PayPal and Your Credit Union

By Robert McGarvey

For CreditUnion 2.0

Feast on a frightening metric: PayPal, an Internet company from the start, now is worth more than venerable American Express. Its current market cap is north of $80 billion and, meantime, it is busy fighting multiple wars, against Apple Pay at point of sale, Square in cash transfers, and Chase and Citibank backed Zelle in peer to peer payments.  

Here’s the question for you: are you better off fighting PayPal or seeking partnership?

Traditionally senior credit union management has viewed PayPal as an archenemy – one  executive once told me with a smile that he knew Satan walked in our midst and it is called PayPal.  That made a sort of sense because at the time around five years ago PayPal was seen as a barrier in p2p plays taking root at credit unions and it also chipped away at point of sale transactions that credit union execs believed should be theirs.

Many have seen PayPal as intent on disintermediating credit unions and banks.  

But maybe it’s a time for a rethink.

Especially at credit unions.

PayPal may well be in a take no prisoners war with the money center banks – it has to see Zelle as a dagger aimed at its heart – but credit unions just may appeal to PayPal as potential partners that in fact help it spread its p2p tools, also perhaps its POS tools.

There also is a history of credit union – PayPal partnerships. And lately PayPal has buried its hatchet with Mastercard and Visa, working with them to provide essentially instant transfers of PayPal cash balances into associated bank and sharedraft accounts.  PayPal even offers these super fast transfers for a fee of a quarter, significantly less than Square charges for similar.  

It’s on the move too. A few months ago it debuted tools that let Skype users send money within the Skype app. Right in that conversation, you can fire off $50 or $100 to help that relative.  Convenient.

Remember, credit unions and their traditional vendors have not excelled at the tools – especially p2p – that make PayPal (and its golden child, Venmo, which handled $17.6 million in transfers in 2016).  And the digitally savvy credit union – a credit union with a plan for longterm success — will want to have p2p tools that members actually use.

It’s not just Millennials that love p2p. It’s also the parents and even grandparents of Millennials who send money via p2p.

Future-thinking credit unions have seen the PayPal value for years. As far back as 2012, Tech Credit Union announced a technology that let members tap a few buttons on an ATM screen and send money to just about any US mobile phone number.  A few months later, Tech CU rolled out Send Money Powered by PayPal that lets Tech CU members send money to a mobile phone number or email address in some 60 countries worldwide, via Tech CU mobile or online banking.  

Many more credit unions now have ties to PayPal.  Alliant for instance.  Peninsula Credit Union.  California Coast Credit Union.  Wescom Credit Union.  America’s Credit Union.  Mountain America Credit Union.  Pacific Marine Credit Union.  

Even giant PSECU recently added PayPal to its offerings.  

The list goes on. There are many, many credit unions that partner with PayPal.

The Michigan Credit Union League even has a piece on “Why Credit Unions Should Not Fear PayPal.”  

(PayPal did not respond to a request from this reporter for detailed information on its many credit union partners.)

Bottomline: for millions of consumers PayPal is a trusted, known way to shift money around.  It’s a good p2p tool for credit unions to consider offering to members and, yes, a tab can be built into many mobile banking apps.

Won’t some consumers think about ditching the credit union and doing all financial services with PayPal?  Not many, especially not if the credit union has done a good job selling itself and its uniqueness as a member–owned, member-centric institution.  Besides, PayPal just doesn’t offer the range of services most credit unions do – and there is no indication it wants to achieve full bank status in the U.S. Does it want to battle Facebook, Google, Apple? Yep.  But that is the fintech, nonbank arena and it’s there that PayPal wants to be a heavyweight.

By all means, keep watchful of PayPal if you choose to partner with them. But know that there are things it does extraordinary well – p2p payments for instance – and it is difficult to see how many credit unions could realistically hope to rival PayPal there.  

And your members may in fact be jazzed when you tell them they can use PayPal within the mobile app.

That’s a lot better outcome than losing them to Chase and Zelle.

Must a Credit Union Hop on the AI Train?


By Robert McGarvey

For CU2.0

Short answer to the question posed in the headline: yes.

More nuanced answer: Yes but slowly, deliberately.

Right now, AI – artificial intelligence – is the hot buzzword in fintech circles. AI means using a computer’s brains to do tasks that traditionally have been done by people, such as speech recognition, translation, and decision making.

What’s happening now is that suddenly AI is entering our homes and offices at a brisk pace. A few years ago, Apple’s Siri – widely introduced in 2011 – was an early form of AI and now there are many, from robo-advisors that plan retirement portfolios to Amazon’s Echo which will let a user do at least some banking with voice commands.

Right now, a lot of AI is more in the spirit of demonstration. “Alexa, what’s the weather?”  Sure, it’s cool that she talks to you – but it’s not honestly much faster than clicking an app on a phone.

Next phase AI will be beefier and deliver more benefits, say the experts. Already the money-center banks are deeply diving into AI so ignore this trend  at your peril. But, no, you’re not behind if you haven’t gotten moving yet, said Celent in a recent research report on AI and banking. “Relatively few banks have begun production or even full-blown research at this stage. For those who think they’re lagging, the good news is that they’re not — there’s still some time.”

In late 2016 when Celent asked financial institutions to prioritize technology initiatives, AI came in dead last, tabbed by only 6% as a top focus.

Probably today that number has nudged up but don’t expect that AI suddenly is the top priority. It isn’t.

But it remains important to monitor.  

Celent added: “We take a rosy view of AI in banking — for those who embrace it, AI will over time provide a better experience for customers and employees while delivering real business value on every dimension.”

Question for you: how and where can you offer AI tools to members? And are there behind the scenes places where AI can star but out of member sight.

In that latter regard, be ready to use AI to help fight fraud. CO-OP is a player in this space and the idea is that a smart computer can get very good at spotting fraud earlier than a human likely would. A real promise of AI is that it can detect criminal innovations just about as soon as they are launched and, theoretically, will thereby cut the loss volumes in the first phase of a criminal gambit. That all sounds realistic, if the AI is powerful and updates itself.

AI, say the experts, will also help credit unions reduce financial risks through better – faster – analysis and very probably earlier warnings about accounts heading into trouble.

What’s tantalizing about AI is that it promises real time, tangible deliverables – if implemented carefully.  How to do that?

Celent in its report, offers a three step map for financial institutions looking for entry points into AI.

Step one:  “Keep an eye on the market, learn the landscape.”  Read articles such as this one and definitely read case studies of financial institutions and AI deployments.

Step two:  Put your data house in order (AI needs clean data, simple as that), consider using a partner, and look for ways to help people (members).

Step three:  Start small. Track progress and adjust.

Celent’s bottomline: “While there’s more AI smoke than fire in mid-2017 (that is, more banks are talking about it than implementing it), every bank should develop a strategy for incorporating AI into their technology stack over the coming years.”

Do as Celent prescribes.

And know that a key area of AI interest among money center banks are so-called chatbots where consumers engage in what looks like realtime conversation with a computer. Word of advice: pick one out and play with it. Then play with it more.

Can your credit union go the chatbot route?

There’s also a lot of interest in developing product recommendation tools a la Netflix or Amazon where, because you streamed all of House of Cards, the service recommends similar videos and – often – the recommendations are stunningly on target. Can a financial institution do likewise? Many think so. Watch this space for exciting innovations.

Sometimes fintech is more sizzle than steak, more promise than reality. That’s almost certainly not going to be the case with AI. Stay aware of progress. Stay ready to jump in. That’s your 2017 action plan.

How to Lend Millennials’ Money – and How Not To

By Robert McGarvey


A new study out of Transunion – Generation Revealed: Decoding Millennial Financial Health – is a goldmine of data for credit unions that are struggling to make sense of their Millennial members and prospects and are also struggling, in many cases, to find profits in serving them.

The excellent news is that Millennials want credit products. The bad news: guided by the borrowing habits of the prior generation, you probably are offering Millennials loans they don’t want.

There are good reasons to be struggling with Millennials (born 1980 – 1994). The Transunion data say that they are a generation different – sharply different from the Gen X group (1965-79) that preceded them. For instance: they carry far fewer credit cards than do Gen Xers.  Their participation in using bank credit cards is 22% less than Gen X.  They use private label credit cards 23% less.

Why? The Transunion study points out a blatant fact: Millennials, many of them, came of age in the economic downturn of the Great Recession. Notes Transunion: “As many Millennials were entering the workforce, they faced economic uncertainty during the Great Recession when the overall unemployment rate soared to nearly 10%. Consequently, Millennials aged 25 to 34 have a 5% lower median income than Gen X consumers at the same period of their lives.”

They also were hit by the CARD Act of 2009 which severely limited the ease of obtaining credit cards by those under 21 years of age.  Gen Xers, many of them, signed up for credit cards during their freshmen orientation.  Not so Millennials.  

Dodd Frank also made it harder to get mortgages.

Add those three facts together – a struggling economy, more stringent card issuance, much more stringent mortgage issuance – and it is obvious that Millennials would have a very different relationship to credit than Gen X.  

According to Transunion, they carry half as many credit cards in their wallets as Gen Xers did at the same age. They also have an average balance $11,000 less than did Gen Xers.

Then there are myths that inhibit offering the right loans to Millennials. For instance, many believe they are happy as renters with no desire to become homeowners.  Not so, says Transunion.  “While Millennials may delay home purchasing by a few years, 74% of Millennials who don’t already have a mortgage plan to purchase homes at some point.”  

A fact however: access to mortgages still lags for Millennials.  Thy want to be buyers but are struggling to make that happen.

Another myth: that Millennials don’t want to own cars.  Said Transunion: “the myth that Millennials don’t want to own a car is simply false. More than 80% of Millennials report owning or leasing a car.”  

In fact, Transunion says that Millennials are opening car loans between the ages of 21 and 34 at a 21% higher rate than Gen Xers.

Mark that as a key opportunity in pursuing Millennial loan business.

But there are other, surprising opportunities.  Such as personal loans. Said Transunion: “Millennials open more than twice as many personal loans as Gen X. This trend is likely driven by the emergence of online lenders creating digital experiences that provide more rapid access to personal loans.”

Read the last sentence again. It fingers where credit unions are leaving lots of business on the table.  Transunion loudly made the point more plainly: “More than 60% of Millennials with a personal loan report getting it from a bank or credit union.”  

That means 40% of this borrowing is by Millennials using non traditional lenders – often online operators who ask a few questions and if satisfied with the answers, speed off a personal loan. 

Also understand that where a Gen Xer might have taken a cash advance against a credit card, or maybe run up a balance on a traditional credit card, a Millennial, in many cases, will opt instead for a personal loan.

Is your credit union set up to handle this demand?

Fintech startups definitely are and daily there are new ones.  According to Transunion, “The FinTech sector, which principally acquires customers online, grew from just 2% of the personal loan market in 2009 to 24% by Q3 2016. Engaging through digital channels like social media has been an effective way to reach Millennial consumers.”

Who hasn’t seen the TV ads for these new breed lenders?  They are eating your lunch.

Bottomline: there are rich lending opportunities with Millennials. Maybe not so much mortgages.  Credit cards also offer dwindling potentials. But definitely car loans and, unquestionably, personal loans.  

Millennials are the future. They want to borrow money. Just offer than the kinds of loans they want, through the channels they use.  

How Are You Celebrating National Credit Union Day?


By Robert McGarvey

Mark your calendar.  October 19th is National Credit Union Day and that is an ideal day to turn a spotlight on your credit union and seek to bring in new members and build stronger ties to existing members.

Sure, National Days of…have gotten silly. There are so many there’s even talk of a National Marmite Day, a spread with few fans in the US.  

But credit unions should definitely not miss out on their day on centerstage. The third Thursday in October has been National Credit Union Day since 1948 and the core idea is to use the day to make clear that credit unions are not banks.  

This year’s theme is “Dreams Thrive Here.”

“The theme reflects the initial results of CUNA’s ongoing research into what resonates with consumers about credit unions,” said Jeremiah Tucker, CUNA consumer engagement program lead. “Credit unions are good at showing how we’re the socially responsible choice for banking, but we also need to remind consumers that credit unions are their best choice for personal success and satisfaction.”

CUNA also has built in a charitable component where a donation is made by participating credit unions to a local Children’s Miracle Network Hospital for every debit and credit card transaction by members on October 19.

Want more specific ideas about how to celebrate?

A page noting the day on your website is a good idea.

WNC Community Credit Union is opening its doors from 11 a.m. to 2 p.m. and is serving free lunch – sliders, chips, cookies – in a day of celebrating its members.  Excellent idea.

United Equity Credit Union is doing similar – serving lunch to members from 11:30 a.m. to 1:30 p.m.

VUE is holding an open house and serving coffee and doughnuts all day, from  8 a.m. to 4:30 p.m.

Fox Communities Credit Union decided a day isn’t enough so it is celebrating National Credit Union Week, October 16 through 21.  There’s a chance to win a $100 gift card.

But know that you can up the ante on all this.  How?

Get up a one page event notice on your website.  There are many members who rarely step into a branch.  So put up a notice where they are likely to see it.  Do that now.

Prepare a one page info sheet that explains how you are not a bank – and in fact are better than a bank.

A one page sheet on the Rochdale Principles that underlie every credit union is another good handout.

Members of CO-OP’s and CuLiance’s ATM networks need to tout the size of their ATM networks.  

Serve snacks from food cooperatives such as Cabot Cheese and Blue Diamond almonds and Ocean Spray cranberry juice.  Here’s a USDA list of the largest and of course it’s smart to emphasize cooperatives in your own community.

A key message: a credit union is not an eccentric, microscopic bank. In fact it is something entirely different. Better.  Member owned.  And every credit union is part of huge movement that is global.  

Open the doors not just to members but also people in the community. Be ready with account opening materials.  Have a highly trained staffer who is good at opening accounts in a few minutes. Make it fast.

Reach out to local media – newspapers, TV, radio – and seek coverage of National Credit Union Day.  Do that right now.

Get aggressive in putting the word out.  A lot of credit unions – most – are passive when it comes to marketing but that just doesn’t work in a world where the money center banks flood the airwaves with ads and don’t forget all those branches which may be empty but they definitely function as billboards.

It just is easy to be unaware of credit unions.  

That’s why this one day is crucial.  Use it wisely. Loudly.  Get out your word.  Tell your story.  The facts support you: a credit union is a better deal for most consumers.  So let them know that.


Cooperating with Cooperatives: A Winning Strategy in National Cooperative Month

By Robert McGarvey


Just maybe the fast track to greater credit union success is staring just about every credit union in the face and that’s the cooperative next door.

Mark your calendar. October is National Cooperative Month and, by some counts, there are around 40,000 cooperatives nationally that are joining in the celebration.

What are you doing to celebrate?

Core advice is get busy putting together cooperative events with other co-ops to celebrate your community, also your cooperative essence.

Do your members know you are a cooperative?  This month is the time to remind them, and to help them recognize that in lots of ways America’s economic success has roots in the cooperative movement. Lot of ideas are at the National Cooperative Business Association. Here are plenty of suggestions for co-op month activities.  

But what I want you to mull is a stretch goal: How about making every month a Cooperative Month in which you look for ways to celebrate the cooperative difference and how cooperatives benefit their communities.

It’s about ownership by members, not shareholders, and the foundation of every cooperative is putting people before profits. That’s a message that resonates especially loudly today and it’s a message that is ideally suited to Millennials. Millennials, the pollsters tell us, want to do business with people they trust and 40% say they want to buy locally.

How does that not say now is an ideal time to be a credit union? How does it not say that when Millennials understand what credit unions are about – local, member ownership, people before profits – they will want to become members?

And other cooperatives will help you get that message out loudly and persuasively.  In many cases you just have to ask for help.

Know this: Cooperatives are a key part of the American economic fabric – and by accentuating the cooperative backbone of every credit union, a savvy credit union can leverage that DNA to build better relationships that stimulate growth.

Who to partner up with? Look at the National Cooperative Bank’s annual list of the top 100 cooperatives.  You’ll know a few names.  Navy Federal places 9th on the list.  State Employees Credit Union in North Carolina ranks 37th. Pentagon Federal is 65.  BECU is 88.  

That means most of the nation’s biggest cooperatives are not in fact credit unions.  What many are is agriculture cooperatives (Sunkist, Cabot Cheese, Land o’Lakes and Blue Diamond are among the better known).  Many are in retail – think Ace and True Value.  There are numerous electric coops, which remain essential in electrifying huge swaths of rural America.  

What’s important – and exciting – about these cooperatives is that they are succeeding and they are rooted in cooperative principles.  

And many just might want to join with you in celebrating what makes cooperatives special.

Paul Stull, CEO of the Credit Union Association of New Mexico, told me: “Credit unions have access to the power of the cooperative.  They can share ideas, technology, employees.  They can enjoy great value through cooperation.”


Another suggestion: look for cooperative partners where you already shop and spend money.  If you are a customer of REI, ask the store manager.  If you buy your nuts and bolts at ACE, ask the local owner.

How can other cooperatives help you out? The big agricultural cooperatives are well known for a willingness to provide product samples at some meetings.  Ask and you may receive a bounty. That’s just one for instance.  Think creatively and there are plenty of ways for a cooperative to help another.

The real point: it is too easy for a consumer to see a credit union as a kind of one-off, eccentric and small bank – but hit home the message that a credit union, as a cooperative, is part of a large movement that aims to put more power in the hands of consumers and also in many cases workers, many in the public will applaud the idea.

What had seemed small and eccentric instead is seen as something that is part of a big movement that empowers those who get involved.

Want another starting point? Put on a quick workshop for employees that reminds them that the credit union is in fact a cooperative and that puts it in a tradition that traces back to the Rochdale farmers and their struggle for a better life in the 1840s.  

And urge employees that where appropriate – in new member onboarding for instance – that they get across the message that a credit union, definitionally, is part of something big and glorious.

Don’t assume they know all about this. Many probably don’t. So building a stronger cooperative movement can start with a little employee education.

And just keep building one cooperator at a time.