BSA, AML, and Your Credit Union: The New Perils

 

By Robert McGarvey

 

For CU2.0

Ask a senior credit union executive what’s new at his/her institution in regard to anti money laundering (AML), Patriot Act, and Bank Secrecy Act initiatives and the reality is that you will have a longer and friendlier conversation if you asked about his/her last colonoscopy.

Yes, it’s that bad.

And that’s despite the reality that a credit union can be shut down if it grievously botches its BSA and AML analysis.

Buckle up because in December 2016 FinCEN issued a press release where it announced a $500,000 fine against a credit union named Bethex in the Bronx.

Bethex has assets of under $13 million.  

They were folded into USALLIANCE, a Rye NY credit union. Bethex was no more.

FinCEN outlined Bethex’s sins: “In 2011, Bethex began providing banking services to many wholesale, commercial money services businesses (MSBs). Many of these MSBs were located in high-risk jurisdictions outside New York and engaged in high-risk activity, including wiring millions of dollars per month to countries at risk for money laundering. When Bethex began to service these MSBs, it did not take steps to update its AML programs.” 

“Among other violations, Bethex failed to timely detect and report suspicious activity to FinCEN and did not file any Suspicious Activity Reports (SARs) from 2008 through 2011. In 2013, as a result of a mandated review of previous transactions, it late-filed 28 SARs. The majority of the suspicious activity involved high-volume, large amount transfers outside of Bethex’s expected customer base by MSBs capable of exploiting Bethex’s AML weaknesses. Most of those SARs were inadequate and contained short, vague narratives encompassing a broad summary of multiple and unrelated instances of suspicious activity. For example, one SAR covered over $906 million in total aggregate of suspicious transactions, but provided little information useful to law enforcement investigators.”

In 2015, North Dade – a small Florida credit union – was effectively put out of business because of AML and BSA violations.  In 2013, tiny North Dade moved over $1 billion in wires, often overseas. According to FinCEN: “When a small institution opens its doors to the world, takes on greater risks than it can manage, and puts profits before AML controls, bad actors are bound to take advantage,” said FinCEN Director Jennifer Shasky Calvery. “This case raises pretty obvious questions that no one seems to have asked. Why would MSBs located all over the world choose a small Florida credit union to conduct close to $2 billion in transactions? Credit unions pride themselves on close and low- risk relationships with known neighborhood customers. However, North Dade welcomed customers far beyond its field of membership, without adequate policies and procedures to ensure AML compliance.”

Face this reality: the big banks have big teams in place to handle BSA, AML, etc. They also have invested – heavily in many cases – in automation that takes a lot of the heavy lifting out of compliance. Machines do the work.

Credit unions – especially the vast majority with assets under $1 billion – generally have not invested in automation for compliance. “There are case management systems that are good. They can be expensive for a small FI.  A lot of bigger banks are using robotics to get screenshots of bank statements and so on – an analyst doesn’t have to spend an hour collecting it. Only the biggest banks are doing this,” said Alma Angotti, managing director in the Global Investigations & Compliance practice of management consulting firm Navigant Consulting, Inc.

Another issue that many small financial institutions now face: “Many employees in compliance are burning out,” said John Podvin, a Dallas lawyer well known in BSA circles.  He added: “There are people in BSA who are asking themselves, do I want to be second guessed all the time. Some are leaving the field.”

A reality in BSA/AML is that the easier course is to file a SAR (suspicious activity report – this documents flags an action for possible investigation by law enforcement). Do that and a financial institution probably has satisfied its regulators. “There is no downside to filing,” said Angotti.

Where the credit union may find itself in a pothole is when it does not file a SAR. In that case the credit union needs to justify why it did not file – and an examiner may well challenge the credit union.

And that means many more hours get invested in explaining and justifying decisions.  Said Podvin: “There are increasing expectations from examiners – that’s the biggest problem now.”

“It’s one thing for a big bank with a staff of several hundred working in compliance. It’s different for a community bank.”

Or credit union.

A result is that slender compliance staffs may be worn down in many small credit unions.

Another barrier at credit unions: there may be “competition for scarce IT resources,” said Angotti. Doing BSA/AML research is computer intensive and, at least at smaller institutions, there may be a battle for resources and ask yourself this: who will win if the fight is between marketing, which needs IT resources to power a new campaign that may bring in lots of new members, and compliance which wants to research possibly suspicious activity by members?

It’s a fight that compliance usually does does not win.

Don’t expect BSA/AML workloads to magically lighten.  

Possible light at this tunnel’s end, said Podvin, is a federal effort to streamline some BSA/AML compliance.  He pointed to pending legislation, HR 6068, as offering hope to financial institutions. The aim of the bill, in its own words, is to “reduce regulatory burdens, and ensure that the information provided is of a ‘high degree of usefulness’ to law enforcement.”

Don’t count on relief until a bill is signed into law.

Meantime, good advice for top credit union management is keep your ear to the ground and ask – and ask again- your BSA and AML teams what issues are they facing and what resources they need to do their jobs better and smarter.  

No credit union CEO wants to increase the budget for compliance work.

But no credit union CEO wants his/her institution to go the way of Bethex.

That makes the choice easier.

 

On the Digital Transformation Journey with GTE Financial’s Brian Best

 

 

By Robert McGarvey

 

For CU2.0

 

It was mid 2016 when Brian Best was handed the top job at GTE Financial in Tampa FL and he’s been charging ahead since.  With over $2 billion in assets GTE Financial is among the nation’s biggest but as CEO Best is busy remaking the institution for the contemporary age.

Resting on laurels is not how he sees his job.

He said that a lot of his drive to remake GTE Financial grows out of the recognition that it’s in a different position.  He elaborated: “In our community, Tampa Bay – we have a lot of Millennials. 51% of our members are Millennials.  And they really like digital. They like the ease of access. We believe they also like brick and mortar.  But we know we need good digital.”

Best dated the start of GTE Financial’s Digital Transformation back to 2015  – he was chief experience officer then – and, he said, the institution’s aim has been to win member loyalty with superior experiences. “We want to make sure our experiences are beneficial to our members. Experiences are what differentiate an institution. Products don’t.”

Said Best: “We are 100% focused on what the member experience looks like.”

Think about that.  Most financial institutions offer roughly the same products and – hype aside – there often isn’t much that distinguishes the basic products at one institution from those at another.

At GTE Financial Best is driven to go beyond the basics and drill into what – really – will captivate members.  That’s at the heart of this digital transformation.

Best said a continuing obstacle is that third party vendors “don’t want to give up control of their APIs,” that is, their Application Protocol Interface, which enables communication with the program.  Many tech vendors jealously guard their APIs and, although that is understandable, it also complicates the job of an institution that is seeking to give members a unified experience.

Best added that many vendors also don’t get that “we want to give our members a different experience” – meaning that GTE Financial does not want to settle for the same off the shelf tool kit that is in use in dozens, maybe hundreds of financial institutions.

“What should digital transformation look like,” Best went on. “We believe a member should be able to access – easily – key information in their accounts.” He pointed to an amortization table as a case in point.  Loan customers should be able to easily access it – that table is crucial to seeing ahead with a loan – but doing so just isn’t ways easy.

None of these changes are simple and many aren’t quick. Best said, “Our main competition is ourself.  We have every big bank in Tampa. They are throwing money at digital transformation but their experiences aren’t that great.”

He added: “Our true competition is the Amazons, the digital payments landscape.  If we don’t live in that world we’ll lose touch with the future. It will be ugly for us if Amazon gets into the banking world.”

“Much like Amazon, the experience needs to be intimate even when it is digital. The artificial intelligence has to really understand what the member is looking for.”

“We want to create real intimacy in the virtual environment.”

Read that again. What Best is saying is that the companies that are winning succeed in combining great digital with genuine intimacy and personalization.  

Getting there just may be critical.

Best nonetheless said he is very optimistic, about the future for GTE Financial in particular and for credit unions in general.  “Credit unions have always put the person first – that’s why I started working for credit unions. Night and day difference between our culture and at the banks where I worked. Banks have a different mission. Credit unions will persevere because of that focus. If we lose that focus we have risk.”

He also shared a valuable tip. Just about every day GTE Financial gets 100 new members. What produces that steady stream?  Best thought about that before he answered.

Here is what he said: “It’s mostly word of mouth. We put a lot of effort into philanthropic giving

We provide $500,000 to $700,000 annually to a lot of non profits in Tampa. We average two financial literacy workshops a day. Word of mouth increases through the right activities. If you are doing the right things, word of mouth happens quickly.”

He continued: “70% of the time new members tell us they really like how we support the community.

They have a good feeling about where they are putting their money when they open an account with us.”

Can you say similar? Do your members?  

Member Engagement: The Big, New Battleground

By Robert McGarvey

For CU2.0

Research out of Pymnts drives home two points: financial institutions, suddenly, are attempting to up their game in consumer engagement – and the better institutions are the ones that are all over this.

Said Pymnts: “Our analysis shows CE is a growing focus for FIs, particularly the top performing innovators in our study. Moreover, those banks that focus on a customer experience and consumer engagement (CXE) strategy are tuned into customer needs and adoption, and
they roll out innovations they say are more successful, too.”

The FIs that are good at this are getting better. The ones that aren’t, aren’t.

That has to be terrifying for the institutions that are laggards – and, sadly, most credit unions (and banks too) fall in the laggard group.  

But more now are trying to do this better, reported Pymnts: “Just 35 percent of [financial institutions] reported having focused on CE during the past three years, while 43 percent said they intended to focus on CE in the following three.”

Word of firm advice: solidly plant your credit union in the CE camp. That’s how to thrive.

Exactly what is meant by consumer engagement?  Pymnts explained: “Consumer engagement in the digital age refers to the combination of consumer experience, digital technology and data analytics.”  The researchers added: “These areas proved to be of particular importance to credit unions and community banks.”

Pymnts continued: “It is also critical to note that top performing FIs are far more likely to report an intent to focus on consumer engagement than their peers. In fact, 80 percent of Top Performers say they will focus on CE initiatives over the next three years, nearly twice the percentage of all FIs as a group (43 percent).”

Understand, the money center banks are focused on digital technology, data analytics, and consumer experience.  Most credit unions are playing catch up. But play they must because there is every indication that, increasingly, members will be won and lost in large part due to their member experience of the credit union.

Think about just one battleground: the mobile banking app. Innovation is continuous at a Chase, or a USAA. Is it at your credit union?  Probably not. Most credit unions are beholden to third party vendors and speed of updates has not been how they have distinguished themselves.

Consider the fast rising consumer demand for p2p inside their mobile banking app. Not many credit unions offer it.  But the big banks are putting Zelle in their mobile apps – they are already there before a majority of consumers know they want the capability but that majority is definitely heading our way. What are you doing to be ready?

Pymnts also expects higher focus by leading FIs on digital wallets as well as loyalty and rewards initiatives. A hope of these initiatives: more mindshare of consumers and more touchpoints.  What credit unions want – and need – are well used accounts and that’s the intended payoff of consumer experience campaigns.

An engaged consumer is a more active consumer.

A lot of next wave consumer engagement will be technology driven.  Many credit union executives think member engagement and immediately think of a smiling teller and a warm voice on the phone.  But Pymnts rocks that paradigm by singling out Bank of America’s machine service rep Erica as a powerful innovation in engagement.  Said Pymnts: “When it comes to the changing nature of customer service, few developments in the financial sector offer quite as illustrative a demonstration as the runaway success of Bank of America’s digital assistant, Erica.”

In its first three months, Erica grabbed one million users. For many of us, said Pymnts, digital assistants now are the “preferred” contact channel with an FI.

It wouldn’t surprise me if many of us have many more contacts with a digital assistant than with a human, in part because the digital assistant is always available and also because – psychologically – we don’t think we are demanding too much attention when we pepper Erica, or Alexa, with questions.  

Pymnts said that the digital components figures in more ways in our customer experience.  It elaborated: “There is a direct correlation between innovative payments technology, a differentiating customer experience and developing newer, more efficient payment features that can help boost CE.”

Consumers like mobile banking and they really like mobile remote deposit capture.

What additional technology do you offer that you know your members love? “I can’t think of any”  is not a good answer.

Accept this reality: technology will shape the looming customer engagement wars and the credit unions that are racing to stay ahead technologically are very probably the ones that will emerge as winners.  Today’s technology will not keep consumers engaged tomorrow. Race to stay in the chase.

When the Credit Union “Human Advantage” Adds Up to Zilch

 

By Robert McGarvey

 

For CU2.0

 

Ask credit union senior executives how they plan to beat banks and – I have heard this everytime I have asked – they say “our people.”

They elaborate that their people are good, kind, caring credit union people, from the community, and this will be the deciding weaponry in the upcoming wars.

Sigh.

There are so many problems with this thinking it is hard to know where to start.

And I am a person who in fact believes that many credit union people in fact are good, kind, caring.  

That’s not the problem.

The problem is a two headed monster that is set to devour that credit union narrative.

Increasingly, the busiest branch is the online website and the next busiest is the mobile app.  Personally I have never been in a branch of my chief credit union (whose nearest branch now is on the other side of the country from me). I have called maybe twice in the last five years.

Are they nice people? I guess. I really haven’t had much to do with many of them. The CEO, whom I know, is and as long as he responds to my emails (which have never been about personal account issues) he’s a good guy in my book.

But I like the mobile app, I like the online banking, and they introduce new features fast enough to keep me from getting frustrated (and, yeah, I have a Chase account too and Chase keeps me in the fast lane).

Here’s a factoid from the latest Digital Banking Tracker via Pymnts: “Mobile banking apps are more popular than ever, with recent research indicating they have become one of the three most used app categories in America as of 2018.”

According to the Fed, in 2017 about half of US adults with a smartphone had used it to access banking.  

The digital access numbers are just going to explode in the near future.

The more digital we become, the less human interactions matter.

And then the second shoe drops.  According to that same Pymnts publication: “Bank of America, just two months after its release, is celebrating the one-millionth user of Erica, its app based, artificial intelligence (AI)-enabled chatbot. Erica is designed to meld AI, predictive analytics and natural language to serve as a virtual financial assistant.”

AI is going vertical, it is changing how we interact with so many elements of our lives.

AI also is becoming human plus.

In a talk at the recent WOCCU conference in Singapore, keynoter Shivvy Jervis warned that digital technologies – think Erica, Amazon’s Alexa, etc. – are becoming “more human.”

You bet.

She added: “Even as we are becoming more digital, I believe digital technologies are becoming more human.”

And we are embracing them.

Hotels for instance are racing to equip rooms with Alexa to answer our questions (when does the restaurant open for breakfast?) and to perform simple chores such as raising the room temperature and turning off the desk lamp.  We are becoming accustomed to dealing with these digital intermediaries – I have three Alexa’s in my house plus a Google Home device – and we like them.

Why should I call a human to find out if a check cleared when I can ask Alexa? Many, many credit unions now are rushing to go live in Alexa and what this adds up to is a lessening of the importance of the human face of the credit union.

Nobody is suggesting that humans aren’t important to credit unions and their members. Of course they are, and that is why I urge credit unions to invest in retraining branch employees to move from transaction processing to financial consultants.

People can – and should – be a credit union assets because members will still come into the branch and call into the call center.  It’s just that fewer and fewer of us will depend upon those channels as primary avenues for financial services.

That means the smart credit unions – the ones that will survive – are investing in their digital transformation.  That is the future of financial services, that is where the wars will be won.  Take a deep dive into big data, into mobile banking, and – absolutely – into AI tools such as Alexa and more.  

A decade from now it will be considered absolutely normal to talk with a computer about one’s finances. You need to be there sooner.

And you need to accept that tomorrow’s battles won’t be won just because you have “the best people.” Which you may have.  But a lot more – mainly digital – will figure into choosing winners and losers and you need to be in the thick of that game to remain a competitor.

Be there.

 

Digital Transformation and the Old Fashioned Con

 

By Robert McGarvey

 

For CU.20

 

Suddenly there is a stampede of self-professed experts who want to guide your credit union through its digital transformation.

Just one problem: quite a few of the experts may be bluffing.  Or full of wishful thinking. Or maybe they are just plain con artists.

It puts me in mind of Odysseus and his voyage past the Sirens in the early part of Homer’s classic poem.  They sing enticing songs but sailors who heard them and sought to get nearer were lured into shipwrecks.  

What did Odysseus do? He plugged the ears of his crew so they wouldn’t hear and he had them tie him to the mast so that even when he heard, he couldn’t act.

Some credit union CEOs really should think about having themselves tied to the vault to prevent them inking a digital transformation deal, and plugging the ears of other executives might not be out of line.

Not when so many tempting, sweet songs are getting sung.

Face this reality: just about every credit union needs to be plunging into a digital transformation because how and where and when we bank has been undergoing massive change in the past quarter century and the changes will continue.  Almost certainly, for instance, the main banking touchpoint for most consumers will become a smartphone. For many it already is. Many of us no longer write checks. Many haven’t been inside a branch in a year or more. The changes keep on coming.

Credit unions need to react, to respond, to plot a path through the digital tomorrow.

Many credit unions won’t survive.  They won’t transform fast or thoroughly enough.

But credit unions actually are well positioned to digitally transform – once they decide they want and need to.

The typical credit union can be more fleet footed than most banks.  Banks have vast legacy branch systems that increasingly seem like so much deadweight. But many bankers, by virtue of their personal pasts and their institutions’ balance sheet, are wed to their branches.  They will pay a price for that.

How should a credit union digitally transform?

It starts by knowing yourself. What does the institution stand for? What does it want to be in 10 years. Who are your members? What do they want from a financial institution?

The next step: look at the institution’s digital contact points and ask how they can be better? How can they better serve members? Most credit unions have blah online banking, their mobile banking is equally blah, and, sure, there are plenty of excuses about this – but it’s probably not going to be good enough.

Today’s comparison isn’t with the community bank down the street. It’s with Chase and, even scarier, with Amazon, Netflix, and the other big online players. Can you digitally compete with them?

What’s your busiest branch?  Your online banking site. And the mobile app is the next busiest.  How much time do you spend optimizing those channels?

You also need a digital marketing strategy, probably built around Facebook, definitely also a lively website.

A small sign in front of a branch is not 21st century marketing.

Most of us will start, and end, our search for financial institutions online. You need a plan for gaining visibility there.

You can’t do all this alone? Just about all credit unions will need to bring in fintech partners – but know that last year’s technology partners may not be right for helping chart your digital transformation,

Many credit union technology vendors reap profits from the status quo which, frankly, as far as technology goes is primitive in the credit union world. But the profits say it’s not in their interest to rock this boat and so they don’t.

Understand this: it’s simply crazy that you can’t use the mobile banking platform you want because it doesn’t easily or cheaply interface with your core  And so a system that may be 20 years old, or is it 40, is dictating the technology landscape?

But so it goes at many credit unions.

What vendors can help you?  Search for partners with rich fintech cred.  Worry less about credit union bona fides and, for many credit unions, their first question always is, what credit unions have you worked with?

That may not be good enough.

What you want are guides who can lead you into and through the digital wilderness.  

Pick wisely.  But pick boldly.

Some years ago the CTO of one of the world’s biggest banks told me what he did when his CEO tasked him with getting a mobile app for the bank.  He downloaded many of the most popular apps at the time, spent a weekend absorbed in them, went to the office on Monday with a list of the 10 or so he liked the best.  None of those apps were at banks. Not a one. He put HR on finding out the names of the key developers, they called in people for interviews, and within a week or so he had assembled a project team to get his bank on the phone.

Was he concerned that none of the developers had banking experience? Not in the slightest. His bank, he said, had hundreds of executives who could add in banker smarts.  What he needed was people with digital smarts and he knew he wouldn’t find them at banks.

Do likewise is my advice.

Want inspiration for a credit union transformation? Read the story of Partners FCU.  

Credit unions are doing this.  

You can too.

 

CUNA: Are the Eyes Wide Shut?

 

By Robert McGarvey

 

For CU2.0

With trumpets loudly blaring, CUNA has announced a new $100 million campaign, called “Open Your Eyes to a CU,” to awaken the country to the magic of credit unions – and just maybe keep the movement alive.

Questions multiply. Is this campaign needed?  Is CUNA the one to lead the charge?

CUNA CEO Jim Nussle laid out his case: “The future of our movement depends on more Americans than ever opening their eyes to everything a credit union offers them. By leveraging modern digital media tools to reach the right consumers at the right time, we’ll create a fresh image for credit unions and challenge their assumptions about who we are and what we do. When they open their eyes to a credit union, they’ll be pleased by what they see.”

“We can’t afford to wait on the sidelines any longer,” said Nussle.

Nussle added that banks outspend credit unions 43 to 1 on marketing.

Know this: five banks each spend over $1 billion annually on marketing.  Chase alone spends over $2 billion annually. Citi and Bank of America spend around $1.4 billion apiece. For a budget in the range of $100 million, look at Fifth Third or Santander – and if you don’t have a clue what they are doing, join the club.

Chase alone spends 20x what CUNA is talking about. 20x.

And the non banks spend even more. They are devouring the home mortgage market and just maybe checking is next.

That has to give you pause.

What are credit unions saying about CUNA’s plan? CUToday ran this: “I have heard three different reactions—like the tale of the three bears, and I don’t mean to be glib about this. But one says it’s too much, another says it’s not enough, and the third says it’s just right,” Nussle said. “This has been the reactions.”

Let me add a fourth reaction.

Start with the reality: credit unions are vanishing.  CUNA showed 5757 credit unions in February 2018, down 240 from February 2017. If the current rate of closure continues there will be 3000 credit unions in 2028.  In 1960 there were 10,000 federally chartered credit unions per NCUA.  

There is no way to sugar coat this.  Many credit unions – literally thousands – are on life support.

Should they trust the CUNA campaign to prop them up?

CUNA spells out its plans in more detail at this website.  Find the password for entry here.

What do I think is missing in CUNA’s planning? A glaring lack is substantial involvement by experts with  digital gravitas.  Where are the gurus with Google and Facebook and Amazon on their resumes? I’m not seeing that. I’m not seeing the brainiacs from fintechs, or the slick marketers from fringe agencies.

Credit union people are great people. But I just don’t see traditional credit union people alone leading the movement out of the torpor it finds itself in.  

There needs to be new, edgy thought leadership.  Boat rocking innovation.

Credit unions cannot match the budgets of big banks. But they could outdo them with creativity and with an embrace of revolution.

I don’t see that with CUNA’s efforts. There’s a well meaning messaging guide at the site – maybe I’m missing it but I don’t see anything that isn’t obvious.

That’s the trouble with what I see in the whole effort.

Obvious – painting within the established credit union lines – isn’t what’s needed today.

Credit unions need to wake up and embrace the belief that radical change is required.  Really, really radical. In both operations and messaging.

Credit unions are at a crossroads.  Many will die – unless there’s a wake up realization that utterly different approaches and different tactics are needed now.

Part of that, I strongly believe, is for credit unions to band together – and also for credit unions to leverage strengths with other kinds of cooperatives such as rural electrics and agricultural.  

When I look around, I also see quite a few credit unions succeeding – on their own, in their local markets.  A credit union is a local business and success will start locally.

Ask yourself:  What are we doing to embrace a digital tomorrow – not just in marketing but everywhere, in every operation of the credit union?

Embrace tomorrow.  It’s coming and it doesn’t care if you want it to or not.

What are you doing to be ready?

 

The Best Credit Union in Every State: The Forbes Rankings

 

By Robert McGarvey

 

For CU2.0

 

How does your credit union stack up against competitors?  A 21st century reality – especially as fields of membership have broadened – is that credit unions do compete against each other. Rankings matter. But, just maybe, they also could matter a great deal to the movement as a whole.

Paradox? Read on for the unraveling.

Probably the biggest competition is from the money center banks with massive marketing budgets, and very talented marketers spending the money.  But many consumers will in fact decide between two credit unions. A lot belong to two credit unions – I personally do – and in that case there usually is one institution that is the winner, the other gets a thin slice of business.  What does it take to be the top credit union?

A new ranking is out via Forbes and market research firm Statista and the result is Best-In-State Banks and Credit Unions.

It joins a crowded ranking field.  Nerd Wallet, J. D Power, Money Magazine, and others have been busily ranking financial institutions.

So how do Forbes-Statista arrive at their rankings? Here’s the explanation: “Statista surveyed more than 25,000 customers in the U.S. for their opinions on their current and former banking relationships. The banks and credit unions were rated on overall recommendations and satisfaction, as well as five subdimensions (trust, terms and conditions, branch services, digital services and financial advice).”

The biggest institutions are excluded from the rankings.  Chase, B of A, Wells, and about 10 more banks with operations in at least 15 states were excluded.  The only credit union with enough reach to be excluded is Navy Federal.

In every state, from one to five institutions were named “best.”  All counted, 124 banks and 145 credit unions were named best.

Importantly, credit unions beat banks.  Said Forbes: “Credit unions, which are member-owned financial cooperatives, outpace banks with an average score of 80 versus 75.2 for banks.”

“Customers prefer credit unions because they themselves are the shareholders,” says Statista CEO Friedrich Schwandt in Forbes. “This is somewhat in keeping with the motto ‘Small is beautiful.’”

Take note: win or lose, this is a story that every credit union should be getting out. That’s because credit unions as a group rocked in the rankings.  To me, it’s just about irrelevant which institutions actually won. What matters more is that lots of Americans applaud what credit unions are doing and they prefer credit unions over banks.

Get that message out.  Don’t be shy.

Of course you want to know which were the highest rated credit unions.  Here’s the big winer: Louisiana based Barksdale Federal, with $1.34 billion in assets, with around 20 branches, mostly around Shreveport, scored 94.93.  

Connecticut’s Thomaston Savings Bank scored 95.4, the highest rating in the survey. Its assets are just over $1 billion.

A powerful conclusion: $1 billion gives an institution enough bulk to play hard ball, successfully.  Neither of the winning institutions is a powerhouse. But they are much liked by those know them. You don’t have to be a money center bank to wow consumers.

That is a good news for the movement story

And it is getting out.

Right now, many of the top credit unions in the Forbes research are issuing press releases to announce their score.

CUNA, too, issued a press release touting credit union ascendancy.

My advice to any credit union that scored high in the ratings is to issue a press release. I cannot promise that a Forbes victory will bring in a lot of new members but I will say it is very good to get out the news that many credit unions in fact rank among the best financial institutions.  A lot of consumers persist in seeing credit unions as musty, dusty oldfashioned places and that just is not so.

Publicly celebrating victories is way to dispel those old myths.  

And one credit union’s win in many ways helps the reputation of all.

How did your credit union do in the ratings?

My principal credit union – Affinity in New Jersey – ranked best in the state with a score of 83.32.

The credit union I belong to in Arizona did not finish in the top three. I have no plan to change credit unions to join a higher rated institution but, honestly, I make small use of this local credit union anyway.  It’s fine for my purposes.

Sure, credit unions compete with each other – but probably the biggest hurdle to new members are beliefs that credit unions are closed universes with tight membership restrictions and also that they just aren’t modern financial institutions.

That’s why, win or lose, in these rankings, I see it in the interest of all credit unions to get out the word about how the industry scored in these ratings.

The bottomline: tell people about the Forces rankings, tell them how well credit unions did, and tell them they can in fact – easily – join a credit union.

 

The Cooperative Advantage: Are You Using It?

By Robert McGarvey

 

For CU2.0 

 

 

Credit unions are cooperatives – although not all know it.

Now you do.

But the important reality is that, as a cooperative, a credit union has a potentially massive ecosystem to tap into, composed of like minded cooperators.

Few credit unions mine that vein.  It’s a mistake. A huge mistake.

I have often heard from executives at cooperatives – agriculture and rural electric in particular – that they just don’t get why credit unions in their region aren’t reaching out to partner in joint venture marketing initiatives to get out the message that cooperatives, by their very nature, are entirely different from for profit businesses.

They exist to serve members. Not to make profits for shareholders and a few owners.  

That is as big as differences get.

So, how big is the cooperative universe in the United States? Nobody knows, not with any precision. In its 2016 annual report the National Cooperative Business Association wrote this: “In 1997, the U.S. Census Bureau stopped identifying the cooperative business sector in any of its census or business reporting surveys. Since then the only available data on co-ops came from federally-supported research by the University of Wisconsin Center for Cooperatives in 2007. That study found that there were 29,000 cooperatives in the U.S. that account for more than $3 trillion in assets, more than $500 billion in revenue, and sustain nearly two million jobs. NCBA CLUSA now estimates that there are closer to 40,000 cooperative businesses in the U.S., but census data is needed to confirm that number.”

In another metric, the National Cooperative Business Association annually releases a list of the biggest 100 co-ops.  Here’s the 2017 list.  Note that Navy Federal ranked as the eighth biggest cooperative.  Pentagon Federal is 65. BECU is 88.

There are many big brands on the list: Land O Lakes. Ace. True Value.  Blue Diamond. Ocean Spray. Cabot Creamery. Welch Foods.

There also are many rural electric co-ops that rarely are known outside their locale but where they serve they usually are well known and well respected. Many of them, by the way, now are also extending into offering high-speed Internet to their rural customers who thus far have mainly been excluded from the digital revolution.

(The United Kingdom, incidentally, has much better data about cooperatives. Here’s a snapshot from a  recent annual report: “The Co-op Economy 2018 report highlights how the UK’s 7,226 independent co-ops turned over £36.1bn last year, contributing 1.9% to the UK’s GDP of £1.9tn. This represents an increase from the £35.2bn in turnover in the previous year. Co-ops also employ 235,000 people, compared to 226,000 in 2017. Their membership has grown from 12m in 2017 to 13m in 2018.”)

Very possibly cooperatives are as important in the U.S. economy. Just think of the many unheralded agricultural cooperatives, for instance. The numbers add up.

What’s the point? Here it is and it is sharp: what is your credit union doing to co-market with cooperatives in your location?

The answer – typically – is nothing.

That’s a mistake. Loyal customers and members of cooperatives already are convinced of the benefit of a co-op.  You don’t have to persuade an REI member that a cooperative is a better way to do business. They already know.

What can credit unions do with cooperatives? Think of jointly sponsored events, even a co-op fair where a half dozen or a dozen co-ops come together, offer samples and information to guests, and generally talk up the cooperative difference.

Print up a short history of the Rochdale weavers and how their determination to create a better way established the cooperative framework we still follow 175 years later.  I have never talked with anybody about the Rochdale weavers and their principles and not left that person impressed with the cooperative difference.

Members of cooperatives are prime potential credit union members. Ask them. Woo them. Ask local cooperatives for help in reaching out to their members.

Few credit unions take this marketing approach and there is no good reason why not.

Many credit unions have lost their founding SEG – once the bedrock relationship of most credit unions – but now there are thousands of like minded cooperatives to joint venture with.

What’s stopping you?