In a very few minutes—under three—on a slow Friday afternoon, I opened and funded a banking account with Lili. Lili is a startup that has won a lot of buzz (plus $25 million in venture funding) in the space of a few short months.
Finextra describes Lili this way: “Lili is one of several startups targeting a huge and fast-growing market: there are nearly 60 million freelancers in the US and Covid-19 has seen 12% of the workforce going solo this year.
Lili is offering these people an app that combines banking services with real-time expense tracking, tax tools, and financial insights.”
Lili, it is said, already has 100,000 users.
Frictionless Banking Is Today’s Must-Have
Think frictionless, niche, and something that sets out to solve an obvious problem (tracking tax deductible expenses). Lili wants not to be all things to all people, but to target a specific segment with a problem. That is brilliant new business development strategizing.
A new FICO report vividly documents how badly most financial institutions are flubbing identity management, especially in crucially important new account opening.
Sure, credit unions have KYC and AML obligations in onboarding new members. But that is no excuse for chasing prospective new members away with clumsy, antiquated, and even hostile new account procedures.
Here are key findings of the research:
“Operationally, lack of automation and the time taken for identity verification is an obstacle for over half of institutions.”
“Physical checking of identity is required for digital applications for personal banking at half of institutions.”
Even as the nation’s air carriers do the right thing they manage to screw it up.
Case in point this week. First I saw a story that led me to want to applaud the courage of some carriers.
Then I saw a story that left me swearing at the carriers’ executives for their greed which threatens our health and defies commonsense.
First the good news: The WAPO headline tells it – Delta, United and Alaska Airlines have banned more than 900 passengers for not wearing masks. Bravo, if the emasculated federal government cannot summon the bottle to issue a mask mandate for public places – an action it should have taken months ago – it’s up to the airlines and some have stepped up.
I know flight attendants – understandably – hesitated to get involved in insisting on masks. They understood there are nutters who believe they have an inalienable right to go maskless (probably they think it is the US Constitution). But airlines and their flight attendants have done the right thing here.
And the carriers have upped the ante by issuing flight bans. Delta leads the pack – it has banned 460 passengers. United has eighty-sixed 300. Alaska has booted 146.
American and Southwest, sadly, declined to issue counts. American Airlines did tell the Washington Post this: “We expect our customers to comply with our policies when they choose to travel with us,” American Airlines spokesperson Curtis Blessing said. “We take action when that is not the case, but the vast majority of our customers have supported and welcomed our continuing efforts to strengthen our face covering policy based on the CDC’s guidance … we may deny future travel for customers who refuse to wear a face covering for the duration of this requirement.”
No, I haven’t an idea what that is supposed to mean and, for now, I won’t be flying American or Southwest anytime soon.
Which brings us to the two steps back. Southwest Airlines has joined the list of carriers who say they will stop blocking middle seats. They start stuffing coach on December 1 (and I do wonder how many passengers will fall ill with Covid-19 due to holiday travel).
According to a tally by The Points Guy the only carriers that are sticking with an empty middle seat policy are Alaska, Delta, and Hawaiian.
That is inexplicable. We are not flying because we fear getting the virus in the air…and we also know two things that are helpful in curtailing spread of Covid-19: mask wearing and social distancing, the latter being all the more important indoors (as in an airplane!).
Meantime, a seven hour flight to Ireland is linked to a staggering 59 Covid-19 cases in Ireland, according to a new report: “An outbreak of 59 cases of coronavirus disease (COVID-19) originated with 13 cases linked by a 7 h, 17% occupancy flight into Ireland, summer 2020. The flight-associated attack rate was 9.8–17.8%. Spread to 46 non-flight cases occurred country-wide.”
Of course I know about a new Harvard report that says, hogwash, air travel is safe. But I also know the carriers paid for the report and that causes me to keep looking for data.
Such as? Another recent report looked specifically at the question: does keeping middle seats empty impact Covid-19 spread. The authors’ conclusion: unquestionably yes. Here is what they write: “We use recent data and research results and a probabilistic model to estimate the chance that an air traveler in coach will contract Covid-19 on a US domestic jet flight two hours long, both when all coach seats are full and when all but middle seats are full. The point estimates we reach based on data from late September 2020 are about 1 in 3,900 for full flights and 1 in 6,400 when middle seats are kept empty.”
That’s commonsense. When you sit literally elbow to elbow next to a passenger in coach your chances of getting any and all contagious diseases rise. An empty middle seat is no panacea. But it definitely makes the flight safer.
No wonder I have re-installed my Delta Sky app – and of course I have now downloaded Alaska Air too.
Note to self: change Amex Plat $200 airline credit from American to Delta in January. Besides, Delta has spiffy new digs at Sky Harbor and there’s a new 7500 sq. ft Sky Club there too. That, plus a tough mask policy and empty middle seats win my business.
Airline executives and their lobbyists are thick as locusts on Capitol Hill as they make a last minute push for another federal bailout. Their opening bid is $25 billion. But they would take more. And some inside the Beltway support this public largesse.
What’s wrong with that? The better question: is anything right with the idea?
Look, I take no joy in the many tens of thousands of unemployed airline employees. It’s a bloodbath. In Phoenix, for instance, the number of flight attendants has gone from 1900 a year ago to around 1000 today. That’s a lot of human suffering. Airline employees and those in related industries have gotten screwed in this pandemic and, often federal aid that was supposed to go to them, in fact went to executives, according to a US House report.
But face this reality: with or without new federal handouts, the airline business is going to shrink. By a lot. The chairman of United has said carriers may shrink by half.
The International Air Transport Association says air traffic will not reach pre-pandemic levels until 2024 and maybe not that quick.
Rising skepticism about the Trump tainted vaccine program – with New York and California governors both saying go slow – makes it ever less likely that many of us will flock for vaccines in the early going. And yet most experts say air traffic will not begin to rebound until vaccines have been widely distributed.
Surviving airlines will in fact shrink – they will literally often fly smaller planes and they will also shrink route maps.
And a lot of airlines just will go bust.
Many already have. Here’s a Forbes list from June. LATAM and Avianca had already filed bankruptcy (although both are seeking to reorganize).
In the US, View from the Wing has said the US carriers most likely to have their day in bankruptcy court are American and United.
According to CNBC, 43 commercial carriers already have failed outright this year. More will. The CNBC story ominously warns that historically airlines build up their cash reserves in the summer so they can survive the lean winters. This year winter is coming but summer has been a bust. Buckle up. Many more carriers will fold.
Haven’t I just made a powerful case for why we need massive federal bailout monies for airlines and we need it now? Nope. That would be the proverbial good money after bad.
Lowenstein added: “There is no reason to single out employees of a particular industry for favored treatment. And the airline industry is among the least deserving. In fact, the bailout will reward the carriers for egregious overcompensation and share buybacks.”
Writing in Wolf Street, Wolf Richter documents the many billions airlines spent in recent, flush years on stock buybacks, enriching executives and some shareholders. This is money that could have been tucked away for the inevitable rainy days – airlines are cyclical industries that get battered in recessions. They also are battered by rising petroleum costs. Bad times are inevitable for them. But, no, US carriers did not stach cash. They spent it on stock. Per Richter, “the big four airlines blew, wasted, and incinerated $44.6 billion in cash on share buybacks from 2012 through Q1 2020.”
In 2017-2019, executive compensation at just the top three carriers hit $325 million.
If they had held onto just half of the dough spent on buybacks and bloated paychecks they would not be on bended knees begging the House and Senate for yet more free money.
There is no reason whatsoever to think airline executives will behave more rationally and prudently going forward. They have a long history of blowing bailout cash – and then yet again getting caught flatfooted in the next bad economy.
It’s time to go Darwinian. Let those that can survive – by virtue of their wits, budget cutting and strong management – survive. The others will perish. There can be scant optimism about the future for today’s airline executives who are good at creating personal wealth but not much else.
And as the public’s appetite for air travel rebounds, new solutions will emerge.
It was once inconceivable that the US economy could function without GM and Ford – and now does anyone notice they are still here? Tesla’s market cap is double GM’s and almost three times Ford’s. And we are not short of automobile options.
Only 60 companies in the Fortune 500 in 1955 were still around in 2017. We are in an age of creative upheaval. And so it comes for air carriers.
There is plenty of reason for a similar embrace of transformation in air travel. When the passengers are there, so will the new carriers.
Here’s the headline news from a new report via DepositAccounts.com: Branch closings slowed substantially in Q2.
According to the report: “Branch closures dropped to an estimated 376 in the second quarter of 2020, well below the per-quarter average of 631 from the second quarter of 2017 through the fourth quarter of 2019.”
Should branch skeptics such as myself, who believe many more branches need to close to rationalize financial services for a digital, contactless era, shut up and go home? As far back as 2014 I wrote in CU Times, “branches are an expensive albatross around the industry’s neck.”
Is it time for me to shut up? Nope. In fact, there is mounting evidence that every demographic, including senior citizens who hitherto have been tech holdouts but who now have embraced tech in the Covid-19 era, feel safer using tech than they do going into branches.
Call this Part 2 of our smarter lending for credit unions. The recent episode, #113, explored small business lending with Capiform’s Sherif Hassan. Listen here. This week it’s time for something entirely different.
Happy with your car loan portfolio?
Many credit unions are anything but and this has become a crucial issue as most are awash in deposits and now are hunting for profitable places to put that cash to work.
Car loans could be it. But indirect lending…not so much.
Enter Nicholas Hinrichsen, an online car sales veteran who co-founded an online used car marketplace in 2015 when he raised $10 million in venture capital. They sold that business in 2017 to Carvana, which by now has grown into one of the nation’s biggest used car retailers.
After logging three years at Carvana he is again starting up a new company, with $5 million in venture funding, where the aim is to help credit unions better sell car loans to their members.
Hinrichsen knows car loans and he also knows about credit union dissatisfaction with indirect loans. He has a better idea: helping members refinance existing car loans issued by third parties, converting them into credit union owned loans.
Credit unions can win that fight, said Hinichsen, because usually their loans are better, at lower interest rates.
Most credit unions, he admits, do “spray and pray” marketing, sending out mailers to all pre-qualified members. In this podcast he tells a smarter, more cost effective way to contact the right members, ones who just might be prospects for car refinance.
Keep listening because he has an idea for tools that will essentially pre-populate a loan app for a member, using data the credit union already has. So filling out a loan application literally takes seconds.
And another – intriguing – idea he has is about how to profitably make sub-prime loans to existing members and, in the process, to create a path for them to get lower interest rates going forward. Just that may be a core credit union mission, especially as more members deal with economic pains of the pandemic.
You know you want to issue more and more profitable auto loans. This is a podcast you have to hear.
Contact Hinrichsen here. The company is named Clutch
Listen up here.
Like what you are hearing? Find out how you can help sponsor this podcast here. Very affordable sponsorship packages are available. Email rjmcgarvey@gmail.com
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What a difference a pandemic makes. Just six months ago when contactless payments came up, credit union c-suiters, most of them, yawned and dismissed it as a nice to have that hadn’t vaulted up to must have status – and, besides, many hundreds of credit unions are signed up for Apple Pay which gives users a version of contactless. Who needs more?
More specifically: who needs a credit union contactless enabled debit or credit card? Most credit unions, just six months ago, thought the right answer was not us.
That was then, this is now and now, in a in a pandemic, the consumer’s cry is getting loud: give us contactless and give it to us now.
The news out of the Ritz London has to fry you: scammers have been calling customers with restaurant reservations and prying out of them credit card details that the scammers quickly put to use making online purchases.
The problem is that this may threaten all of us who dine out, even if we have never set foot in the Ritz and have no plans to. That’s because these scammers have shined a spotlight on a failing that may entrap us all.
The Ritz said this in an August 15 tweet: “We can confirm that on 12th August 2020, we were aware of a potential data breach within our food and beverage reservation system, which may have compromised some of our clients’ personal data. This does not include any credit card details or payment information.”
Where did the credit card info get into this? Apparently the scammers called diners with reservations and said, “Sorry, there’s a problem validating your credit card info to secure the reservation. Can we have it again?” Or words to that effect.
To use the language of the trade, the crooks – who apparently had access to the hotel’s restaurant reservations – used social engineering to pry the valuable info out of the cardholders.
According to the BBC, “One woman, who had made an online booking for afternoon tea at the Ritz as part of a celebration, received a call the day before her reservation.
“The scammers asked her to ‘confirm’ the booking by providing her payment card details.
“The call was convincing because it appeared to have come from the hotel’s real phone number, and the scammers knew exactly when and where her reservation was.”
The last bit is important. What it means is that the crooks gamed caller id to spoof the Ritz’s real phone number.
Number spoofing is so easy even a caveman could do it. Details here.
Never believe a phone number that pops up on your screen. It may be real, it may be spoofed.
So, where do you come into this frame? If there is a theme song among restauranteurs in this pandemic it is complaints about dining no shows. The Washingtonian headline tells the story: Don’t be the jerk who no shows on a restaurant reservation during a pandemic.
Even across the pond in England a celebrated chef won applause from his peers for calling no shows “disgraceful.”
As restaurateurs explain, in much of the US, restaurants are required to operate at a reduced capacity. In Phoenix, for instance, they are required by an order of the governor to operate at no more than 50% capacity. It’s 50% also in Seattle. Ditto Texas.
Many restaurant struggled to turn a profit pre Covid. Capacity limits have put more stress on them. And every diner matters in reaching break even.
A solution: restaurant gurus are advocating what amounts to a no show fee be slapped on diners who don’t turn up. In some cases it might be $25 for a two-top – but some restaurants are charging multiple hundreds of dollars, that is, essentially requiring diners to pre-pay for their meal in order to secure a reservation.
Here is where the news gets worse: restaurants are among the most common victims of data breaches and you can be victimized two ways. A crafty scammer who grabbed only a reservations log – which almost always includes a phone number – could recycle the Ritz London scam and call the diners asking for a credit card number to secure the reservation. Know that scammers are copy cats and when they saw that Ritz scam, they knew their next move.
At restaurants that require a prepayment there already is a credit card number in the file.
A round up of food service businesses that suffered breaches is here.
Big names are in the mix such as DoorDash and Landry’s which operates some 60 national chains including Joe’s Crab Shack and Morton’s.
But I ask, are you more confident that small restaurants won’t be breached? I am not. Indeed, I wonder how many already are breached and don’t know it (and, sadly, often the only way they learn about it is when an energetic fraud researcher at one of the big credit card issuers follows the bouncing balls and traces back a fraud outbreak to a small restaurant. I know one very large credit union that actually traced it back to a particular server at a restaurant).
Not surprisingly, a poll found 62% of consumers already fear restaurant data breaches. The only surprise is that the number isn’t higher.
How can you protect yourself?
Get a call from a restaurant asking you to confirm a credit card number and standard advice is to say you will call them back – and make very sure you are calling a publicly listed number for the restaurant or hotel. Don’t call a number given you by the caller. They may just hang up and move on to the next fish in the net.
What about restaurant prepayments? I understand the restaurateur angst. My standard suggestion is use a credit card with a very low credit limit. If necessary, apply for one with, say, a $500 limit. Do not use a debit card for this, never. You probably can claw back money stolen on a credit card. Your rights are less with a debit card.
Last to-do – if you make a reservation, show up – or at least have the decency to cancel a day in advance. I know that’s asking a lot in the Covid-19 era. But it’s not to much for a restaurant to ask when their survival is at stake.
The NCUA lit this bonfire when in early May it tweaked the criteria for a credit union to win designation as a low-income credit union. That matters because an LICU gains significant flexibility in how it can do business, notably it can accept deposits from any source and gain exemption from aggregate loan limits on member business accounts.
Remember the NCUA change is a tweak, nothing more. What the regulator did was change the rules to allow counting of Post Office Boxes as addresses. Before, that was a no-go; only street addresses counted. It is believed this tweak will allow counting of more military personnel, many of whom are said to use PO Boxes as addresses.
You might think that in the midst of the nation’s worst economic collapse in 90 years, there would be applause for this NCUA broadening of the criteria for qualifying as a low-income credit union.
You would be wrong, however, because the Independent Community Bankers of America (ICBA) sees a Trojan horse conspiracy. They think credit unions are using the benign appearance of servicing low-income segments—which few oppose—to forward an agenda letting credit unions engage in “unbridled commercial lending.” Lots of it, in fact, complained ICBA in a statement by CEO Rebeca Romero Rainey, in which she implores Congress to review the NCUA action.
ICBA went on: “Today’s sudden National Credit Union Administration move to change its methodology in designating low-income credit unions benefits neither low-income Americans nor military personnel—but the largest, most growth-obsessed credit unions, which continue to be subsidized by taxpayers.
“The NCUA’s changes—made without a formal rule subject to public review and comment—is another example of this captive regulator expanding the powers of credit unions well beyond the limits established by Congress to justify their tax exemption.”
$550 – that’s the annual fee for the Amex Platinum card and for some years I have readily paid it, plus $175 for a card for my wife, but this year I find myself asking, is it worth it?
The trigger is of course that the Centurion clubs – for me the prime attraction of the card (and before Centurion there was the rather broad access to carrier clubs) – are closed. Indefinitely. And definitely need a revamp when they do open and that throws into question the frequently tasty (and free!) buffet tables. There have also been capacity issues so how does Amex change access to make clubs less crowded (and thus safer) when too many want access to begin with? Certainly the clubs will reopen but as what? With what rules? Nobody knows.
Besides, with business related travel now as sparse as it was in late 2001, I don’t much need the clubs anyway.
Also now lying unused in my hands is a $200 annual credit ($15/month plus a kicker in December) for Uber which I have personally used infrequently but often I gifted free rides to relatives and friends which made me seem a generous hero at no cost. But I have not summoned an Uber in two months and don’t anticipate doing so soon.
So do I renew the Platinum card or not?
You may face the same question. Particularly if you too have been a Centurion junkie.
As it happens, recently a friend who wants anonymity hit exactly the same moment of questioning. Listen to his story: “In early April, my annual fee was due. I called and asked what they could do. Basically, I was looking for something like a $50 statement credit or something, just an acknowledgement that they are getting $550 from me and there probably would be nothing interesting for me. She said, ‘we got nothing, but we’ll defer your monthly fee for a month.’ I asked why that mattered. She said: You never know. I said fine.
“Fast forward to last week. Now the fee is due….So I call to cancel, knowing I’ll immediately be sent to the ‘retention specialist’ (AKA ‘saver’).”
And then what: “No counter offer. So I closed the card. First time in 35 years or so without a Platinum. First time since 1997 no Priority Pass.
“But the reality is Amex’s response here is irrational. They made me angry.”
Will I do likewise?
I go to the Amex website and what jumps out at me are two new benefits: a $20 monthly credit against a wireless bill (T-Mobile qualifies and I already have two lines there), also a $20 streaming video credit that I decide to apply to a new YouTube.TV account but could just as well use to pay my Netflix bill (which I realize I’d been paying via PayPal, don’t ask why).
Bingo, that’s about $280 in credits through the rest of the year. There’s no guarantee the credits will be offered in 2021, but I imagine about the time the credits lapse the Centurion clubs will be open again and there will be renewed need for Uber in my universe.
There’s also a new $200 travel credit that’s on top of the annual $200 credit against airline fees (for baggage check, booze inflight, a sandwich, etc). This new credit applies to purchases made on the Amex Travel Portal.
There also is elite status in the Hilton and Marriott BonVoy programs and I have activated both.
And I also discovered the card offers a $100 annual credit against purchases at Saks and that’s free money. I had not known about this perk until I poked around the card site. Do likewise and you may find neglected perks too.
Bottomline: I will renew.
Who’s right, me or my old pal?
We both are of course. Different people, different circumstances, different decisions.
The bigger point is that nowadays we all need to be assessing just about every fee- does it make sense? Should I do without? In a deep recession, with no end in sight, it only makes sense to monitor outgo.
And don’t be shy about threatening to cancel. Sure, my pal got bupkis but on a different day, with a different vendor, there might be different results. When I called T-Mo to drop one of my phone lines, the rep informed me that I am eligible for a special senior rate that basically provides two lines for the price of one. So I kept both lines but halved the rate just by asking.
When we called to cancel Cox cable, however, we were offered nothing meaningful – and cancel we did.
And maybe next year I too will cancel the Plat card. Times may change.
Are you assessing your renewals? Just do it. Something good very well may result.
