shopping fashionable, and keeping shareholders happy. These are outstanding “big picture” ideas—general in focus, huge in their implications. However, let’s look at two specific details of Costco operations that the credit union movement would be wise to consider for implementation.

Controversial Topic 1: Membership Fees

In credit unions’ quest to gain market share in the financial services market we have sought easier loans via indirect lending, easier ways to join via community charters, and nearly non-existent barriers to joining (membership fees, maintenance fees, etc.). While we have not achieved “open membership,” I would argue that it has never been easier for an American to join a credit union. In many cases, citizens of certain states or municipalities have multiple choices of fine credit unions to join. Some companies even offer their workers membership into multiple credit unions as part of their employee benefits packages. It’s exciting to know that if someone wants to join a credit union, chances are quite good that there is one out there for which he/she is eligible.

In many ways, though, this has cheapened the relationship. It has simultaneously become just as simple to leave a credit union as it has to join one. With some credit union members, there’s a diminished sense of belonging with their financial institution. With others, they have no obvious vested interest in remaining a member of their specific credit union.

Costco charges an annual standard membership fee of $50. For a marginally higher investment, you can get an executive membership that gives you cash back on your annual purchases at Costco stores. What does this fee cause shoppers to do? Shop. Shop A LOT! Costco members realize that to get their $50 out of their membership, they need to make enough annual purchases to offset their annual fee. How cool, huh? Costco gets $50/member/year AND members who want to do as much business with them as possible.

I think there’s a market out there for consumers who want to feel some exclusivity with their financial institution. People who want to feel special. People who want to save money. People who are impressed by a financial institution that is so confident in their services and ability to save members money that they can charge an annual membership fee. Show them your value. Keep track of members’ annual savings, and communicate that with every transaction.

“Thank you for stopping by today, Mrs. Jenkins! You have now saved $455.34 this year by being a member.”

As an added bonus, return 5% of that calculated total to members at the end of the year. With luck, that total will be at least the $50 membership fee required for renewal. The purpose of the fee would not be income, after all, it would be for loyalty. Even more than that, it’s to prove the value of your financial institution. You’re saying “it’s well worth your $50 to be a member at our credit union.”

Controversial Topic 2: Gas

Gas prices are sucking the life out of American families. The purpose of credit unions is to promote thrift among our members. Isn’t there something we can do, within that purpose, to ease the burden of fuel costs?

Costco sold 1.7 billion gallons of gasoline in 2007. Typically saving Costco members three to ten cents per gallon compared to competitor gas stations, the idea to offer discount gas as a membership perk has proven to be a tremendous business decision. Members help justify their membership fee with the cost savings they receive with this discounted gas. Costco in turn is able to become more attractive to potential members.

How about forming “Credit Union Gas Stations”? Credit unions could form a gas cooperative that would require member credit unions to invest .1% of total assets in year one to fund its start (eg. $500 million credit union invests $500,000). Credit Union Gas Stations would be built in high traffic, high visibility locations across the nation to provide this membership perk. Gas would be sold at the per gallon cost plus two pennies to offset operation costs. The effect would be around six cents per gallon savings for participating credit union members. To pump gas at these stations, you must be a credit union member of a member credit union. You will be able to join a credit union at the station’s information center. Credit unions would issue a card to their members that authorizes the pumping of up to 40 gallons/month at these stations, making sure that no member or member credit union gets an unfairly high proportion of the fuel supply.

We’re cooperatives. Let’s take advantage of our collective economies of scale to make something like this happen. Costco has proven that it can be successful.

Portable Deck System's a "Big Idea"

anngeocaris@filene.org (Ann B. Geocaris) — Thu, 10 Jul 2008 00:00:00 -0400

Wright-Patt Credit Union in Ohio has announced its first “What’s the Big Idea” Challenge winner—DECX, a green-friendly business that will manufacture portable decking systems. The credit union’s “What’s the Big Idea” Challenge was announced this past February, and resulted in 92 contest entries and an increase in new business accounts. Filene i³ member Tim Mislansky from Wright-Patt was instrumental in piloting this new idea.

Partnering with Filene Research Institute’s i³ Group, his credit union piloted the online reality-style challenge to help entrepreneurs take their business ideas from conception to implementation. Click here to read the full text of Wright-Patt’s recent press release. Here’s to more “Big Ideas!”

Caught (from) the Web

benrogers@filene.org (Benjamin Rogers) — Wed, 09 Jul 2008 00:00:00 -0400

Mike Escudero, 30 Under 30 member, MBA candidate University of Southern California

The home pages were so content heavy I had trouble locating perhaps the most important link of all – how do I become a customer?

I went to Bank of America’s Web site today. Then I went to Wells Fargo’s. Both sites shared many similarities, but the thing that stood out the most about both had to be the amount of information being squeezed onto their home pages. With so many links it looked like Bank of America and Wells Fargo were selling ad space to Google. But how do you sign up?

Credit union Web sites are the same way, with maybe a little less clutter. The problem is, we only design our sites for existing members. Not a bad idea, as our number one mission is to serve members, but here’s the thing. We started tracking Web traffic at my credit union recently and found that people were really only visiting our site to log into Online Banking to check account balances, pay bills and move money around. Virtually no one was visiting our site to learn about accounts.

I doubt my credit union can be alone, so why don’t we beat the major banks to the punch and follow the ING Direct approach? Let’s focus our Web sites on acquiring new members. The ING Direct Web site isn’t beautiful, but the site’s simplicity and structure help ING effectively attract new customers while serving existing ones.

Of course this is easier said than done with technological and regulatory considerations, but now is the time. Time to make it easy, make it simple, and make it happen all online. The fact of the matter is your bank or credit union hasn’t earned my time yet, so I’m not going to spend more than 10 seconds trying to figure out how to become a member. And I’m certainly not going to come into a branch to open an account, unless the branch is across the street from my home or work. It’s true that youth are impatient, but it’s also true that we’re the future.

Gen Y to CUs: 'I like you, but I'm not looking for a relationship right now'

benrogers@filene.org (Benjamin Rogers) — Mon, 07 Jul 2008 00:00:00 -0400

Christopher Danvers, 30 Under 30 member, Delta Community Credit Union

There’s an essential societal change that we should be paying attention to, and that’s the exit of Baby Boomers from the credit driven market segment and the rise of Gen Y to take their place.

The Credit Union movement has come along way from the mid 1800’s when famine from crop failure helped form the first cooperatives based on the philosophy of ‘people helping people’. Although today’s parallel of an 1800s crop failure (recession, depression, stagflation, inflation) controls the news headlines, society is so different with our easy credit, buy-now-pay-later mentality.

You’ve probably seen the “I Love you” parody ad at the BankerSpank Website, which portrays the difference between credit unions and banks as our touchy-feely relationship with our members. Democratically owner controlled and the power of membership have served our industry well, but might not effectively serve Gen Y. The fact is, generally speaking of course, Gen Y isn’t looking for a relationship (a.k.a., membership in a movement), and here’s my reasoning:

Gen Y has used the Internet since the day Al Gore invented it, and have enjoyed access to anything, anywhere, anytime.
Reached maturity watching 24/7 news coverage of corporate scandals, politics, economic issues, Baby Boomer retirement issues with pensions, etc.
Grew up with the buy-now-pay-later mentality, plastic (both debit and credit) and * PayPal as primary spending habits rather than paper money and checks,
View anything other than instant gratification as a waste of time…. So ‘90s.

Because of the environment Gen Y has grown up in, you’ll find they have specific product driven needs, little patience for distractions or interactions that they don’t view as relevant, and will probably be turned off a product offering if they have to join to become a member first. Interestingly, an emerging ‘solo household’ trend mentioned was also captured in the book Microtrends, by Mark Penn. In 1980, 17% of Americans lived in solo households, and today that number is more than 1 in 4 Americans. Does that make this generation more independent in thought and relationships? Maybe.

So what does all of this have to do with credit unions? It indicates that the emphasis we place on membership and owner-control isn’t the selling point for Gen Y. Of course field of membership restrictions will always be a part of the credit union charter, but we might need to seriously consider placing them in the background and emphasize product and price when selling to potential Gen Y members instead. Take note credit unions, it’s time to forget about what is historically important to the ‘movement’ and embrace what is perceived as important to this new audience called Gen Y that will ultimately ensure the continued success of credit unions.

Strengths revolution

benrogers@filene.org (Benjamin Rogers) — Thu, 03 Jul 2008 00:00:00 -0400

Julie Cosgrove, 30 Under 30, Affinity Plus FCU

“It’s fine to hire bright sparks but to fail to plant them where they can fuel fire is wasteful.” Roy White, the VP of HR with Sony Europe. Roy White’s message to Sony’s graduate program employees who are moving into permanent roles is, “Do what you are passionate about and find a way to use your talents to contribute to the business.”

What do you see your credit union focusing more on with individual employees—-areas of strength or areas of weakness? Its not surprising that based on research that Marcus Buckingham facilitated on how often people actually really use their core strengths at work, he found only 14% of people who could say that they use their strengths most of the time

Given the next generation of employees who thrive on environments that are less about command and control and more about the opportunity to be independent, creative and driven by doing what they are really good at, workplaces will have to find ways to further develop ways that maximize an employee’s strengths, resulting in even stronger performance outcomes for the members as well as for the organization.

Marcus Buckingham has remarked that while the statement “Our company’s greatest asset is our people!” is a nice motto, its basically meaningless without introspection and application. He believes that people aren’t your greatest asset, unless they’re in position to leverage their greatest strengths – those things they do well consistently and energetically.

In an industry that is founded on people helping people, the credit union industry has an incredible opportunity to be known as an industry that brings out the best strengths in people, maximizing performance outcomes for the members and communities in which they serve as well as creating the most engaged and passionate employee base.

Responsible Debt Relief

joseysiegenthaler@filene.org (Josey Siegenthaler) — Wed, 02 Jul 2008 15:36:41 -0400

In Responsible Debt Relief (RDR): An Algorithmic Assessment of Household Debt Capacity and Repayment Capability, Robert Manning, director of the center for consumer financial services at the Rochester Institute of Technology, introduces the concept of RDR. RDR is an algorithm that statistically estimates the net return to creditors and guides consumers to the debt reduction plan that best matches their financial situation. Dr. Manning is one of the country’s leading experts on America’s ever expanding debt phenomenon. Listen to his recent interviews on NPR:

All Things Considered Interview

Marketplace Interview

Baby Boom and You

kelseybalcaitis@filene.org (Kelsey Balcaitis) — Wed, 02 Jul 2008 00:00:00 -0400

According to the Center for Disease Control and www.babycenter.com, 2005-2006 saw a 3 percent increase in the number of babies born in the United States. This is the largest single year increase in the number of births since 1989, and the largest total number of births since 1967. But what does this have to do with you and your credit union?

Over 4 million babies are born in the United States each year, each one with the potential to grow up to be a credit union member. And how you market and appeal to these potential members is becoming increasingly important.

With so many resources and research going into learning about youth, there is a wide variety of information out there to help your credit union attract the younger generations.

One of our board members, Pat Smith, recently welcomed a grandson, Logan, into her life. Before she and his parents realize it, it will be time to teach young Logan about finances.

Congratulations Pat and family (Pat’s husband Bill is seen in the background)!

Couldn't We Just Flip a Coin?

joseysiegenthaler@filene.org (Josey Siegenthaler) — Tue, 01 Jul 2008 00:00:00 -0400

It is not unsual for decisions to be made at my house by flipping a coin. Economists have a much tougher job when it comes to forecasting the economy. With gas prices hitting another all-time high today, it is easy to see why people feel gloomy about our economic future. What isn’t easy, is accurately forcasting these economic highs and lows. Filene Fellow, James Wilcox, professor of financial institutions at UC Berkeley, shed some light on this topic in the Federal Reserve article Consumer Sentiment and Consumer Spending.

The paper found that the use of responses from the University of Michigan’s Index of Consumer Sentiment forecast model, could improve forecasts on consumer spending. Currently, most economic forecasts are based on the personal consumer expenditures (PCE). Wilcox found:

The ICS data reports on current and expected economic conditions versus what has already happened.
Consumer attitudes captured by the ICS may incorporate the impact of rate or unique shocks such as wars or Hurricane Katrina that could not be estimated by past data.
Household answers might reflect changed expectations and uncertainties about future conditions that have not yet occurred (such as changes in political candidates).

Wilcox went on to compare forecasts for 2001-2007 excluding and including consumer attitudes. He found that “forecasts including the ICS questions were more accurate when growth was failing.“

So, with all the economic forecasts and data available what resources do you rely upon at your credit union?