January 13, 2012

Who Are The Future Leaders Of The Credit Union Movement?

A recent comment on this blog from Hap Landies deserves a bigger spotlight. In response to a comment I left to Mark Arnold, Hap writes:

“Ron, I’ve been working in credit unions for more than 30 years. I know hundreds of C-level officials, and I disagree that there is a “meaningful number of young professionals involved with managing, leading, and running credit unions…..” There is indeed a cadre of outspoken young people on the blogosphere and around the watercooler, but from what I’ve observed, they are more junior level people from credit union marketing and training departments, and the numerous marketing agencies that want to sell them stuff. They are indeed a rah rah bunch, but they aren’t leading their organizations now, nor will they be leading them in the future. The path to the corner offices doesn’t go through the marketing departments of credit unions. Never has and never will.

I should add……..thankfully for us.”

What do you think? Is Hap right?

My take: The question of whether or not the future leaders of CUs will come from marketing can’t be answered without understanding why the past leaders haven’t come from marketing. Two reasons dominate:

1. Worn-rug syndrome. Is there a rug in your house or office that has a path worn-into it? And what do people do when there’s a path already worn-into the rug? They walk on it.  So when the path to the CEO position has always been filled with people from a particular part of the organization, not only does the incumbent CEO think the position should be filled by someone from that path, but so does the board. And what happens is that marketing isn’t considered a source for the job.

2. Poor reputation. Let’s face it. Marketing has a poor reputation in the eyes of many senior CU executives. This negative becomes ingrained and even a great potential future leader will suffer to overcome this if s/he is in marketing.

So, is Hap right? That it will “never” change?

No. 

But that’s not to say that marketers in credit unions will somehow magically be on the CEO track in the future. The ones who get on that track will have to redefine the role of marketing in their organizations. 

Needless to say, the tchotchke-marketers (those whose view of marketing is centered around giving out refrigerator magnets) won’t be on the leadership track.

But marketers who view the marketing function too narrowly — typically in advertising terms — won’t make the track either.

The marketers who infuse marketing into members’ channel experiences, and who influence overall corporate strategy will be the marketers who make it on the leadership track.

Sorry for the political incorrectness, but a lot of older CMOs won’t get there. Their narrow view of marketing is too ingrained. The younger marketers are starting from a different mindset of what marketing is, and what it could be.

I hope you’re still around credit unions for the next 30 years, Hap, for these young CU leaders to prove you wrong. 

For more on this topic, see this post on The Mojo Company blog.

Posted by on January 13, 2012 in Credit Unions.

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January 11, 2012

Financial Spas

99.8% of the financial services world calls the physical dinosaurs that populate the real world “branches.” There’s .1% that refers to them as “cafes” (ING Direct) and .1% that calls them “stores” (Wells Fargo). 

Snooze. 

Banks and credit unions are missing a huge opportunity here. Namely, to transform those legacy physical structures into financial “spas.”

You know, the place where you go to get into “financial shape”. Kinda gives new meaning to the term “loan workout”, no?

Seriously though (OK, not too seriously), instead of trying to get people to hang out and drink coffee, if banks transformed their branches into spas, while women were getting their mani/pedis, they could be having meaningful conversations with financial reps about their financial lives. 

Open an account (or maintain a certain balance, number of accounts, etc., you get the picture), get the manicure for free. 

Think I’m being sexist? Screw that, everybody knows it’s women making the financial decisions in an incredibly high percentage of households.  It’s certainly no more sexist than slapping some pink colors on something and calling it “marketing to women” (and you know that there are banks and other types of companies that do that).

You don’t think this idea will fly, do you? That’s OK. Because cafes and high-tech, self-service gizmos aren’t the “branches of the future” either. 

Posted by on January 11, 2012 in Humor, Marketing, Retail Banking and tagged , .

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January 10, 2012

Quantipulation: Online Banks’ Deposit Growth

American Banker ran an article titled Online Banks’ Deposits Grow at Quadruple Industry Pace which stated:

Among the nation’s largest stand-alone direct banks, deposits have increased by 70% since the first quarter of 2008 to a combined $330 billion as of Sept. 30, or roughly four times the industrywide pace. Even for ING Direct, the largest and most established Internet deposit business, deposit growth of 27% since the first quarter of 2008 to $82 billion at Sept. 30 was far ahead of industrywide growth of 17% to about $10 trillion.

My take: The online banks may have grown far faster than other FIs (70% vs. 17%), but given the smaller base of deposits, that’s not very hard to do. In fact, if AB wanted to further sweeten the online banks’ story, it could have mentioned that their market share of deposits grew from 2.3% in 2008 to 3.3% in 2011 — a 43% jump in market share.

Ah, but now I’m the one quantipulating.

There is another side to this story, however.

Based on the numbers presented by the article, the online banks captured just 9% of the industry’s total deposit growth from 2008 to 2011. Meanwhile the top 5 banks (JPMC, C, BofA, WF, USBank) captured 40% of the deposit growth (my estimate is based on adding Wachovia into the WF numbers, and Wamu into the JPMC total).

While AB points out that the online banks’ growth rate is four times greater than the industry pace, it fails to mention that the top 5 banks’ deposit growth ($, not %) is four times greater than the online banks’ increase. In addition, as the online banks’ share of the total market grew from 2.3% to 3.3%, the top 5 banks’ share remained constant at 41%.

What it means: 1) Despite the “safety scare” of 2008-2009, and the “move your money” and other negative sentiment toward large banks in 2011, the top 5 banks are weathering the industry’s storm, at least from a deposits perspective; and 2) The online banks’ gains would appear to come at the expense of credit unions and community banks.

Oh, and the other thing it means is that, if you’re going to quantipulate, remember that there’s probably another side to the story. 

Posted by on January 10, 2012 in Marketing, Retail Banking and tagged , , , , , , , , .

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January 9, 2012

Credit Unions’ Achilles Heel?

If you work in financial services — and like market research data — check out Prime Performance’s 2011 Bank and Credit Union Satisfaction.

If you work for one of a handful of large banks, you probably won’t like what you see, and will probably stop reading half way through. If you work for a credit union, then enjoy this cup of kool-aid.

I’m not disparaging the study with that last statement. The study is well executed, the sample size is more than adequate. But as with much of the market research in financial services — and I am as guilty of this as anybody — data about credit unions is reported at the overall level, which obscures the differences in individual institutions.

Instead, I’m taking a playful swipe at the credit union folks who will see that credit unions are rated highest in every category tracked except for one, and pat themselves on the back, as they do every time a survey comes out that shows that they’re superior to the big banks.

There are, however, two things credit union people should take away from the survey results:

1. There is some halo effect going on here. I’m not surprised in the least to see higher satisfaction and higher advocacy (“Doing What is in Your Best Interest”) scores for credit unions. But significantly higher scores for “reps offer higher quality advice”, “reps have the expertise to handle your financial needs”, and “satisfaction with Internet banking”? OK, maybe I can give in a little on the first two of those criteria, but there are a lot of credit unions out there whose public Web sites are atrocities and whose authenticated site design and functionality is serious lacking. I suspect that many respondents are just giving their credit union a high score across the board regardless of their actual experience, as well as the opposite for some of the large banks.

2. Mobile banking scores. In the scheme of things, credit unions’ scores on mobile banking are hardly a cause for concern — 68% of respondents are satisfied, 12% dissatisfied. But in comparison to the scores on the criteria — where the percentage dissatisfied average between 2% and 3%, and the percentage are often in the mid- to high-80s — mobile banking might be a cause for concern.

Is mobile banking credit unions’ Achilles heel?

I’m coming to the conclusion that channels are segmentation tools. Sure, Seniors may use the Internet, but they still rely on branches — and the branch is probably the most influential channel impacting their satisfaction. Boomers are big users of the call center (as well as the Internet), and Gen Xers are big users of their banks’ and CUs’ web sites.

Gen Yers? Well, the mobile channel is becoming — if it isn’t already — their primary access channel. As (pretty much) every credit union in the US goes about trying to lower the average age of their member base by attracting Gen Yers, the mobile channel will likely be — if it isn’t already — the competitive battleground and point of differentiation. 

The challenge for credit unions is to look beyond mobile banking. Looking up account balances, transferring money between accounts, an even getting alerts are basic features. Every institution will have those capabilities before too long. 

What credit unions should be exploring and experimenting with are what I like to call “purely mobile” apps — capabilities like location awareness, augmented reality, and mobile payments that are available only through the mobile channel.

Public villains come and go. You don’t see too many articles about BP anymore. With time, banks won’t be the whipping boys they are today. 

Developing innovative mobile capabilities may very well be one way in which they get back into their customers’ — and the public’s — good graces. Not to mention a way for start-ups like Movenbank and Simple, or even firms like Google and Facebook , to offer banking-like products that compete with established banks and credit unions. 

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I hope the mobile banking scores in the Prime Performance study raise some discussions in credit unionland. In the meantime, congrats to CUs for kicking bank butt on the Prime Performance satisfaction survey.

JAN 10 UPDATE: Well, at least I now know that CUs aren’t ignoring the mobile opportunity. Check out this article titled Credit Unions Gear Up for Mobile Banking Explosion on the Credit Unions Online site. 

Posted by on January 9, 2012 in Credit Unions, Marketing, Mobile, Retail Banking and tagged , , , , .

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