Zelle vs Venmo vs Your Credit Union

By Robert McGarvey

The big guns are blasting, consumers are switching to p2p, mega banks are cashing in and where exactly does that leave you?

Several reports now are out on p2p and the inescapable conclusion is that Americans like p2p.  A lot. Many billions of dollars worth.

In a report written by Cornerstone’s Ron Shevlin and commissioned by Q2, Shevlin said “Consumers will rack up roughly $478 billion in P2P payments in 2018—a little more than half of that going through their banks or credit unions.”

Hear more from Shevlin in his CU2.0 podcast here.  It’s a lively look at “Is the Party Over?”

Surprisingly, PopMoney – once written off as dead by many – is at least on life support, per Shevlin’s research.  He said 7% of consumers use it. Will that number grow? Hard to say but PopMoney does not look like a big winner in this race.

The big winners are financial institutions – account to account transfers – and also big bank owned Zelle and PayPal owned Venmo.  Also PayPal itself.

Per Shevlin’s numbers 48% of consumers use PayPal.  27% use bank p2p. 22% use Venmo. 12% use Zelle.

But money talks and in 2018 transaction volume Shevlin shows banks ahead at $172 billion in p2p.  PayPal logs $142 billion. Zelle comes in at $122 billion. And Venmo lags at $64 billion.

A Pymnts p2p report offers another calculation: “Venmo posted an 80 percent spike in transaction volume, hitting $19 billion in the fourth quarter of 2018, according to PayPal’s most recent financial earnings release. When it came to total P2P volume, including transfers sent through the core PayPal service, the Q4 volume hit $39 billion.

That last figure was ahead of Zelle’s reported payment volume of $35 billion during the fourth quarter of 2018, but there’s a hitch to that — that $39 billion was for the entire PayPal network, not just Venmo for that quarter.”

Slice the numbers as you wish, a clear takeaway is that a lot of consumers are all in on p2p.  

Another takeaway, per Shevlin, is that this is not a winner take all contest.   “Roughly half of consumers between the ages of 21 and 53 use three or more providers. In contrast, just about a quarter of Boomers do so,” wrote Shevlin.

Surprised? Don’t be. How many of us use just one credit or debit card? Personally I have three or four in active use and that’s a rather typical number.  Apparently similar shows up with p2p tools too.

Wrote Shevlin: “Banks and credit unions are getting a share of the [p2p] pie—and the expansion of Zelle may further drive volume to financial institutions—but they will have to operate in an environment where consumers make choices on which P2P provider to use on a transaction-by-transaction basis, and will have to learn how to provide value in a multi-provider world.”

Incidentally, credit unions and smaller community banks are in fact embracing Zelle.  The Pymnts report noted that, per Zelle, 77% of FIs in its network state assets equal to or less than $1 billion.

The bottomline action item that emerges from the new research is that your credit union needs a p2p strategy. Sitting on the sidelines is not a smart move.  Consumers, especially younger ones, want p2p but there is ample evidence that many Baby Boomers too are using the tools (if only to shift money to their young relatives).  

Is PopMoney alone good enough? So think both of the credit unions I belong to — it’s the only p2p tool on offer by them – but the reality is that I use PayPal multiple times monthly. I do not recall the last time I used PopMoney but it was many years ago.  I also have Zelle connected to a Chase account.

So my credit unions are sidelined from my p2p, except that one is used to fund some PayPal transfers. A thankless task.

The question for credit unions is simple. Do you want to be an active player in p2p – or do you want a minor role?  To go active my advice is to look hard at Zelle and definitely also PayPal and Venmo.

P2p has become a mainstream money movement tool.  It shouldn’t be ignored. Give your members the tools they want and will use. Ask them what they want. And listen to them.

Find out more about CU2.0 and the digital transformation of credit unions here. It’s a journey every credit union needs to take. Pronto.

Where Would You Open a New Account Today?

By Robert McGarvey

Direct question: if you were opening a new account at a financial institution today, for yourself, perhaps for a child or another relative, where would it be?

It can’t be at your present employer.

That’s the only exclusion.  

So where would you open it?

A few months ago I opened a new account at a Phoenix credit union with a branch closest to my home and when I opened it, I did not bother to put a five-figure deposit into a savings account because the rate was pitiful,

Still is.  0.5%. I just checked.

A simple checking account pays exactly 0.0.

Oh, and opening an account using only online tools at this institution proved impossible. I had to visit the branch to conclude the process.

Yes, I was determined to open a credit union account. So I persevered. Will other consumers? 

Look at your institution through the eyes of a prospective new account holder. What do they see?

Do you like what they see?

Hold that thought and now focus on this: Today’s email brought a press release from MagnifyMoney announcing its rankings of the best online banks.

Many of these are institutions with robust advertising and marketing budgets. Consumers know about them. Will that consumer think of them – or of you – when they want to open a new account?  And when they compare the best online banks with your offerings, how do you stack up?

The best online bank, per MagnifyMoney, is Ally which of course dates back to 1919 and its former name GMAC.  Its longevity is as good as just about every credit union.

Ally pays 2.2% on its savings account.  0.1% on checking. 0.9% on a money market account.

How do you stack up?

Also high ranking in the MagnifyMoney scoring are Synchrony, Goldman Sachs, Barclays, and Capital One 360.

Vio won honors as the best new online bank. It’s a division of MidFirst bank.  Savings pays 2.39%. It promises online account opening in less than five minutes.

Again, the question is: how do you stack up?

A shrewd consumer just might find the smart move is to open a checking account at your credit union – and to park other money in savings at Vio.

Many executives at credit unions see free checking as the gateway relationship that leads to other relationships. But what if it isn’t?  Especially not today when it it is easy for a consumer to shop around online and to open new accounts at a variety of institutions. Maybe one for checking, one for savings, a third for a credit card, and a fourth for a car loan.

Then where is your business plan that revolves around free checking?

About now exasperated credit union executives will shout that the consumer should open an account at a credit union, instead of a for profit bank, because that is the right thing to do and it helps keep more money in the local community.

Yes, absolutely true. I agree.

The trouble is, not that many consumers agree.

In fact research reported by The FinancialBrand is adamant that consumers “know diddly squat about credit unions.”

64% of non members are not familiar with credit unions.

33% say there aren’t enough branches. 25% say there aren’t enough ATMs.

30% say it’s difficult to find a credit union they can join.

Sure, it is easy to say the consumers just don’t know – but we already stipulated they don’t know diddly squat.

They don’t and that is what makes the moral imperative argument ineffective.  It just can’t be counted to persuade that many consumers to go with a credit union.

Why aren’t the trades, the larger CUSOs, and the largest credit unions pushing the credit union advantage? Why haven’t they mounted powerful – effective – campaigns? Why don’t we see high profile influencers who are happy to act as evangelists for credit unions and the cooperative way?

I don’t know why but I sure would like to hear from the big players.

Another question: why are many of the largest credit unions yanking “credit union” out of their names?

The bottomline is simple. Credit unions, to win new accounts, need to work very hard to offer products that are competitive with the offerings from the online banks.

That’s not fair? It ignores the costs involved with brick and mortar?

True enough.  So what should your credit union do if in fact you cannot match the rates offered by online banks?  Double-down on the credit union advantages. Make them the cornerstone of your advertising/marketing. Educate consumers about credit unions. Make it an ethical argument. Go local, go self-ownership. Those arguments will resonate with consumers who just may want to open an account in an institution where they are an owner rather than with an online bank with better rates.

Talk about the Rochdale Principles.

Sell cooperatives and credit unions because – really – they are the better way. And many consumers will get that message. But first you have to tell it to them.

The Best Credit Card for Business Travelers

By Robert Mcgarvey

Put three business travelers at a Holiday Inn bar and around 9 p.m., after drinks have flowed for maybe three hours, toss out this topic – what’s the absolute best credit card for business travel, the one you won’t leave home without – and then hastily back off.

That’s because fists and bottles may start flying.

Nobody gets worked up debating the best domestic carrier – they all suck so why fight.

Or the best business travel hotel. Who gives a whit about Hilton vs Marriot vs IHC?

With the best bank there may be a little debate but, really, we all know the big banks stink and therefore the best answers are going to be curve balls. (Here’s my answer by the way.)

But the real fisticuffs come out when the debate is about credit cards because we all have them and we all have opinions.

The trigger for this column was a recent New York Times story headlined “Best Credit Card for Travelers? Probably Not One From an Airline.”

And right at jump I had to disagree.

Sort of.

According to the Times, your best bet for a travel card is Amex Platinum ($550) or Chase Sapphire Reserve ($450) — “they provide hefty credits that can be used with any airline to cover expenses like checked bags and in-flight purchases, along with other benefits like access to airport lounges.”

Personally I’ve had the Platinum card for years and I swear by the Centurion lounges, I like the annual $200 credit for Uber (dribbled out in monthly $15 tranches and a year-end bonus), the $200 airline fee credit (against checked bag fees, etc. – applicable only to one airline designated annually), free Priority Pass membership, reimbursement for Global Entry or Pre (I used it for Pre), and free Boingo Preferred WiFi access at many airports. There’s also 5x points on air and hotel expenses. And still more stuff.  It is indeed a feature rich card that returns what I pay for it and more.

But it is not quite enough for me.

Maybe I do not think they are the best credit cards for travelers. But I do also have a United World Explorer card – $95 per year and for that I get 2X miles at restaurants, hotel, and United purchases. There’s a free checked bag.  $100 towards TSA Pre or Global Entry (I used it for the latter.) A couple club passes annually. And no foreign transaction fees.  

There’s also priority boarding which is why I have the card in the first place. That gives me the key perk that comes with low level elite status which I no longer have because I have no airline loyalty.  None.

I also have an American Airlines AAdvantage Aviator card.  Also $95.  2X miles on American purchases. Free checked bag. No foreign transaction fees.  

And, again, priority boarding.

If you don’t have elite status – and unless it is easy to get why bother? – an airline credit card gives you what you most want from status.

Do I need both the airline cards? Probably not. I got the United card (nee Continental) when I lived in Jersey City NJ, flew out of EWR and always flew Continental.

I now live in Phoenix and usually fly American, thus that card.

But until Platinum gives me priority boarding – and I do not see that day coming – I will have at least one airline credit card. When you do carryon and only carryon, which is how I’ve flown for over a dozen years, early boarding is a must.  Hanging out at baggage carousels to collect a gate checked bag just is so uncool. And a complete waste of my time.

So I pay a small fee (tax deductible) for a card that gives me early boarding and that combination of an airline card with Amex Platinum is to me just about perfect.

Except — there is one perk I definitely think a travel card ought to include and that’s free access to Authentic 8’s Silo or a VPN, to give travelers much better Internet security at airports, inflight, at coffee shops, and also hotels. Public WiFi is a trap, simply awful. I do not use it. And recommend others don’t unless they take security precautions. Sure, a decent VPN or Silo can be yours for under $15 monthly – Silo is better, but it doesn’t run on everything – but as a perk I’d take either over Boingo any day. Just saying, Amex.

The Best Bank for the Business Traveler

By Robert McGarvey

The best bank for the business traveler just may not be a bank. But understand this is a story where such claims carry asterisks with qualifiers.

What does a business traveler need from a bank? Nowadays it comes down to ATM access in most cases. I can tell you how to get the most free ATM access and will in a bit. I am a purist about this. I can tell you all the times in the past six years I paid for ATM access – exactly once. I quiver with rage at the thought of paying $3 or $5 or more to get $100 out of a machine. Plain wrong. Free is the only price I will pay.

And yet there I was five years ago in Las Vegas on a business trip and I had to do a wire transfer – it had to happen that day – and it occurred to me I had sufficient funds in a Chase account. I glanced at the website, decided not to bother with it, got in a cab, rode a few miles to a Chase branch and, whoosh, the money was on its way. Chase could not have been cooler about processing a six figure transfer. Yes, the money was going to a known mortgage escrow company, not a cousin in Albania, but still, this was frictionless. I maintain a Chase account and probably long will.

Nonetheless that’s not the institution I recommend for business travelers.

Look at most articles about why credit unions won’t work for you and, in most cases, a decisive reason is the sparseness of the ATM fleet. In truth a credit union with a fleet >100 is a rare beast. Some have just a single digit count of ATMs.

Yet I will tell you that a well chosen credit union will give you the broadest, deepest ATM access in the nation.

A 2016 count of bank owned ATMs found Chase with the most, around 18,600. B of A had a tad over 16,000. Wells Fargo had 12,800. PNC had about 9000.

But don’t think that therefore Chase or B of A or Wells is necessarily your best bank.

Much better is a credit union that belongs to the CO-OP ATM network or the CuLiance (nee CU24) network. CO-OP has around 30,000 ATMS in its network. CuLiance says it has more.

Joining either network requires the credit union to give fee-free ATM access to members of other, participating credit unions.

It’s a credit union perk that it is difficult to see how banks could match. You just don’t see Chase, B of A and Wells pooling their networks. No way.

Thousands of credit unions do. But not all. When opening a new account, always ask, are you a member of the CO-OP or CuLiance fee free ATM network?

There’s one more credit union perk: CO-OP shared branching which allows members of participating credit unions to conduct business in other participating credit unions exactly as though they were home. Need a wire transfer? You got it.

My principal credit union is in the shared branching network (and, no, I could not do the transfer through it because I did not have enough dough in that account).

CO-OP claims its network gives it 5600 shared branching locations. It says 1852 credit unions participate and that gives their 62 million members what amounts to a cross country branch network. (Wells Fargo has the largest branch network in the US with 5900 locations. Chase is second with 5200. But heads up. Big banks are shuttering locations so these numbers are dynamic.)

Does this mean a credit union is the best choice for the business traveler?

For many, yes. Not for all.

The exceptions are those with heavy international travel. Few credit unions offer enticing services for international travelers.

But Capital One 360 does, per Nerdwallet. It imposes no foreign transaction fees and it also does not charge for foreign ATM access (the machine owner may and probably will). It also has no account fees so it’s a good card to keep for just the occasional foreign trip.

That’s key by the way: I advise most of us to have several accounts. I do. One with Chase, one with a large credit union. I have a third account that bounces around so I can explore institutions (it had been with Capital One 360 but I moved it to a small Phoenix credit union and probably it will go in motion again – but I’m a banking nerd and don’t recommend this kind of shuffle to any who aren’t).

So there you have it. Have a credit union account – literally thousands offer free checking with no minimum balance – and also a Capital One 360 account and you are well covered, domestically and internationally. You will pay minimal or no fees, get the service you need, and may even start cussing about how rotten your bank is.