Will TSA Search The Content of Your Electronic Devices on Domestic Flights?


By Robert McGarvey


The ACLU has now filed suit against TSA, claiming that agents are searching the devices of domestic travelers.

“Domestic” is the key word.  For some years, the US government – along with many foreign governments – has searched devices owned by international travelers.    That’s handled by US Customs and Border Patrol agents and, in 2017, searches were in fact up 60% from 2016.

But the total number of searches in 2017 hit only 30,200.  Customs, by the way, has a clear right to search such devices – only diplomats are excepted – and it can search people arriving or departing, US citizens as well as foreign nationals.

About 80% of searches are on devices of non US citizens.

And, really, not many people are searched.  0.0007 of international travelers in 2017.

Domestic travel searches of devices is an entirely different matter.

And I know many very senior executives who sometimes travel with highly confidential documents – pertaining to merger and acquisition targets, for example – who would freak out if they feared their documents might have been scanned in a TSA search. And maybe they could have been.  

There’s a lot we just don’t know about domestic data searches.

For what it’s worth, TSA denies it conducts searches: “TSA does not search the contents of electronic devices,” a TSA executive told The Guardian.  

ACLU has a different perspective.  “We’ve received reports of passengers on purely domestic flights having their phones and laptops searched, and the takeaway is that TSA has been taking these items from people without providing any reason why,” staff attorney Vasudha Talla told the Guardian. 

One fact: I personally don’t give much of a hoot if TSA wants to search my devices. Not personally. But I do care a great deal if civil liberties are trampled upon and, per the ACLU, that’s exactly what is occuring.

The ACLU staff lawyer, in a press statement, elaborated: “TSA is searching the electronic devices of domestic passengers, but without offering any reason for the search,” said Talla. “We don’t know why the government is singling out some passengers, and we don’t know what exactly TSA is searching on the devices. Our phones and laptops contain very personal information, and the federal government should not be digging through our digital data without a warrant.”

As far back as July 2017, TSA in fact did issue some details in a press statement:As new procedures are phased in, TSA officers will begin to ask travelers to remove electronics larger than a cell phone from their carry-on bags and place them in a bin with nothing on top or below, similar to how laptops have been screened for years. This simple step helps TSA officers obtain a clearer X-ray image.”

Notice the phrase:  “similar to how laptops have been screened for years.”  I recall the days when , occasionally, TSA would ask a traveler to remove a laptop from a bag and boot it up. I recall sidelining a computer with a bad battery because it couldn’t reliably perform that chore.  I doubtless grumbled…but it didn’t bother me particularly.

What about today? And the apparent entry of TSA into device data searches? The ACLU suit fingers the hottest button: “the federal government’s policies on searching electronic devices of domestic air passengers remains shrouded in secrecy.”

Thus the ACLU suit.

ACLU, by the way, said it had previously filed Freedom of Information Act demands for data from TSA but the agency had ignored those filings.

The US Customs and Border Protection has issued a detailed, 12 page report on its search of devices of international travelers.  It’s extensive and if you have questions, probably the answers are in this January 2018 document.

TSA, by contrast, is opaque.  Per the ACLU suit: “TSA has not made publicly available any policies or procedures governing searches of electronic devices, especially those held by passengers engaged in purely domestic air travel. As such, the public is unaware of the legal basis for TSA’s searches of electronic devices of passengers not presenting themselves at the border and flying on a domestic flight. Further, the public is unaware of TSA’s policies and procedures for advanced or forensic searches, in which external equipment is used to search, examine, or extract data from passengers’ electronic devices and SIM cards. And the public has no knowledge of TSA’s policies and procedures relating to seizure of electronic devices, retention or destruction of data resident on those devices, or use of the device to access data held on a ‘cloud’ or elsewhere.”

Question: if you have a confidential document, how can you shield it from TSA? I’m guessing if it resides in the cloud, not on the device, you might be good to go. But that’s just a guess.

Question: do you need to start carrying sanitized devices on domestic flights – and that’s been the advice of corporate security for international travelers for as long as I’ve covered the space.

There’s just a lot savvy business travelers need to know to keep organizational secrets safe – and right now we just don’t know all we need to know to make shrewd decisions.  Maybe the ACLU suit will shed the light that’s needed.

At least we can hope.


Payday Loans and Your Credit Union


By Robert McGarvey

For Credit Union 2.0


Should your credit union offer payday loans?  Don’t rush to say no. In North Carolina, and spiraling out of there, Self-Help Credit Union and its offshoots such as the Center for Responsible Lending have documented that there is good to be done, and even some money to be made, by offering payday loans.

Technology, by the way, may be the magic that lets this flourish.  Read on.

Start with Pew Charitable Trusts’  blockbuster report that says credit unions should look hard at plunging into payday lending.

Some credit unions already are doing it.  Like Technicolor FCU.  Unify FCU.  Horizon FCU.  Banner FCU. There are others.

But there could be more.

Understand: according to Self-Help’s CRL, the average rate for a payday loan is 391%.

In bygone days, when the Mafia offered street lending at shipyards and factories in north Jersey and New York City the typical term was “five for six.”  Borrow $5 on Tuesday and when payday came on Friday the borrower owed $6. If he couldn’t pay in full, he could pay $1 to stay current. Many borrowers did exactly that, forever paying interest on a principal that long before was spent.

Everybody knew those loansharks were evil.

But – and this is the point that often is missed – they thrived because they lent money when others said no, and there weren’t that many others anyway. Banks and credit unions had no interest in small dollar, unsecured personal loans. There were no consumer credit vehicles in mass distribution (a la Visa and Mastercard).  Mainly there were relatives and friends and when they said no, borrowers turned to loansharks.

An estimated 10 to 12 million of us want payday loans every year today.

Everybody knows these loans, too, are evil.  

The market continues to thrive however. People need these loans, to feed their families, to keep the lights on, to stop an eviction.

So why aren’t more traditional lenders wading into these waters? Regulators are dragging their feet in enabling small dollar loans and many institutions just don’t like the smell of them, said Pew.  “Because regulators have not yet issued guidance for how banks and credit unions should offer small-dollar installment loans, or granted specific regulatory approvals for offering a high volume of such loans, these programs have not achieved a scale to rival the 100 million or so payday loans issued annually.”

The Center for Responsible Lending has campaigned to cap interest rates on small dollar loans at 36% – enough, said CRL, for a smart institution to make some money but not so much as to bury the borrower in a spiral of indebtedness.  According to CRL, 15 states plus the District of Columbia have enacted caps of 36% or less.

Payday loans to members of the military already are capped at 36% APR.

What needs to happen to get more credit unions making small dollar, personal loans? Said Pew: “banks and credit unions will need to develop small-loan products, and their primary regulators—the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board of Governors, the Federal Deposit Insurance Corp. (FDIC), and the National Credit Union Administration (NCUA)—will need to approve the products.”

The NCUA has given a green light of sorts to credit unions to proceed, cautiously: “NCUA is aware that an increasing number of FCUs are interested in establishing short- term loan programs that are more advantageous to their members than programs available from traditional payday lenders and pawn shops. NCUA believes a well-run loan program can be an opportunity for an FCU to improve the lives of its members by providing low cost, small loans.”

Just offering such loans isn’t enough. Pew stressed that credit unions would have to get the word out that they in fact offer low interest payday loans.  Just as cucially, noted Pew, “banks and credit unions would need to compete with nonbank lenders on speed, likelihood of approval, and ease of application.”

Pew did note that credit unions entering payday lending could do so with a lot of advantages: “banks and credit unions would also enter the market with large comparative advantages over nonbank lenders, with their lower costs of doing business allowing them to offer loans profitably to many of the same borrowers at prices six times lower than those of payday and other similar lenders.”

Note: Pew, in its report, persuasively argues that credit unions have enormous cost advantages when it comes to issuing payday loans versus a standalone paycheck loan operator.  That can translate into much lower – but still profitable – interest rates.

Pew added: “The average payday loan customer borrows $375 over five months of the year and pays $520 in fees, while banks and credit unions could profitably offer that same $375 over five months for less than $100.”

A key to doing this profitably, said Pew, is to embrace automation: “The cost of manually processing applications is too high to offer small loans at scale. So, to keep the cost of origination low—and to compete with nonbank lenders on speed and ease—banks and credit unions will need to largely automate the lending process, including determining eligibility, establishing the maximum loan size, processing applications, and disbursing funds.”

What about provisions for losses? According to Pew, in pilots, charge offs have been comparatively few.  

A bottomline: many Americans want credit unions to make payday loans and they are willing to pay for them.  The regulators, admittedly slowly, have signaled support for cautious entry into payday lending. Smart, community focused credit unions will take the cue and get out the word that they are there to make loans to the very needy.

That’s a win in terms of community relations, it’s a win for the borrowers, and – according to the Pew and CRL data – it’s a win for the credit unions.

We All Lose When AA Sells “Basic Economy” Seats on International Flights


When I first saw the headline that American Airlines planned soon to roll out its barebones basic economy fares on international flights, I shrugged with haughty indifference: I’d never buy a seat that came without the ability to actually pick the seat so what does this matter to me?

A few days later the horror set in: I will be impacted powerfully. So will you.

Watch just about every carrier pile into this. Delta of course has offered basic economy to Europe for some time.  United now is saying it will be on board with this later this year. Of course all the legacy carriers want to combat WOW, Norwegian and any other no frills carrier with an eye on US international routes. And they’ve decided basic economy is the card to play.

Basic economy international is trending.  And now that I get what’s going on, I want to scream.

Okay, if you fly upfront, none of this much impacts you. But I hear of fewer and fewer organizations that pay for upfront seats, not even on international flights. Sure, I think that’s pennywise (especially with ever better sleeping possibilities upfront) – but I am not and never have been a corporate accountant so nobody on the highest floors is listening to me about this.

And all the rest of us now have to wrestle with Basic Economy’s spread into international travel.

AA spells out the rules regarding its international basic economy here.  There are changes from the US basic economy” fare, notably passengers to Europe do get to check a bag, gratis.  International basic economy passengers also get to use the overhead bin, unlike AA domestic basic economy passengers.

Here’s the one big difference between “Basic Economy” and standard economy for international travelers: “Seat assignments: Free seat assignments are made automatically when customers check in. Customers flying trans-Atlantic Basic Economy can purchase a seat assignment at any time.”

That means they can’t pick a seat when they book the flight a few weeks, or months, out.

Why this impacts us is that – I’m sure you do likewise- when picking a seat I study the seating maps and occupancy, looking especially for empty middle seats next to the aisle seat I always pick.

Often I’ll review my choices a day or two before travel.

Now I have no way of knowing if I have the right seat because middle seats will fill in as the basic economy passengers check in and many of them, count on it, will check in not long before boarding.

My entire system for picking slightly more comfortable seats to Europe is in jeopardy.

Look at the seat map for the AA 757-200.

The 767-300at least has the rows of two seats on the aisles. But picking that aisle seat does not give me an empty seat next to me which is what I want.

Worse: on domestic flights a growing number of corporate travel policies have nudged employees into buying basic economy -or upgrading on their own nickel.  Expect to see similar on flights overseas. Some companies are blocking basic economy but know that others are embracing the perceived savings.

That means there’s a probability that you may find yourself steered into basic economy on an international flight.

What a horror show.

Honestly, I never much missed flying upfront on flights to Europe because when you picked the right seat, on the right flight, there was a high chance of a lot of personal privacy in the back, maybe even more than in business class upfront.

I think those days are just about over however and what we are looking at is the high probability of planes with every seat filled even in coach on international flights.

Know too that upgrades are not possible, regardless of your elite status, when you fly basic economy internationally.

And you board in the 8th group – after everybody else. (Exceptions are made for those with elite status and who bought tickets with certain AA credit cards.)

Basic economy of course also is a scam.  Yes, ticket prices are a little lower – but the evidence is plain that the carriers are making that up with a raft of fees.  In a recent quarter passengers paid $1.2 billion in baggage fees alone – a new record. Delta even has yanked the free checked bag and now wants $60 for that luggage to accompany you to Europe when you fly basic economy.

The worst news is that there really is no alternative to flying when it comes to Europe. From my Phoenix base, I can – and probably will – drive to Las Vegas and Los Angeles. But I sure am not going to drive to Paris.

What should business travelers do about basic economy in international travel? Start by flatly refusing to fly it when an employer asks – and point out that the “economy” often is a false promise.

And begin agitating for employers to pay for upgraded seating because, really, the days of gaming the system to nab a better economy seat on international flights is coming to a close.

The game is over, the carriers have won.





On the Digital Transformation Journey with Partners FCU’s CEO

By Robert McGarvey


For Credit Union 2.0


“We are not moving fast enough. We need to move 2x or 4x faster,” said John Janclaes, CEO of the $1 billion Partners Federal Credit Union headquartered in Burbank, CA.

In a wide ranging interview, Janclaes revealed exactly why he had put the credit union on what he describes as a journey of digital transformation – and he also talked about progress made.

You might think Partners is a blessed credit union. It has enough assets to compete and it has strong SEG ties – it essentially is the Disney credit union and pulls membership from the many Disney companies, from the theme parks to movies and ESPN.  It also has two very different geographical hubs – southern California and Orlando, FL. It has a lot going for it.

But three or four years ago, Janclaes looked at the competitive landscape and he had a worrisome thought: “Credit unions are in the crosshairs,” he said. He elaborated that the industry faces ever smarter, tougher competition from big banks and also fintechs and companies like Amazon.  “We need to keep up with that level of competition.”

Not that many decades ago, credit unions, he said, were a well balanced three legged stool that offered better rates, better service, and better convenience because many members could bank at work.

And then that happy bubble burst as consumers – increasingly – have demanded digital banking and many credit unions have faltered in the transformation from high personal touch and community based institutions.

“We recognized we need to keep changing to remain relevant to our members,” said Janclaes.

Fueling his thinking was a CO-OP funded study on digital transformation that found, in a survey of 221 credit union leaders, 88% said digital transformation is “extremely or quite important.”  And about half the respondents acknowledged their digital experience is “inferior” to top brands like Google and Apple.

Janclaes wanted more for Partners, he wanted to offer members a digital experience that in fact rivaled the best of breed because – face it – those are benchmarks members use to grade what they get from their financial services providers.

A big step was that he went outside to Kony and also the Boston Consulting Group to help Partners in its journey. “We wanted to work with trusted partners who are industry leaders,” said Janclaes.

“We have de-emphasized inhouse tech innovation,” said Janclaes and that is because – looked at frankly – few credit unions have the scale and environment to attract the top tech talent that is needed to create a thriving 21st century institution. “We are picking where we can win.”

What especially attracted him to Kony – which has done the bulk of the heavy digital lifting for Partners – is that it had a limited credit union background and also had had successes in very different industries such as retail and energy.

“We did not want a credit union incumbent with a credit union mentality,” said Janclaes.

Read that sentence again.  Credit union management orthodoxy is to vet potential vendors based on their resumes of past credit union hits.  

But Janclaes turned this thinking upside down.

He elaborated that “we are getting better at picking strategic partners.”

He also has taken an increasingly active role. “Ten years ago I was not involved with our tech partners. Now I am. I talk regularly with their CEOs.”

He said he had full support from his board which, he explained, is composed of Disney executives.

“Our sponsor sees us a value for the company and its cast members,” said Janclaes.

A challenge, he added, is coordinating the new digital credit union with the traditional brick and mortar credit union  He indicated that every measure says that in fact is happening as Partners has committed to offering an omnichannel presence that lets members pick how they want to interact. Most tasks – from account opening to joining the credit union – now can be done via any channel and that, believes Janclaes, is the future of credit unions that aim to thrive tomorrow.

Along the way, Janclaes has recognized that the traditional credit union way of updating digital functions via an annual or semi-annual upgrade just doesn’t work today. “We need to do this much faster, 3x, 4x.  We have started with 2x – that’s the business problem now in front of us.”

“We want to make incremental improvements at a rapid pace,” said Janclaes.

This, he said, represents a massive “mindset shift” in credit unions that, traditionally, have aimed for perfection and that has taken time.

Today calls for faster and that means, often, perfection won’t be there.

But what happens will nonetheless be good enough.

That of course is how all tech companies think.

“Our members are already ahead of us in thinking that way,” said Janclaes.

And now Janclaes is determined to bring Partners to that mindset too.


An 11 minute video on the Partners digital transformation is here.  It’s worth a view by any credit union manager, or board member, contemplating the next steps in their institution’s digital journey because that has become a ride no one can refuse.


What’s your CEO story? This column is looking for credit union CEOs – institutions may be any size – to share their transformation story.  Email rjmcgarvey@gmail.com


New Javelin Research: Mobile Banking Rules – and Where You Still Stumble


By Robert McGarvey


For CU 2.0


New research out of Javelin, sponsored by identity specialist Jumio, makes plain multiple facts and the central one is that digital banking rules and it does so across generations.  It’s not just a Millennial thing anymore.

Another key takeaway: most financial institutions – eyes on you – stumble in many key places, particularly in deploying mobile banking. This is eroding member loyalty: they will sometimes simply flee to another institution.

And security concerns continue to be a bother for many users, according to the Javelin research. Despite the fact that generally a mobile banking session over a cellular network is much more secure than one over an online network.  No matter. A lot of users remain very worried about safety and digital banking and the smart institutions are addressing these fears.

What all this means is that mobile banking – increasingly the channel that matters in banking – is where credit unions have to double down on efforts to compete with the money center banks and the fintechs that continue to nibble at the user base of smaller, legacy institutions (talking about you, Amazon).  

Al Pascual, SVP, Research Director and Head of Fraud & Security at Javelin Research elaborated: “To capitalize on the growing demand for mobile banking as millennials grow in spending power, financial institutions must simplify user experience and address ongoing concerns around security and fraud.”

Dive deeper into the report and the results can surprise.  For instance, although 76% of Millennials now regularly use digital banking, 77% of Boomers do – and, yep, that says Boomers have greater acceptance of the channel.

But Millennials are way ahead with mobile banking. 62% use it monthly, compared to 34% of Boomers.  Also, claimed Jumio, “Millennials report stronger satisfaction with nearly all aspects of mobile banking, compared to Generation X and Baby Boomers.”

Millennials definitely have fewer gripes about mobile banking.  25% of them express concerns with the channel, compared to 33% of Gen X and 35% of Boomers. What kinds of concerns? 28% grumble about “hidden fees,” while 53% complain about ease of use.

The study uncovered valuable findings when it focused on abandonment issues – why do we just close out when midway into a task in a digital banking session?  36% said they did so because “the process [was] taking too long.” 20% complained about authentication “being too time consuming.”

Waste a consumer’s time – and the consumer is the judge of this, not a cautious credit union manager – and they will blow you off.  Just that fast.

Here’s the kick in the head: “One-third of consumers respond negatively to their FI after abandoning a mobile banking activity,” reported Jumio. Understand: 7% decided to open an account at another financial institution.  And 13% shared their grumble about the experience with family and friends.

That’s word of mouth you don’t need.

In this regard, the Javelin research shows that account opening tools must cater to Millennials, mainly because they are the leading cohort when it comes to adding new accounts and services. Their chief complaint: it takes too long.  The antidote: speed it up.

And make it easy to complete the tasks on a mobile device. That is becoming a crucial battleground.

When it comes to authentication, Millennials in particular prefer biometrics, especially eye scans and facial recognition, according to the Javelin data.  Farther down the list are legacy modes such as QR codes. Very probably institutions that want to stay on the cutting edge of Millennial acceptance need to roll out multiple biometric modalities.

Another, key piece of advice from the research is: “Put security first (and make sure your customers know it).”  

“But… weave security into the customer experience in smooth, fast, intuitive ways.”

Don’t make security into hurdles members have to jump – how many routinely forget passwords? – but do let members know that security protocols are always there, always protecting them. They want that reassurance even if they don’t want the hassles of dealing with in your face security challenges (what street did your father live on at age 6?).  

Sift through the Javelin findings and there is much to cheer credit union leaders. There is no way they can compete with money center banks in terms of branches – but they don’t need to.  What a credit union needs is top grade digital experiences, online and mobile, that include easy account opening and build in seamless security that will protect members.

None of that is easy.

But it all is doable at credit unions that embrace the digital mandate.

A Different Kind of Hotel Loyalty Program – and I Like It


How many hotel loyalty programs do you belong to?  Probably lots. Personally I have no idea because I take none of them very seriously.  I join because I usually get free (bad) WiFi and maybe a complimentary drink (which I just about never drink).  It takes a couple minutes to sign up and, once I’ve done that, I usually forget I’ve joined. I know I do belong because I get many emails from Hilton, Hyatt, et. al. and although I don’t open them, they do serve as reminders that I belong.

Maybe I am so casual about hotel loyalty because, at least in recent years, the majority of my hotel stays have been booked by clients who are using their preferred provider deals to score the best prices.  Or I am attending big meetings where the organizer made its deal. I don’t usually have much choice and, frankly, I haven’t much cared either. Hotel rooms are fungible in my calculus. The upshot is that I stay at lots of places and have no real loyalty points cache anywhere.

And I haven’t cared.

But the new Fans of M. O. – via Mandarin Oriental – has won my favorable interest.  And its rewards do not include free hotel rooms.

Repeat: no free stays.

That’s fine by me.  When I am traveling enough to win free stays in a loyalty program usually the last thing I want is another hotel stay – and, yeah, I know most conventional programs let members swap points for stuff like fitness trackers, tablet computers, and phones but I already have the gear I want.

What else you don’t get in the M.O. program is status. At least for now, there are no silver, gold, platinum type levels. At least not in the program. But you can bet that Mandarin’s data system tracks its best spenders and already knows who has the status that matters even if there’s no formal declaration. That’s obvious. Talk to any GM in a large group and he will tell you he gets regular updates of arrivals of heavy hitters and he is expected to act accordingly.

Mandarin, I’d bet, does likewise.

What do certified Mandarin fans get? It starts with free WiFi and an “amenity.” Nothing to applaud there. Nothing unusual. Table stakes really.

What is fun about Fans of M.O. is that members get to pick two amenities from a list of 8: Early check in (as early as noon); Late check out (as late as 4 p.m.); daily breakfast; dining or spa credit; room upgrade; streaming WiFi; celebratory treat; or pressing services.

Knowing me, I’d just about always go for the fast WFi and the free breakfast – but if my packing had failed, the free pressing definitely could be a winner and of course, depending upon circumstances, late checkout or early check in might thrill me.  That is, I like the idea of tailoring my choices to the particular trip.  You don’t have to pick two and live by them forever.

Your trousers got soaked in a storm and now you want to swap out a free breakfast for pressing? Maybe you in fact can: “To change your benefits after booking, please contact the hotel to confirm availability,” advised Mandarin.

The only hitch: bookings have to be online.  But that’s no big deal for most of us. I can’t remember the last time I booked a hotel room anywhere except online.

Mandarin also notes there may be some variation in available amenities depending upon the specific property and dates: “Benefits vary according to hotel and date, but we assure you will always have a selection of benefits to choose from.”

Of course bookings also have to be via Mandarin, not third parties, which is a plus for Mandarin – it may actually have figured out with this program how to thwart the rise of OTAs – but again no big deal for me and probably not for you.  I sometimes have used OTAs to book hotel rooms but am not wedded to doing it that way. Directly with the hotel is fine by me, especially if there’s a perk (and a vague promise about “the lowest rates” really doesn’t do it – sorry Marriott, Hilton, et. al.). Mandarin actually is offering things I want.

Press coverage of the Fans of M.O. so far is largely positive.

Want to sign up? Go here.  It took me about two minutes to sign up. It’s fast and unintrusive.

If nothing else, I hope this program triggers a reinvention of the big hotel groups’ programs – which have always seemed plain vanilla, bland and thoughtless to me.

But I wouldn’t hold my breath on that.


Is The Enemy Us? A Credit Union Wakeup Call


By Robert McGarvey

For Credit Union 2.0


Rob Taylor, CEO of Idaho State Credit Union in Pocatello, Idaho, wants you to know his enemies aren’t big banks – it’s other credit unions.

That’s the provocative point of an op-ed he recently penned for American Banker.

I doubt Taylor will soon get a congratulation bouquet from CUNA, but he just may have a point that many of us ignore the reality that credit unions today are arch competitors with each other.

Wrote Taylor: “The problem with our movement is most of us have been indoctrinated to believe our common enemy are bankers… when in fact the real threat to our future lies within our own industry.”

Believe this: Chase does not care if you thrive.  No big bank does.  In fact big banks are glad credit unions exist because it lets them say that they welcome small, local institutions. When credit unions move into underserved neighborhoods, probably big banks break out the private reserve brandy to toast their bravery because those banks do not want to be pressured to move back into urban and rural communities they have abandoned. If credit unions are serving those people, hoorah! And pass the brandy.

Sure, community banks – in many cases – actively dislike credit unions and vice versa but they are both squabbling over table scraps that have fallen to the floor.

While the big banks get bigger.

Back up a step. What’s the most competitive vertical in the credit union business? The clear winner are the military themed credit unions and in that sector there are two of the nation’s very biggest credit unions. I count four in the top 20.  But a few years ago I tried, and failed, to get on the record sources to talk about competition amongst military credit unions for a proposed story for Credit Union Times. The official line is that they don’t compete.


Maybe they even believe it. But myth it is.

Wrote Taylor: “[S]ince HR 1151 was signed into law by President Clinton in 1998, large, multiple common bond credit unions have continued to get larger by expanding their fields of membership, sometimes overlapping in predatory ways to the detriment to smaller credit unions that have stayed true to their original fields of membership.”

Years ago, FOMs were well defined and narrow. A credit union served only New York Times employees, or maybe only employees of AT&T.  I personally belong to that former AT&T credit union – Affinity Federal – and its field of membership is far broader than it once was. Indeed, Affinity on its website headlines: “Almost anyone can join.” That’s because dozens of organizations are in its FOM and if that’s not good enough, Affinity notes: “Don’t see your organization? No worries! You can become a member of the New Jersey Coalition for Financial Education by making a $5 donation when you fill out your online application.”

I’m not dissing Affinity. I’m a happy member. But the broadening of FOMs leads – pretty much instantly – to competition among credit unions for those among us who are fans of the credit union model.  

In Arizona, where I now live, Desert Financial – nee Desert Schools proclaims that anyone who lives, works, worships, or goes to school in Maricopa, Gila, or Pinal counties can join. Maricopa – Phoenix – has around 4 million people, more than half the state’s total population. That credit union is in sharp competition with every other credit union in Phoenix and that is fact.  

Back to Taylor.  He wrote that his institution just does not compete with Idaho’s biggest banks. As far as competition with credit unions, it’s a different story. Taylor elaborated: “The largest bank headquartered in… Idaho holds $1.3 billion in assets, which is less than half the size of the largest credit union based here. This bank has never been in direct competition with my credit union for consumer loans or deposits, even though we have branches in the same cities.”

He went on: “However, every day we compete vigorously with the aforementioned credit union for consumer deposits and loans from overlapping members.”

Then Taylor tossed out his spitball: “Now, here is where it’s going to get ugly for me and where I lose friends. I agree with Sen. Hatch that many larger credit unions operate in the same manner as taxable banks, and I believe it’s time for them to convert to bank charters and be taxed like the ‘big boys,’ because the credit union movement doesn’t need them. We stopped being a movement and became an industry when HR 1151 was signed into law. “


Agree with Taylor or not, he deserves a round of applause. He has put on the table the topic nobody wants to discuss. Do credit unions compete with each other? Of course they do. Is this hurting small credit unions? Of course it does.

Discussing just these topics needs to happen and soon. Because just maybe we have seen the enemy and he is us.

Consumers Say Boo To Your Digital Banking Products – Now What Do You Do?


By Robert McGarvey

For Credit Union 2.0


The press release headline had me at go: “D3 Banking Technology Survey Finds More than Two-Thirds of American Digital Banking Users are Frust.”

Nah, I didn’t know what “frust” means either.  The Internet tells me a secondary slang meaning is frustrated.  

And, you bet, I too am frustrated with credit union mobile and online banking – and I’m not alone, per D3, and that should definitely worry credit union execs.

I have accounts at two credit unions. Digital products at both are inferior to Chase, where I also have an account.  If I could have only one account – and if I weren’t a big believer in the credit union movement – it would be with Chase.  I hate to say that. But it’s true and, thankfully, I am not limited to just one account.

Chase is forever improving its digital products. My credit unions aren’t (and, yes, I know they are locked into their vendors’ upgrade cycles – but why accept that?).  

Five years ago just having mobile banking was good enough.  20 years ago just having online banking, however feeble, was cause for a celebratory press release. In 2018 that definitely is not enough.

Not even close.

D3 proves that with its Harris poll that surveyed 1600 digital banking users (who had used it in the past 12 months) and they were quick to vent. Two in three – 68% – expressed frustration with their digital banking experience.

Count me among them. Yesterday I logged in to change the PIN of my debit card.  No can do in my credit union’s mobile banking app.  I eventually called an automated line and accomplished the task and how 1985 is that?

Why can’t I do a simple, mechanical task like changing a PIN on a mobile phone – and, really, do you think call centers do a better job of screening out fraudsters? Ask Microsoft co-founder Paul Allen about that.  

Nor is there evidence to suggest doing this via online or mobile banking is inherently riskier than via a telephone call.

So why can’t I do it?

A bottomline reality is that in 2018 an increasing number of consumers want – indeed demand – that their mobile banking app and online banking let them do anything they could do in a branch visit.

D3/Harris did find that there are age differences in expectations about mobile banking – but the differences aren’t as big as you might have hoped for. Said D3: “The survey revealed that digital banking users ages 18-34 are more likely than those ages 55+ to be frustrated with their digital banking experience, as 73% of the younger group indicated that they have been frustrated with their digital banking experience over the past year, compared to only 61% of adults ages 55+.”

Even tho credit union members skew older, it is safe to assume 6 in 10 of them are dissatisfied with their mobile banking experience.

For sure, too, members demand a feature rich digital banking experience: “The survey also found that more than half of digital banking users feel it is important for financial institutions to provide mobile deposit (70%), P2P services (66%) and mobile account opening (51%) as part of their digital banking offerings,” relayed D3.

Here’s the frightening kicker: “32% of digital banking users report that they are willing to leave their current bank or credit union for a better digital experience.”

That is blunt: one in three members who use digital services say they just may shift financial institutions to get better services.

Mark Vipond, CEO of D3, observed that that’s the real issue here is “the number of American digital banking users – 32 percent as found in our survey – who are willing to leave their current banking relationship for a better digital experience. As new types of technology continue to be introduced, financial institutions are going to need a strategy built on technology that allows them to innovate and introduce new features and functionality faster than they have to date.”

That’s the reality. Today consumers benchmark your app and website against Amazon, Netflix, Google and the other top digital services – and, sadly, at all but a handful of financial institutions the digital products are mediocre at best.

What’s the solution: commit, today, to improving your digital offerings just about daily, certainly weekly.  Word of advice: smart credit unions are committing to continuous improvement of their digital offerings.  The era of a once or twice a year update is over.  

The path to credit union extinction is paved with complacency.

Particularly with Millennials, credit unions have key positive attributes – they are local, they are community-minded, they generally are intimate scale, and they aren’t “big business.” All good. But will Millennials suffer a poor digital experience to do business with a credit union with bad online and mobile offerings?

Most credit unions seem to be betting that indeed Millennials will.

I don’t think they will.

Do you?