When Small Credit Unions Go, So Do the Big Ones


By Robert McGarvey

A chart in consultant Marvin Umholtz’s year-end CU Strategic Hot Topics newsletter jumped out at me and triggered a tsunami of worries about the future of credit unions.

Crunching NCUA data, Umhoeltz said there were 5480 credit unions as of mid 2018.  But get this: 3904 have assets under $100 million.

1454 have assets under $10 million.

Just 542 have assets above $500 million.

So what?

Here’s what: many experts I talk with tell me that the minimum size needed for credit union survival is $1 billion. Some scoff at that and say a well run institution with $500 million will do fine.

Nobody is optimistic about the future of micro credit unions.

But, increasingly, I believe that it is the micro credit unions that are the face of the movement and they are cause of some benefits that go to even big institutions.

Such as tax exemption.  No politician wants to give tax exemption to big credit unions that can go toe to toe with community banks – if only because community bankers continue to raise a loud, pained whine about tax exemption. But it is hard to turn down the plea of a micro credit union.

Small credit unions bring other benefits.  When credit unions “walk the Hill” – knocking on legislators’ doors in Washington DC – the ones who are likeliest to gain entry are the small institutions.  How do I know? Because CEOs of some of the biggest credit unions told me exactly that, that they ride in the wake of the small institutions.

But the terrible news is that as credit unions shrink in number it is the small ones that are folding.  Sometimes it’s because a longtime CEO retires and who wants to take over a small institution where the hours are long, the pay is low, and the responsibilities are high?

When a board can’t find a CEO increasingly it throws in the towel and merges with another institution.

Other credit unions give up because they can no longer keep up with government demands for BSA, AML, Patriot Act scrutiny of accounts and deposits.  

Sometimes, too, credit unions fold because they can’t figure out how to offer the technology that’s needed to stay current.

Occasionally, too, credit unions fold because they made hideously bad investments – think of the failures due to over exposure to taxi medallions.

But, really, bad investments are the lesser cause of closures these days. Now it’s mainly regulatory fatigue and inability to keep up in the personnel wars.

But this doesn’t mean small credit unions necessarily must close. They don’t.

Two years ago, I wrote a piece “How to Save Thousands of Small Credit Unions.”  

That article by the way noted that in 2010 there were 7486 credit unions.  That means 2006 closed in eight years. That’s roughly five a week, one every working day.

Wow.

In 2016 by the way there were 5916 credit unions.  Two years later there were 436 fewer.

Cue the bagpipe dirge.

For the big credit unions too because – again – they need the small ones.

In that 2017 article, I quote Jim Blaine, then CEO of State Employees Credit Union of North Carolina, the nation’s second biggest, thusly: “I hope we do a lot to help smaller credit unions. If the small credit union goes away, the larger ones will be in a mess.”

Blaine is spot on.

What can big credit unions do?  They can offer free ATM access for instance, that’s a big plus for members of tiny credit unions with maybe two ATMs. They can offer free management consulting. They can direct restless, ambitious, talented staff to cut the cord and take a job with a micro credit union, they can help spearhead innovative solutions, sometimes through credit union leagues, where small credit unions learn how they can join together to collectively hire a BSA expert or even a CEO (and, yes, there are cases where one person acts as CEO of multiple institutions).

Accept that the survival of small credit unions is critical to the survival of all and, suddenly, extreme actions start to make sense.

Word of advice: don’t shrug off the next death notice you read about a small credit union.

Because next the bells may toll for thee.

Tune into the CU2.0 Podcast for continuing thinking on credit unions, their challenges, and what tomorrow may bring.

Politics and Your Travels

 

By Robert Mcgarvey 

New research from the Chief Marketing Officer Council’s GeoBranding Center and AIG Travel slaps me in the face with the unexpected. Just 8% of us take politics, ethics, human rights, and prejudices into account when choosing a destination.

92% do not apparently give a fig about ethics or decency when picking a destination.

Color me shocked.

About one fourth of the planet consists of places I would not go due to politics – Tibet, Burma, Sudan, Syria, Honduras, Saudi Arabia among them.

Nor would I stay at a Trump hotel. I would not even go to a meeting in one.

I do not seek to impose my views on others. But they are my views and I try to live them.

Part of living them is knowing where I won’t go.

Where won’t you go?

My list doesn’t have to be yours. But we all need a list of where we won’t go. And we need to know why we won’t.

Some years ago, much of the world united in boycotting South Africa. That included travel.  And when the country changed, the boycott ceased.

Some need similar today, Why isn’t it happening?

Ethics are not the province of a political party or creed or nation. But ethics also are quite clear cut. There usually isn’t much doubt or indecision. Some place or somebody is good, or bad, and that is that.

As Socrates said the unexamined life is not worth living and core to living an examined life has to be integrating ethics into our decisions.

There are some countries and places that just are wrong. And I don’t want to support them with my time, presence, or money.

Security, stability and friendliness of a location rank as important to 36% of us in making travel choices, although I admit to some puzzlement how so many more say they value stability and security than ethics.  

Safety matters, absolutely. I would not go to Pakistan not because it is too lacking in ethics but because it just is too dangerous for me.  Its ethics are borderline but I don’t want to go there because of the lack of safety. If it were safer I’d have to give a harder think to ethics. But I don’t have to.

More puzzlement is that many in this poll cited anxieties about dangers as a top detractor to travel.

But maybe dangers to others – because of ethnic, religious or political differences – just aren’t a worry to some.

Nearly 50% of travelers told the pollsters that the internet and device connectivity make travel better and I agree but part of that better, in my mind, is more knowledge.  Including knowledge about ethics and local conditions. 

34% say that loyalty programs and perks matter when making travel decisions and that suggests a cruel dictatorship with a lavish loyalty program just might be fine for many of us.

Socrates never said ethical decision making would be easy. And of course he died because of his stubborn determination to hold to an ethical code.

Plato, Socrates’ student, enumerated four virtues- wisdom, temperance, courage and justice. When it comes to judging a place, justice has to be a paramount factor. Countries without justice are not places I want to visit.

Good news may be found on the generational front. Many millennials are keenly set on doing travel that is more responsible, more environmentally sound and, yes, more ethical. There is plenty of evidence to support the belief that millennials are rewriting the travel rules for the better, for all of us.  Just look at the wave of resorts that have banned plastic straws, for instance, and there is no good reason to insist on plastic straws. But it is millennials to whom we owe thanks for getting them banned.

Maybe millennials will succeed too in bringing us all to a higher state of ethical travel.

We can all hope. 

How to Avoid Merging Into Oblivion: Three Steps to Save Your Credit Union

 

By Robert McGarvey

 

For Cu2.0

 

Should you applaud, cry, or scream?

That’s my question as I read a Credit Union Times story headlined “NCUA Approves 14 Mergers in June”  — “Credit union consolidations for the first half of the year decline from last year.”

So far this year NCUA has approved 87 mergers which, CUTimes pointed out, is down from the 95 it had approved at this point last year.

Say 120 credit unions merge out of existence this year.  Where will that leave the credit union count?

According to CUNA in March there were 5644 credit unions.  That’s down from 6680 five years ago.

Do the math. In 2028, there probably will be under 4500 credit unions. Maybe fewer than 4000.

That kind of musing recently led marketer Bo McDonald to post a column at CUInsight headlined “The last credit union in America is….”  

He recalled Blockbuster – once ubiquitous in America, now largely forgotten. Are credit unions headed that way, he asked.

Good question.

It doesn’t have to end there but if credit unions don’t embrace the bleakness of their futures, the industry may well wind up as a footnote in business history books.

Big banks keep getting bigger. Chase, Wells Fargo, Cit, Bank of America are growing. They  long ago began measuring their bulk in trillions of dollars

And community banks and credit unions keep faltering. Add all credit union assets together and they about equal the holdings of one big bank.  Just one.

A sliver of good news in the CUNA data is that credit union assets and membership both are up.  

But you have to be worried about the question of when do credit unions become statistically unimportant.

And when does NCUA seem as needed as, say, an agency to regulate farriers and another to oversee typewriters.

It’s not that bad? Not yet. But the trends are plain.

There is a path to a brighter tomorrow. Technology, in its essence, is a great leveler. Smart, hungry credit unions can and are riding the digital transformation rails and are building institutions that will thrive for years to come.  Digital transformation has emerged as a must do for credit unions that want to survive and thrive.

Know that a healthy future is digital and that gets you moving in the right direction.

And then there is still more that needs doing.  Such as? Just three steps will help credit unions move into that brighter future and, you bet, this is all about rocking the boat. But when the boat is sinking, what does a little rocking matter?

Here are your three to-do’s:

Make big data your life blood.  Increasingly, data is the plasma that produces business health and credit unions have the ability to create big data insights that will rival what Chase and Citi produce. Communal data lakes are within reach and very probably will be up and running in 2019.

No, a credit union does not have enough data on its own – but when 1000 join together to share data, they collectively have what they need.

Make your mobile world class. Increasingly, too, mobile is the contact point that will matter to members (definitely not branches!) – but smart credit unions recognize that reality and at least some are busy developing their own mobile apps.

That’s a tough order for smaller credit unions – really any institution below $500 million in assets, which is around 90% of credit unions.  My advice to those institutions is to lean on your vendors, hard, and demand a mobile app that is as good as Chase’s and also Venmo and if they can’t produce, find a vendor who can.

Make your core system work for you, not the other way around. It’s ridiculous: many credit unions let their core systems, often 20+ years old, set their technology limits.  The limitations of their cores shape what online banking provider they will use, what mobile provider, often what payments processor.

That has to stop.  It makes as much sense as creating a shrine for an old Burroughs adding machine and saying daily prayers to it.

Start now to lessen the dominance of the core in your institution’s technology decisionmaking and, sure, I know that won’t be easy.

But going out of business isn’t easy either.

Think on it.

 

Bleisure and Your Travels

By Robert McGarvey

 

New research from Expedia owned business travel management shop Egencia says that we like bleisure add ons to business trips – kind of, sort of, maybe.

We’ve lately been bombarded with trend reporting – paid for by hotel interests? – that has insisted that bleisure  has been cresting, especially with Millennials, and for some years I’ve wondered just how accurate this reporting is.

I’ve also wondered if any of this is at all new.

The Egencia research throws light on this.

Understand, I have long personally added leisure in connection with trips to cities that especially interested me in that moment such as New Orleans (and its long recovery from Katrina) and Chicago (where I made a tour of deep dish pie purveyors and grew to like them, but not as alternatives to thin crust pie, just as something different) and Washington DC (which I have liked as a town since I lived there 45 years ago).

I also strongly believe that a little “bleisure” is just the right touch to just about every business trip. See below. But what I’m talking about doesn’t involve extending stays and adding room nights.

That’s from where I sit. What’s the actual fact?

Egencia waded into this to find the statistical realities.  It surveyed 9000 business travelers. And it has some real insights into bleisure.

One finding resonated with my experiences: “Destination location is by far the biggest factor in determining whether or not to take a bleisure trip, with 30 percent of North America business travelers prioritizing location.”

A fun location, the company said, is the #1 reason to extend a business trip.

Agreed. There are towns I have been to a lot on business and have never spent a second more. Las Vegas, for instance.  Houston is another example.  I’ve traveled to both, a lot, in the past decade and like them fine but haven’t seen any reason to prolong the trip.

My point: bleisure always has to be seen as a contextual choice.

Egencia has still other, rich data. A key finding: “Twenty percent of business travelers have foregone adding leisure portions to their trips because of how it may look to their employer. ”

That is, will your bosses think you’re a slacker if you add on a few days to a Phoenix trip to enjoy spa treatments at some of the country’s best?  If you think your boss will see you as a mooch, you’ll go straight home, suggested Egencia.

Egencia offered a qualifier: “Proximity to the weekend may minimize that perception, with nearly one-quarter of respondents saying this impacts their decision.”  Sure. When a meeting ends Friday midday – quite common with many conferences (although most attendees evacuate Thursday evening, in my experience) – what’s the harm in extending and returning home Sunday night?

When the meeting is a Tuesday-Wednesday affair, we have problems.

Another issue in my experience – not explored in the Egencia data – is the role of an at home spouse or partner. Do you really want to go out on the town in the French Quarter while your partner sits at home watching PBS re-runs?

Proximity to family, by the way, was cited as important by 16% of Egencia respondents in making bleisure stay decisions.

Either way, we are doing a lot of bleisure, said Egencia: “68 percent [of respondents] take at least one bleisure trip per year.”

74% of us are planning or considering a bleisure trip in the next six months, said Egencia.

20% made adding in bleisure a resolution for the year.

Is this a generational thing? Naw. The reality is that Millennials, increasingly, carry a bigger share of the business travel can. But that age group has done so, certainly since the 1970s.  Nothing has changed. Baby Boomers had such decisions to make in the 1970s and 1980s, it’s just that the word “bleisure” didn’t exist.

The choices did

Last advice which is my own bleisure prescription: always build in at least one personally important thing on every business trip. That can be a muffuletta at Central Grocery, a visit to the Warhol Museum in Pittsburgh, a walk through Central Park in Manhattan, a noon Mass at St. Mary’s Basilica in downtown in Phoenix – whatever catches your interest.  I have not always done that (let me count the trips to Las Vegas) and I regret at least some of those missed opportunities (not so much involving Las Vegas).

But I firmly believe that doing one personally important thing on every business trip makes those trips that much more satisfying. It doesn’t require adding on a weekend, just making a half hour for a noon Mass or a similar amount of time for some gumbo and a beer at Emeril’s.  And you don’t need a poll to know this is the right thing to do to add a dash of pleasure your life.

 

 

 

Why Are We Still Waiting for Biometric Authorization to Fly?

 

By Robert McGarvey

The other day I realized I can sign into checking accounts at two different credit unions with a fingerprint.  I can also buy just about anything with Apple Pay on an iPhone and a fingerprint.

So why can’t I get on a plane and fly to anyplace based upon a biometric measure?

If you are enrolled in TSA Pre, the government already has your fingerprints on file.  That data is there.

Clear, meantime, has rolled out entry – via a fingerprint or eye print – at a number of airports.  That’s a private service that the company says will get you through security in five minutes – and I like the idea of not fumbling for a driver’s license. So I may enroll.

But I may not just because I am cranky that the government and airlines are both dragging feet about deploying biometrics which, to my eyes, are potentially a lot more secure than photo IDs such as driver’s licenses and passports.

So why aren’t biometrics in greater use in US airports?

That’s hard to answer.  

There are tiny signs of progress. Right now, JetBlue is experimenting with facial scans for boarding.

Homeland Security is saying it wants to use facial scans of all passengers who hold visas on international flights.  

But there is no big push to speed up widespread biometrics adoption at airports, definitely not for domestic flights.

Is it because the technology isn’t there yet?

Nope. Financial services prove that biometrics are reliable. Big banks wouldn’t use them if they weren’t. Many, many organizations – including government agencies – also use biometrics for entry into certain buildings.  

Security – of our bank accounts and many companies and government agencies – rests on biometrics already.

The CIA – ironically perhaps – has been grumbling that increased use of biometrics , especially in foreign airports, may lead to blowing the covers of its spies.

This is technology that works – except when it’s not deployed.

Boil it down and there are two issues holding up adoption at US airports. For one there are grumbles about privacy lost – but personally if I had any privacy I lost it over the past 15 years.  Believing in privacy is as sensible as believing in the tooth fairy.

Reason two is that a kind of stinginess still prevails in airport security. The federal government does not want to pay for stepped up airport biometrics and neither, so far, do the airlines.

That might paint a pessimistic picture. But I am increasingly optimistic.

My hunch is that biometrics will come to airports sooner than many think, because they work and also because we the passengers will begin to demand them. Biometrics work and, in our everyday lives, we see that.  We trust them, we use them.

And the technology just seems to keep getting better.

Which should airports deploy?

I talked with the president of a large biometrics company and asked him a simple question: which biometric did he see gaining supremacy in the US?

Right now, in banking, there are many competing biometrics: fingerprints, face scans (selfies), voice prints, iris scans, retinal scans are all scrapping for attention.

Which will reign supreme?

He told me that was no longer the question. He claimed that more institutions are now offering multiple biometrics so individuals can choose the one that best suits them in the moment.  A case in point is the big bank USAA which now lets its customers choose among fingerprint, voice, or face.

The reality is that – probably – many of us will use all three, just at different times.  You might like a selfie, except when you are driving, for instance, in which moments voice might be the way to go.

At airports, to, it easy to see several biometrics put into place – maybe selfies without our active participation, possibly voice and/or fingerprint with our participation.

If the result is a surer identification of me – and I believe it would be – I am all in.

What about the people who are upset about privacy lost?  I hear that complaint but, honestly, since 9/11 there has been a steady erosion in our privacy. I do not applaud that but I acknowledge it and I am not going to pretend we have something we no longer do.

And remember the goal here is both more secure and faster movement at airports.

Biometrics will get us there.