Are Credit Unions Merging the Movement Out of Existence?


By Robert McGarvey


For CU2.0


The headline in American Banker screams: “Credit unions are bulking up via M&A — and banks are nervous.”

The story continued: “Since March…there have been three deals in which the credit union being acquired had more than $300 million in assets. And a New York investment banker said he is working on a fourth deal — with even more possibly on the way.

“Those deals threaten to create bigger, and more formidable, credit unions to compete against banks.”

The thesis, plainly, is that while mergers once were the exclusive province of generally small, dying credit unions, suddenly bigger ones are getting the urge to combine – and bankers should be trembling in their boots.

Word of caution: remember the source of this contention.  American Banker.  

Word of advice: file all this under fake news.

That’s a label I never thought I’d use but it just may fit in this instance.

According to American Banker, “nearly 670 credit union mergers took place between 2015 and 2017.”

That compares to 774 bank mergers in the same period, per American Banker.

The article – naturally – quotes a chorus of banking voices all of whom warn that the big bad credit unions are rushing to combine in order to better to gobble down the bankers’ cheese.  

The narrative is compelling. But fundamentally flawed.  

What is fact is that in the vast majority of cases, credit unions merge because one is grievously injured and there are pressures on a stronger credit union to do the right thing and take over the weakling.

Very occasionally, the weak institutions are large – think taxi medallions – but, generally, the weak are small, sub $100 million in assets and they find themselves unable to compete in technology and services and compliance with complex regulations increasingly try the talents and resources of tiny credit unions.

Meantime, numbers out of CUNA Mutual, by way of NCUA, in fact show that the number of mergers fell in 2017.  

And, yep, most mergers involve tiny credit unions. In February, said NCUA, there were 9 mergers and the average asset size was $13 million.

Personally I believe many more credit unions will close (typically by merging out of existence) in the next 10 years. Possibly  as many as 2000, roughly one-third of today’s 5700+. But most will be small. A few larger institutions will shutter due to grievously bad operational decisions (such as an over concentration in taxi medallion loans) but they will be the exception.

Also exceptional – extremely – will be mergers of two large, healthy credit unions.

On paper merging Navy and PenFed  might make a kind of sense – to better compete with USAA and the money center banks – but I believe my chances of winning PowerBall Friday night are significantly better than the odds of that merger occurring.

Five years ago in Credit Union Times, I wrote a story headlined: “Mergers Will Continue to Cull the CU Herd.”

Not much has changed since then, except many hundreds of credit unions have merged out of existence since 2013.  

The article picked a number – $100 million – as a kind of arbitrary benchmark for the size a credit union needed in order to survive the turbulence that lay ahead.  But it cited other experts touting bigger numbers, as much as $500 million in assets.

The reality is that there is no known minimum size. A lot depends upon the ingenuity of the top managers, the energy of the line staff, and the passion of the FOM. If enough members want their small credit union to live, it will. Simple as that.

When they don’t, it won’t.

But it certainly is sheer rubbish to insist that there is a wave of mergers of big, healthy credit unions and this is threatening the survival of community banks.

What’s threatening their survival is the same as what’s threatening many mid sized and larger credit unions: the growing strength of money center banks and, especially, the rise of non banks.

It’s idiocy for bankers to worry about credit union mergers.  Worry about Quicken Loans is my advice. Or any of many non bank car loans companies. Or any of many non bank p2p players.  

Really. Just plain idiocy to gnash teeth about credit union mergers threatening banks.

But it makes good fake news headlines, doesn’t it?


A Nation of Wimps? The State of Corporate Travel Policies


By Robert McGarvey


When the travel masters at your organization issue pages of rules and restrictions is your only question: how high should I jump?

Now we know the answer. American Express has dumped piles of data on us in its latest Traveler 360, a 20+  page overview of who we are, what we care about, and, yes, how compliant we are with corporate policies.

What shocks me in the Amex data is how docile we are.  We really, really are.

Me, too. I’m generally compliant, except when the policies are asinine – like one company that capped hotel rates at $300/night and the closest I could find in Manhattan during UN General Assembly week was north of $400. I just ignored that pennypinching, booked the pricier hotel, and don’t recall hearing boo in protest.

But on the big stuff – such as flying coach (but never basic economy) – I am generally on board.

71% of US travelers, by the way, told Amex their company has a business travel policy.  That is pretty much true around the globe. In India, 90% say their company does. In German, 67% do.  

Where big differences arise is in employee understanding of the policy. In France, 59% say their company does not have a clear policy on travel and expense reporting.  In Germany it’s 58%. In the UK it’s 53%,

Guess what it is in the US and know you will almost certainly be wrong.

It’s a piddly 21% who say their company policy is not clear.

Why is the US so different? Amex takes a stab at an explanation: “One potential explanation is necessity, as 3 out of 4 of US travelers also report that their companies strictly enforce said policies.”

The US also is a laggard in the number of travelers who admit to “going rogue” in business travel. Just 40% of us admit to doing so.  In Australia it’s 52%. Stunningly, in Germany, a country well known for its rules compliance, 67% say they go rogue.

The usual reason for ignoring organizational policies: to stay closer to an event or meeting. And, yeah, I’ve challenged hotel bookings on the grounds of inconvenience and can’t recall a time when the organization didn’t let me stay where I chose.  (It probably helps that I have scant interest in hotel loyalty programs and can’t be accused of staying at a preferred place just to accumulate points.)  

Amex also said that we ignore policy when booking a hotel to stay in a safer location, and that is especially true of Americans and French.

Have you ever done that? I did it once when I was booked into the Europa Hotel in Belfast – known during the  “troubles” as the world’s most bombed hotel – and I declined.  I booked myself into the family owned Wellington Park Hotel – never bombed and my personal go-to on visits to Belfast in the violent years. Oddly enough, the event organizer followed up and rebooked some attendees into the Wellington Park as well.  

We in the US differ from our international compatriots on a number of reasons for booking hotels out of policy.  Just 49% of us will do so to have better business lounge access. 87% of Brits will do it.

Just 52% of us say we book out of policy because we prefer the hotels.  84% of Brits will do it.

55% of us say we will fly another airline – not in the policy – because we like it better.  87% of Brits say they will ignore policy to book a preferred carrier.

71% of us say will book in a hotel not in the policy because it’s better quality.  90% of Brits will.

What can organizations do to get more compliance with travel policies? Amex said: “Since having a strict policy enforcement approach does not work for all countries or companies, offering incentives could be a way to change traveler behavior. Travelers responded favorably to things like having a percentage of the money they saved by booking within policy put into their paycheck and receiving bonus vacation days or paid time off.”

Amex also insisted: “The more travelers understand their company travel policy and the benefits that are in it for them, the more they will comply.”

If you were bribed, would you be even more compliant?  Personally I don’t think it would make a whit of difference to me.  But exactly what bribe is on offer?


The Reinvention of CO-OP: News from Think18


By Robert McGarvey


For CU2.0


One message came through loudly at the recent CO-OP Think18 conference in Phoenix: this is not your father’s CO-OP.

“We are in a revolution inside CO-OP,” said Todd Clark, who has logged two years as CEO of the nation’s largest CUSO.  

“We are sprinting towards change.  We are driving this hard,” said Samantha Paxson, CO-OP’s chief marketing and experience officer.

“We are positioning CO-OP to move forward,” agreed Nick Calcanes, CO-OP’s chief information officer who just may be the busiest CO-OP executive because so much of what is planned is in the digital arena, an area where CO-OP had proceeded cautiously in much of this century, a time when big banks – and at least some big credit unions – had already doubled down on digital.

It was about time for CO-OP to take the digital plunge. And now executive after executive at Think18 sang from the same hymnal: CO-OP is in the midst of a digital transformation, driven by the perception that the credit union movement needs this, that it needs a leader that draws on the sharing and communal culture that distinguishes credit unions from their for profit brethren banks.

That leader, said CO-OP, will be it.  “Our goal is to be a world class technology company,” said Calcanes.  

These changes won’t happen with the snap of the fingers.  “Digital transformation is a continuous process. You don’t just wake up one morning and go ‘We did it! We’re transformed,’” warned James Wester, research director for IDC Financial Insights, a Think18 mainstage speaker. His message was aimed at the audience – executives from some 400 credit unions – as they contemplate their own organization’s transformation but it could just as well be an invocation to look at CO-OP’s transformation with a measure of patience.

Just what is going on at CO-OP which most in the credit union universe know for its 30,000+ fee-free ATM network and its shared branching network which consists of 5600 credit union branches where members at a participating credit union can walk into another credit union’s branch and do many of the transactions they can do at their home credit union? Many experts have cited these cooperative ventures as a credit union secret sauce that gives members access to a bigger ATM fleet (twice the size of Bank of America’s and Chase’s) and a branch system second only to Wells Fargo’s 6000+.

Count them as great achievements. But – realistically – it is the tech frontier where the financial services wars will be fought and won or lost.  

“The future of banking will be mobile,” said futurist Thomas Frey, another mainstage speaker. He added that “over 20% of branches will disappear by 2022. We are now closing three branches every day. That number will go up.”

CO-OP, under Clark, knows this.  And it has taken some bold steps — for instance, the acquisition of all of The Members Group from the Iowa Credit Union League for $100 million in 2017. (CO-OP had been a minority owner.) That instantly gave CO-OP significant digital payments credibility.  It also triggered big changes inside CO-OP because Clark’s aim with TMG has been to integrate it into CO-OP, to meld the TMG culture in with the more traditional CO-OP culture. In the acquisition press release, he said: “We are creating a new CO-OP that embraces technology and best-in-class service delivery to create a seamless, secure and personalized experience for our clients and their members, however they choose to interact with their credit union using a CO-OP product.”

Specifics about that vision have been scant, however – until Think18 where CO-OP’s leadership got busy communicating significant substance about the CUSO’s way forward. Understand: the CO-OP reinvention is a work in progress.  But a takeaway from Think18 is that CO-OP’s leadership is promising that the $424 million in revenues CUSO is thinking big – and about what will be needed for credit unions to thrive tomorrow.

Already there is big news about a new fraud initiative from CO-OP – as well as good news about Zelle, the p2p payment tool that last year processed a staggering $75 billion, twice what fintech darling Venmo moved.  

Ab0ut Zelle – which already has a handful of credit unions in its go live queue – Clark said the company is eager to enroll credit unions but it wants all but the biggest to go through a third party. Enter CO-OP.  “CO-OP will be an intermediary for credit unions,” said Clark.

The industry understands this from Apple Pay. Few credit unions – possibly only Navy Federal – worked directly with Apple. Others went through third parties such as TMG, CO-OP, Fiserv, and First Data.  Expect similar with Zelle but, stressed Clark, Zelle is a no brainer. “P2p is an important engagement channel,” he stressed and with its mushrooming name recognition, Zelle is becoming a tool digitally aware credit unions want to offer members.  

Bigger, more tangible news from CO-OP revolves around what it calls COOPER which CO-OP described this way in a press statement: “COOPER is CO-OP’s largest technology initiative, in which the company is investing millions of dollars to provide state-of-the-art machine learning and artificial intelligence to its client credit unions across the CO-OP ecosystem.”

Clark added: “COOPER is a major piece in our strategy to bring greater security throughout our products and services, while providing the most seamless experience to credit union members. COOPER will allow us to constantly improve upon the fight against fraud by enabling the understanding of huge amounts of data and detecting complex patterns rapidly.”

COOPER is built around what’s called machine learning which means it’s a smart system that keeps on learning.  It’s based on technology developed by machine learning company Feedzai, which has focused on fighting fraud in financial services and which counts First Data among its clients.

Clark said COOPER will be rolled out to the shared branching system in June. Wider roll outs follow.

“Credit unions are waiting for what we are doing to make a difference for them,” said Clark – and he clearly is betting that COOPER will be an answer to the worried prayers of many credit union executives who increasingly face armies of very smart, very skilled fraudsters.  

Fotis Konstantinidis, a senior vice president at CO-OP charged with overseeing fraud products, elaborated:  “Effective fraud prevention is a competitive issue for FIs. Our ultimate goal is to democratize AI and give credit unions the technology to compete with big banks.”

Another CO-OP initiative – still taking shape – was hinted at by Clark. He wants to put CO-OP to work monetizing the huge data lakes, as he called them, that CO-OP and many credit unions already have.  Said Clark: “The data we have can give you a real picture of what your member is doing if you use the data correctly.”

The initial steps are using data to attack fraud (a la Cooper).

Then it may get a lot more interesting.

“The power of this data is amazing,” said Clark.

This kind of data is how Netflix knows what you want to watch before you do.  It’s how Amazon knows what you need to buy before you do. Trust this: big banks have been all over this for at least five years. They are getting very good at knowing more about end-users than they may in fact know about themselves.

Credit unions – the vast majority – are not on this bus. Many don’t even know it’s out there.

Your future may hinge on getting smart about the data you have.  The answers you need already are there, if you know where to look.

CO-OP believes it is in a position to be the credit union wagon master on the trail through this digital wilderness of big data. In this bargain, what CO-OP has, via its partner credit unions, is lots of info about what we spend on, how much money we have, what our interests are, that’s a good place to be.

“We can use data to optimize member engagement, to anticipate their needs and deliver what they want before they know they want it,” said Paxson.

CO-OP has big dreams about how to monetize those data lakes so watch this space. The big data play may be the most transformative initiative at CO-OP.

There’s more percolating at CO-OP. Matt Maguire, chief data officer, noted that what credit unions members want – want all of us want – is what he called “a GAFA experience.”

He suggested that CO-OP wants to play a lead role in helping credit unions rise to the excellence of GAFA.

Because that just may be the bare necessity needed for a financial institution to thrive in the coming years of the 21st century.

Don’t know what GAFA is?  Look it up. Because just that is a perfectly 21st century gambit, and not bothering is just so 20th century.

Back at CO-OP chief marketer Samantha Paxson noted, “Amazon is our muse. It’s critical that we behave like Amazon.”


What’s the credit union response to CO-OP’s plans? Maybe the most succinct view belonged to Chuck Purvis, CEO of Coastal Federal in North Carolina, who said: “CO-OP has scale and reach that will entice fintechs to work with them.”

That’s key because, frankly, outside help – for instance, from companies like Feedzai in machine learning – will be needed. And CO-OP is getting that help.  The new CO-OP plainly has signaled that it will reach out to leaders and experts in order to better meet the needs of CO-OP members and their members.

It’s also moving faster. And that now is critical.

Warned Purvis: “If we don’t develop urgency about change we won’t be around.  We need to embrace change.”

The clock is ticking, it ticks for you.


Hyatt Thinks It Knows Business Travelers – Does It?


by Robert McGarvey


The more I learn from hotels about what they say they know about business travelers, the more I am skeptical, indeed the more I think they know bupkis.

A proof comes via Hyatt which, working with Harris Poll which conducted an online survey of 1300 adults who have traveled for business in the last year, has dug deep into what makes business travelers tick – so now does it really know you?  The focus was on what motivates business travelers and what we learn during our travels.  The hotel company that really gets that will have an edge. Does Hyatt?

You be the judge.

Among the findings:

  • 77% of US business travelers say business travel has helped them communicate more successfully with different types of people. The number varies by nationality. 95% of Indians, for instance, say similar.  Is this true for you? For me, sure, but I don’t see this as a rocket science insight. Anything that gets us out and about and interacting with a range of other people helps our communication skills, I think.
  • 68% of business travelers say business travel inclines them to be more empathetic with others, says Hyatt. As for me, nah, I don’t believe it. I see so much astounding rudeness on the road (mea culpa, sometimes it’s me who is rude).  I don’t see increased empathy. Look at the scrum for overhead storage space in coach. Are the combatants – many of whom are business travelers – more empathetic?
  • 59% of international business travelers see challenges as opportunities to grow.  OK, sure, but that mindset is standard for anybody who wants to get ahead.  Get handed lemons and the successful person thinks lemonade.  I’m actually surprised this percentage is only 59%. And just because we see something as an opportunity to grow doesn’t mean we applaud it. Or that we grow.
  • 92% of employed US business travelers are inclined to advance their careers.  Duh? You thought people went on the road because they like too small coach seats, lumpy and strange mattresses, and gallons of bad coffee?  Almost everybody I’ve known who travels a lot for business does it to advance. They suffer the hotels they stay in as a means to an end.
  • More business travelers, says Hyatt, are driven by creating a better life for their families (48%) than by receiving praise or recognition at work (33%). No real surprise here.
  • 77% of US business travelers believe they have learned skills that can help them in their personal life. Agreed. I have learned everything from how to more intelligently order in a posh sushi bar to how to calm an angry colleague.  It all adds up and business skills blur with personal. I am glad for the business travel I’ve had, very glad, even if there were many moments when I was miserable and other moments when I was enraged.  And I do keep working on skills to help me better cope with road stresses.

The survey also dug a bit into our on the road habits – somewhat randomly – and here Hyatt and I go in very different directions.

  • 22% think wearing pajamas on conference calls made from a hotel room is a major perk.  Really? Do you bring pj’s in your travel bag? I cannot recall ever doing it.  I have worn hotel robes of course and made phone calls wearing them but a perk that isn’t.  Not to me. It’s just a convenience. And I don’t think I have ever packed pj’s for a business trip.
  • 27% say they binge watch TV shows in hotel rooms.  I never have. As in never. I have at home, occasionally (most recently: Good Girls Revolt on Amazon).  But other than watching news shows, I don’t recall watching any TV in hotel rooms. None. Nor anything on my iPad. Trips just have very busy to-do lists.
  • 26% of business travelers indulge with a stiff drink at the hotel bar. In my case: guilty as charged in decades past, not so much now, not because I am older but because trips just seem busier.  Now at night I go back to my room and write up what happened that day, typically because clients who are paying for the travel want to know what I’m learning and they want to know now.

Add it up and I’m not impressed with the Hyatt findings. Are you? They could have gotten equally potent insights with a few Tarot card readings.

Hyatt, incidentally, in the fine print at the bottom of its press release about the poll makes this comment: “These online surveys are not based on a probability sample, and therefore, no estimate of theoretical sampling error can be calculated.”



News Flash: Mobile Banking Apps Now Among the Most Used


By Robert McGarvey


For Credit Union 2.0


The Citi 2018 Mobile Banking Study told us what we should already have known: consumers love a decent mobile banking app.  And they use it a lot.

How often? Citi said that mobile banking apps come in third, after only social media apps and weather.

That’s based upon a survey of 2000 US adults.

How often do your members use your app?

The question is not theoretical.  It’s in your face, life and death.  If your members don’t like your app – and I personally dislike the apps used at the two credit unions I belong to – what’s your future look like?

Almost half – 46% of consumers – told Citi they have increased their mobile usage in the past year.  Nearly two thirds of Millennials have done same. Expect that number to keep trending higher. As more of us discover that we can easily do most routine banking chores on a phone, we’ll migrate there – especially if we get the message that generally a mobile phone banking session (via cellular) is more secure than the same session on a Windows computer connected to WiFi.

Citi threw more numbers at us. 8 out of 10 of us use mobile banking nine days a month. One-third of us mobile bank 10 or more times a month.

91% of us prefer mobile banking over a visit to a branch – and don’t expect that number to decrease. Branches are dead, except for special purposes. If a consumer needs a wire transfer as part of a home purchase, sure, he/she may go to a branch (I did exactly that five years ago); it just seems simpler.  But for routine banking chores – including check deposit – it is vastly more time efficient to do it in one’s home, work, or car.

Personally I just deposited three checks via MRDC and transferred money from one account to another, all done at my desk, all done within five minutes. Going to a nearby branch would have eaten up at least 30 minutes and who has time for that?

Not many of us anymore.

“Mobile banking usage is skyrocketing as more consumers experience the benefits of greater convenience, speed and financial insights driven by new app features and upgrades,” said Alice Milligan, Chief Digital Client Experience Officer, U.S. Consumer Bank, Citi, in a press statement. “Over the past year we’ve witnessed this increase in engagement first-hand, with mobile usage in North America increasing by almost 25 percent, and we don’t see this trend slowing down any time soon.”

Mobile banking users also told Citi they feel more in control of their finances.  95% believe they know their exact balance right now, compared to 85% of non users.  Citi elaborated: “Nine out of ten (91 percent) have experienced additional positive outcomes from mobile banking, including greater awareness of their financial situation (62 percent); fewer concerns about managing their finances (41 percent) and a better understanding of the services offered by their bank (38 percent).”

Now for the bad news for you.  Read this: “Milligan added: ‘At Citi, we launched over 1,000 digital features in the U.S. in 2017, a nearly 500 percent increase over the previous year, and we continue to reimagine the client experience through innovative capabilities that deliver ease and simplicity for our cardmembers. In recent months, we have introduced a number of features to further enhance protection and security, such as face ID sign-on for the Citi Mobile App on iPhone X and email notifications when we detect unknown attempts to access customers’ accounts.’”

How fast are your vendors upgrading your apps?  Judging by the ones at my credit unions I’d say not frequently.

Not nearly often enough.  Not nearly enough to keep pace with the likes of Citi and Chase.

Can you say better about your apps?

You need to be able to,  That’s the reality for today.

When I talk with senior executives at many credit unions a common complaint about their apps vendors is that upgrades come too slowly.  It’s rare that I don’t hear that complaint.

But just maybe it’s no longer good enough just to complain.

Take action to make faster – richer – upgrades a regular reality. That’s how to survive today.

How Many Airline Credit Cards Are In Your Wallet?

By Robert McGarvey


The headline on Ron Lieber’s New York Times column grabbed me:  Why Airline Credit Cards Have an Enduring Appeal.  

That’s because – although I’ve consciously shed credit cards in recent years – I presently have two airline credit cards and often find myself eyeing a third.

The reason: as I move into a post loyalty world where I have status on no carrier, airline credit cards give me many things that I used to get when I had status.  With them in hand, I feel no pain at the loss of elite perks because I am buying what I need with the airline plastic.

Airlines, in their greedy rush to grab up non traditional revenues streams such as credit cards, have given us all a backdoor that lets us avoid scrambling for elite status but still enjoy all the perks.

Of course I at first balked at adding airline plastic to my wallet. Then a reasonable review of the perks persuaded me of my errors.

Lieber said that at first he too was skeptical about loud claims for successes of airline credit cards.  But then “I looked in my wallet. After years of fealty to my trusty Starwood Preferred Guest credit card, I, too, gave in last year and picked up cards from American Airlines and Delta.”

Me, when I lived in Jersey City I had only a Continental (United) card because at EWR that was plenty. In Phoenix, where I now live, no carrier has similar hegemony so I have the United card, supplemented by an American Airlines card, and I frequently eye the Southwestern card but have thus far resisted.

An irony in all this, and reported on by Lieber, is that we are in an era of skepticism about the value of airline miles.  When you can earn them doing just about anything and when carriers frequently make flight rewards seemingly forever out of reach, there are plenty of reasons to view miles with a jaundiced eye.

But the card issuers and airlines know that.  Yes, the cards accumulate miles on purchases.  But they do a lot more. Lieber quoted Brian Kelly, aka The Points Guy, on what really matters with airline cards: “As points [miles] become more confusing and devalued, people turn to perks — and they are easy to see and easy to value.”

Kelly continued: “The issuers are doubling down on perks, and it appears to be paying off.”

Talk about coincidence. This morning’s mail brought a thick envelope from United/Chase regarding changes in my card -the basic Explorer Card ($95 annual fee) – and there’s an avalanche of new perks, effective June 1.

Continuing benefits include: a free checked bag; 2 United Club passes annually; priority boarding; no foreign transaction fees; 2 miles per $1 spent on United purchases; 1 mile per $1 on other purchases.

I always buy United tickets on this card, which gives a mileage bonus. And I am in it because of the priority boarding which means that just about always overhead bin space is available.

New benefits include: 2 miles per $1 spent at restaurants; 2 miles per $1 spent on hotel accommodations; 25% back as inflight purchases (food, beverage, WiFi) on United; and reimbursement for Global Entry or TSA Pre.

Count me as loving the Global Entry reimbursement – I’ll sign up tout suite.  And I like the 25% refund on inflight purchases.

That $95 fee pays itself back lots of ways. Nope, I will not use the card anywhere except where there’s a direct United tie-in. But, in those cases, I now find it indispensable. 

Ditto for the $95  Barclays/American Airline Aviator card.  Its benefits aren’t quite as rich – no club passes, for instance, and no reimbursement for TSA Pre or Global Entry.

But the AA card offers priority boarding, free checked bag, 25% credit for inflight purchases, a 7500 miles discount on certain rewards trips, and trip cancellation/interruption coverage in at least some cases. There’s also a 2X mileage award for American Airlines purchases and 1X on other purchases.

I’ll be surprised if Barclays too doesn’t sweeten the pot with more perks for cardholders soon.  

Word of advice: if you have an airline card, check the perks. They may well have recently been upgraded (the reimbursement for Global Entry on the United card was news to me).

Do you need an airline card? My advice is – if you don’t have high level elite status with your primary airline – the $95 a basic card costs could well be money well spent. Check the benefits for your airline – the differences between the Chase and Barclays cards are big enough to matter for some travelers. All airline cards are not created equal.

And if you see $95 in benefits for the card you want, take the plunge.

Most cards also waive the first year fee and throw a basket of free miles at new cardholders (typically 40,000 or a little more).

To me, this is a no brainer.

But your math may well differ.

The Vanishing Credit Union Gets Bigger


By Robert McGarvey


For CU2.0


The April CUNA Mutual Trends Report drops a paradoxical bomb that leaves us confused: are credit unions getting bigger? Or are they vanishing?

First the good news: more of us belong to credit unions, reported CUNA Mutual.  “Credit union membership growth was on a tear during the first two months of 2018, adding 850,000 new memberships versus the 650,000 reported in the first two months of 2017.”

CUNA Mutual went on: “Credit unions should expect membership growth to exceed 3.5% in 2018. This will push the total number of credit union memberships to 117.6 million by year end, which is equal to 33% of the total U.S. population.”

Roll back to 1960 and, per NCUA data, just 6 million of us belonged to federal credit unions.  A similar number belonged to state chartered institutions. That’s 12 million total, out of a US population of 180 million.  That’s about 6.7% of us, far below today’s one in three.

Plainly, a lot more of us belong to credit unions now, probably because of expanding FOMs and also because many credit unions offer tempting deals – for used car loans, for instance, and in some markets home mortgages – that bring in members at least for those specific products.

More credit unions also are working smarter and better at communicating that their membership is pretty much open to all. There remain some of us who believe they can’t join a credit union because they don’t belong to a union – but those numbers are shrinking.

Member growth is good.  But do the CUNA Mutual data mean the credit union movement should pop open champagne and toast the good times?

Maybe not.

At least not just yet.  There’s more to digest in the CUNA Mutual data dump.

Toward the end of the report, CUNA Mutual serves up these disturbing numbers: “As of February 2018, CUNA estimates 5,757 credit unions are in operation, down 240 from February 2017. The pace of consolidation in the credit union system is accelerating due to the following factors: retiring baby boomer CEOs, rising regulatory/compliance burdens, low net interest margins, rising concerns over scale and operating efficiency, rising competitive pressures, and members’ demand for ever more products, services and access channels. NCUA’s Insurance Report of Activity showed 9 mergers – 7 mergers were due to ‘expanded services,’ 1 for ‘poor financial conditions,’ and one for ‘lack of growth’ – were approved in February with a merging credit union average asset size of $13 million. This is a fewer than the number of mergers reported in February 2016 with a merging credit union average asset size of $10 million. We are forecasting the number of credit unions will decline 250 in 2018.”

Do the math. If the current rate of consolidation continues, by 2028 there will be a bit over 3000 credit unions.

In 1960 there were about 10,000 federally chartered credit unions, per NCUA.  

As for the membership growth, CUNA Mutual sees it continuing, sort of.  “The membership gain was partly driven by the 502,000 new jobs created during January and February, according to the Bureau of Labor Statistics, and by the tremendous growth in credit union indirect auto lending. During the last few years credit union membership growth has been highly correlated with job creation with the seasonally adjusted annualized growth rate exceeding 4% over the last year. With job growth expected to slow slightly in 2018 to 2.2 million, we forecast credit unions to pick-up an additional 4.0 million members.”  (Emphasis added.)

Many credit union executives, at least privately, of course grumble about indirect car loans because the “members” they bring in often limit their memberships to the car loan and they aren’t especially profitable.

Add this up and what’s the meaning? Credit unions need to do a much better job of expanding their relationships with members.  It is great to have an expanding number of members, it is not so great not to be creating more solvent credit unions.

The truly good news is that if one in three Americans belong to a credit union that is plenty of bulk to use to seek to grow the institutions organically.  For instance: get that indirect car loan borrower using a sharedraft account and a credit card and the credit union is onto something wonderful.

The alternative is to join the thundering herd of dying credit unions, many of which are like wildebeest in the Tanzanian Great Migration, there essentially to be picked off by predators.

Parse the CUNA Mutual data and just maybe the message is a double edged sword: grow membership, especially the right membership, and success may lie ahead. Or shrink into extinction.

That is the stark choice in front of today’s credit union executives.

Why Hotel Loyalty Programs Miss Our Marks


By Robert McGarvey


Oracle has weighed in with a data rich report that basically says hoteliers think they know about our loyalties but they don’t know bupkis.  Said Oracle: “We’ve uncovered a surprising divide in perception between how businesses view loyalty programs and what guests really think.”

Put another way: what we have here is failure to communicate.

And that’s at the root of why, so often, hoteliers seem oblivious to what even frequent guests honestly want from their rooms.  

So often hoteliers seem to miss the obvious.  That’s a conclusion from the Oracle data, which explores loyalty programs and also our views on social influencers and hotel tech. It’s a mixed bag of data but the one consistent reality is that we are misunderstood by hoteliers.

What do hoteliers get wrong about us?

Oracle starts off by tossing this hand grenade: “Given the choice to revoke their personal information from hotel brands, more than 80% of respondents said they would. Yet loyalty programs are at the heart of hoteliers’ commercial strategy.”

Oracle said “misconception 1” on the part of hoteliers is thinking we give much of a hoot about their loyalty programs in the first place.  Said Oracle: “Hotels think that guests would openly sign up to every loyalty program…guests are much more selective, only signing up to programs with real relevance.”

61% of hoteliers think guests sign up for every program.  Just 24% of us say we do. Hoteliers think 6% of us rarely join any program. But 30% of us say we rarely do.

Count me in that group who often decline to sign up.  Why bother when there is nothing on offer that interests me?

Hoteliers think we covet the possibility of room upgrades and rolling, 24 hour check in – the kinds of perks doled out to loyal guests.  Do we?

Said Oracle: “Guests, however, are far less engaged in the programs than hoteliers realize.”

54% of hoteliers say their offers to loyal guests are “mostly relevant.”  But only 22% of us say they are. And 39% of us say offers are “rarely relevant.”  But just 6% of hoteliers think their offers are rarely relevant.

Those are wide perception gaps.  And probably the why of our hotel discontents.

The research veers into areas where I might not agree with its findings – do you?  For instance, 37% of us say “Hoteliers used and recommended by social media influencers are more trustworthy than those recommended by celebrities.”

And 32% of us said that social media influencers reviews are more trustworthy than generic customer reviews (think TripAdvisor).  

Are you on board with this perception of influencers – keeping in mind that they work for money and further keeping in mind that the Federal Trade Commission wants their postings clearly labeled as ads.

I’m not putting influencers down, just suggesting that the rush to embrace is premature. Some are very credible. Some aren’t.

As for hotel loyalty programs, what do we want from them? Oracle says – no surprise here – that we want more personalized offers.  In fact 90% say they find this appealing: “Personalized service from hotel staff that understand my preferences and show me relevant excursions, recommendations and offers.”

65% want offers based upon our past purchase history.

86% say they are willing to complete a questionnaire so that offers can in fact be more precisely targeted.

What we are saying is listen to us and we’ll tell you how to make these loyalty programs work better. Will hoteliers listen? That is the question.

As for hotel tech, 87% of us want to be able to check out rooms with virtual reality before checking in. Just 73% are keen to use Alexa or Siri in the room. Count me as a huge Alexa fan and while I own a Google Daydream I don’t recall the last time I fired it up.  I certainly wouldn’t just to “walk” through a hotel room before booking.  Would you?

Add this up and – still – we are left with a divide between what hoteliers think we want and what we truly want.  What’s strange is that hoteliers have a lot of data at their disposal – especially regarding loyal, frequent guests – and yet they just don’t seem to be using it.

That just may be the most baffling reality about 2018 hotels.  They have what they need to know. They just don’t know it.




Can You Trust Zelle?

By Robert McGarvey


Big banks have rushed to embrace Zelle – the new breed person to person payment tool – and credit unions too are joining the queue.

And now there is news about rising rates of fraud and criminality involving Zelle.

Time for a rethink?

First off, why Zelle?  Part of the answer is in the immensity of its primary backers, such as Chase, Bank of America, Citi, Capital One, Wells Fargo, USAA, and a handful of credit unions including BECU, First Tech, Schools First, Star One. Many more institutions – credit unions included – are in the queue to go live.

Zelle makes it very easy to send money to anyone with an email account or mobile phone number and a bank account.  No Zelle account is needed.

Some years ago I tried an experiment where I sent small payments to people using services such as Dwolla and the redemption rate was about zero. People asked me if I’d been co-opted by Nigerian scammers.  They just did not want to pick up money involving a service they hadn’t heard of.

Zelle is hard to not have heard of. A lot of TV ads and digital ads support it.

And then there’s how easy it is to get the cash.

Consider this a death warning to legacy but clunky services such as PopMoney.

But the trigger that launched Zelle was the PayPal fueled fire around Venmo which, out of nowhere, had emerged as the p2p tool of choice.  Bankers had snorted at tools like PopMoney but Venmo was different – users liked it, it had fintech heritage, and suddenly p2p was gaining the kind of enthusiasm many had predicted for it but that had stubbornly not materialized.

Bankers decided they needed their own weapon and thus Zelle, which in 2017 moved an estimated $75 billion, twice as much as Venmo, and the scariest bit is that this is plainly early days for Zelle.  Thought of a trillion dollar market is not far-fetched. Pymnts offered this dazzling buffet of Zelle stats: “Earlier this year, Zelle revealed that on average, close to 100,000 customers signed up each day for 2017. It also said it processed more than 247 million payments last year, which marks a 45 percent jump from 2016. It handled a total of $75 billion in peer-to-peer (P2P) payments in 2017, a significant increase from the $55 billion it made the year before.”

And now there are the stories about Zelle as a platform for fraudsters. The New York Times dropped the biggest bomb in a piece that began this way: “Big banks are making it easy to zap money to your friends. Maybe too easy.”

The Times continued: “Interviews with more than two dozen customers who had their money stolen through Zelle illustrate the weaknesses that criminals are using in targeting the network. While all financial systems are susceptible to fraud, aspects of Zelle’s design, like not always notifying customers when money is transferred — some banks do; others don’t — have contributed to the system’s vulnerability.”

Time to re-think Zelle? Not so fast.  Three years ago I wrote a piece for The Street headlined: “Are Peer-to-Peer Money Transfer Apps Unsafe to Use? Worries Focus on Venmo.”

The story started this way: “The Internet has been abuzz for a couple weeks with chatter about documented cases of theft of money from accounts of users of Venmo, the p2p (peer-to-peer) money transfer app that had been the the fast growing darling of Millennials.

One user, in a story reported in Slate, had $2,850 looted from a Chase checking account.”

Sound familiar? Indeed, it sounds exactly like the Zelle growing pains.  Regarding Venmo back then, PayPal told me they had moved fast to put in more security. File this under problem solved was their message.

Similar is getting said about Zelle.  Lou Anne Alexander, head of payments at Early Warning which runs Zelle, told the New York Times: “When there is a problem, we and the banks are proactive. It’s not something we’re putting our heads in the sand about.”

A lot is riding on Zelle for the banks and credit unions that embrace it.

There’s no present reason for a financial institution to panic about Zelle. If fraud reports continue and multiply, by all means, get worried. But for now this all sounds like growing pains and there are enough grown ups in the room to put in the needed fixes.

Color me optimistic.