Delta Is Betting You Will Pay Your Own Money for Better Seats. I’d Bet You Won’t


By Robert McGarvey


Delta Airlines is betting big that you will dig into your own pocket to pay to upgrade your seat – and they say they took in $80 million last year after they allowed customers to upgrade after purchase.  

They also say they will begin allowing passengers to pay for upgrades with miles.

Are you on board with this?

The problem of course is that many employers and clients simply refuse to pay for upgraded air.  When I began in the workplace 40 years ago, the standard policy – at two of my first employers – was that if a flight was over 2 hours, they would pay for first class (business class had not yet caught on).

But now I have exactly no clients who will pay for upgraded air. To anywhere. That means if I’m flying from Phx to Sin, it’s in coach.  For maybe 21 hours.  Ouch.

If I want upgraded comfort, it comes out of my pocket.

Same for you probably.

Delta insists we are opening our own wallets.  

Are you?

I cannot recall ever paying my own money to upgrade air seating.  Never. I do recall many cases where I used miles to buy upgrades but I rationalized it with the thought that client X had in a way bought the miles because I earned them on flights paid for by X and if I used them on another flight for X, all was right with the world.

I am not sure I am entirely correct about that. But it’s how my brain worked.

And mine is a brain schooled in travel by hardened 1970s road warriors who were sure it was a sin to spend one’s own money on a business travel.

Thus my deep hesitation to pay for a better airplane seat.

Indeed, I still cannot wrap my mind around paying actual cash, from my pocket, for a better seat.  I just will not do it.

Will you?

Skift, by the way, reports that Delta will generate two receipts.  One for the base fare, one for the upgrade. The idea is to hand in for reimbursement the base fare receipt and thus dodge any hassles from bean counters.

Skift also quoted Delta’s president this way: “the goal is to avoid ‘driving to the bottom’ by selling an airline seat as a ‘commodity.’ Instead, it wants to attract “people who are discerning who want to buy premiums and products and services.”

But wait. Airline seats on US carriers are “commodities” and are fungible.  Telling me they aren’t is presupposing massive gullibility on my part.

Interesting, however, is that per Delta’s CEO – as quoted by Skift – the carrier a few years ago sold 15% of its domestic first class seats (the rest were given out to folks like me, typically for no payment at all). Now Delta sells about 50% of its upfront seats and it wants to sell more.

CEO Ed Bastian added this: “One of the reasons why we moved into the paid upgrade opportunity, not only does it allow customers to provide certainty by being able to buy the experience, but we also have a very good product in our Comfort+, which we didn’t have in the past, so that for many of our loyal customers that were unable to upgrade, they now have a place where they can actually have an enhanced experience, versus prior years where you’d be in the main cabin.”

I’m still not in.  I long ago decided I could handle the six hour discomfort of flying from LAX to EWR in coach – it’s not that bad.  Really. I don’t eat the food upfront, I don’t drink alcohol on business flights, and I don’t want to sleep on domestic flights. I don’t do any of that in coach either, but so what?

So I can get what I want, at a cheap price, from coach.

Why would I spend my money to get a slightly upgraded experience upfront?

My answer is that I won’t.

What’s yours?

When I see subheads like this – from CNBC “Passengers are opening their wallets” what I smell is airline spin. Say it’s so loud enough and often enough and it just may be believed.

But not here.

The Non Bank Threat to Sharedraft Accounts: Why Your Lunch May Be Eaten


By Robert McGarvey


For Credit Union 2.0


You already know that non banks are fast in a race to seize a majority of home mortgages but the far, far worse news is that non banks may soon be grabbing your sharedraft business.

Credit unions have options. They can win this. But that will involve big changes in mindset.

Here’s a nudge towards that new reality: in November, the acting Comptroller of the Currency, Keith Noreika, said he believed it was time for a fresh debate on the role of non banks in traditional banking. Implied was an endorsement of a possible role for companies like WalMart in banking.

The current Comptroller of the Currency, Joseph Otting, has been on record supporting similar.

One more reason to worry: evidence mounts that a sizable slice of the population, mainly but not exclusively millennials, has been moving money out of banks and into other parking places. They are finding that just maybe they can get along fine without banks and credit unions.

Don’t assume a credit union future is a given. Ten years ago how many book and record stores realized they were at the end of the line?  How about consumer electronics stores? Now even grocery stores seem on life support, as WalMart on the one hand and Amazon-Whole Foods on the other seem primed to devour the market.

Banking services are very much in play.

Probably the most cogent arguing on this issue is from Ron Shevlin, now with Cornerstone Advisors. In a Snarketing post Shevlin points out that “the percentage of US households without a checking account dropped from 8.2% in 2011 to 7% in 201, and since 2000, deposits at banks have tripled.”

So,that means things are good? Nope. Shevlin continued: “there is a longer-term trend that will hamper financial institutions’ efforts to keep up the recent pace of growth. I have a name for this trend: deposit displacement.”

His point: huge volumes of money are shifting out of traditional checking and sharedraft accounts and into new vehicles such as health savings accounts, P2P tools such as PayPal, retailer mobile apps (think Starbucks, whose customers are believed to have multiple billions of dollars parked in their apps), also robo-advisors.

I’d add to the list the rise of prepaid debit cards which a growing number of consumers are using as a replacement for both credit cards and sharedraft accounts. Many billions of dollars already are funneled quarterly through the popular Visa and Mastercard prepaid debit card channels.

Personally I’ve had a Bluebird card, via Amex, for some years. It even comes with a checkbook option. 

I also use PayPal multiple times monthly, to pay some recurring charges (Netflix, NYTimes) and to put money in the hands of relatives and friends.

An advantage of options such as prepaid debit cards and P2P tools: most involve no credit check. Set up is nearly instant. The friction has been removed from the system.

Go ahead and attempt to open a new sharedraft account at a credit union near you where you have no present relationship. Word of warning: it won’t be easy. And it may be impossible to do it online. Just sayin’.

Why is money moving out of checking accounts? Simple: there often is no benefit to the member in keeping money in that account. And many accounts involve all manner of fees deemed sneaky by many consumers.

Try to use a prepaid debit card to buy groceries at Safeway and if the attempted charge is over the balance, there’s only a little embarrassment as the checker says the card has been declined. Try to pay with a checking account and there is maybe an overdraft fee of perhaps $35. For what? A few bits and bytes burping in the matrix?

Warned Shevlin: “Deposit gathering for all financial institutions will become more difficult over the next five years, as this trend toward deposit displacement accelerates. Combating deposit displacement means reinventing checking accounts.”

Read that again. It’s time to re-invent checking and sharedraft accounts. Burn the fees. Banish the friction. Make the accounts easy to use, easy to initiate, easy to predict the costs involved. Create incentives for use of the sharedraft account.  

Does your credit union offer a prepaid debit card option? Few do. But many, many big banks do, from Chase to Wells Fargo.

Navy Federal wins kudos for offering a prepaid debit card. How many other credit unions do?

Best advice: urgently slate a meeting to reinvent your sharedraft account. That’s just about the only way to stop the displacement of funds that Shevlin warns about. It will happen unless you take prompt steps to stop it.


Are You Less Safe in an Uber?


By Robert McGarvey


Blunt question: do you feel less safe in an Uber or Lyft than you do in a properly medallioned taxi driven by a properly licensed taxi driver?  The National Limousine Association is betting that you do – at least that you will after seeing its fear provoking TV ads.  

The pitch is that ride sharing drivers haven’t been drug tested or thoroughly background checked.

But licensed taxi drivers are both, said the National Limousine Association.

Ask the passengers of John Worboys about that. A black taxi driver in London – thus a certified possessor of “the knowledge” – in 2009 Worboys was sent to prison for sexually assaulting at least 12 women, usually after drugging them in his cab.  He is said to have been one of the most prolific sexual assaulters in UK history. Over 100 women stepped forward and accused him.  Police believe his victim count could have exceeded 500.

Closer to home there is Sherman Jackson II, owner and operator of Sherman’s Safe Ride in Butler County, OH, who was charged with sexually assaulting two Miami University students. (Jackson denied the accusation.)  

In Washington, DC, Yared Geremew Mekonnen, a taxi driver, was arrested for raping a passenger who, incidentally, had fallen asleep in the backseat of Mekonnen’s cab. When she awoke, she said he was raping her.  Mekonnen too denied the allegation.

In Chicago, a taxi driver was arrested for raping drunk Loyola students, according to claims by the prosecutor.  

The list could go on. Travis Bickle isn’t the only criminal taxi driver – there are plenty of deviants in real life.

I also could quickly assemble a collection of cases involving Uber and Lyft drivers. Absolutely.

My point is that the National Limousine Association is just plain ignorant if it believes it can make a case that passengers feel less safe in an Uber than a licensed taxi and that they should feel less safe.

In many cases, by the way, ride share drivers are former taxi drivers who say they make more money with the ride share outfits. At least that’s what I have heard from a number of drivers.

Understand: I personally drove a taxi, off and on, in Boston and Cambridge, Mass.  I had hackney licenses issued by both towns. As I recall, the vetting – conducted by the city issuing the license – consisted of taking my fingerprints and running them through an FBI database.  


In Phoenix, where I now live, getting a taxi license apparently involves providing a criminal background check.  

I am not anti taxi driver.

But I am also not anti Uber driver.

I am against inflammatory ads that hope to stoke groundless fears however.

Look, background checks aren’t that hard.  Recently, I offered myself as a volunteer in the Catholic Church in Phoenix.  I learned that volunteering requires watching a “Safe Environment” video and filling out a fairly extensive personal history as well as providing three or four personal references and agreeing to a criminal background check.

That may seem a lot but given the Church’s recent history it quite clearly is necessary.

If I can do that much to serve as a volunteer, surely ride-share drivers can do similar.

At Uber they do in fact – which makes the National Limousine Association argument that much more baffling.

Lyft does too.  

Also, with Uber and Lyft your ride is logged by the computers.  There’s a record of the route and time. That’s more than usually documents a taxi ride.

I am not saying that therefore your safety is guaranteed in an Uber ride – or a medallioned yellow cab. Use your wits. If you feel unsafe, get out.  Don’t doubt your instincts.

But very, very probably all will be well, no matter which transportation mode you choose.

Oh, one last slap at the National Limousine Association. A few years ago I was a passenger in a licensed Journal Square, Jersey City taxi where the driver’s license was prominently displayed. I look at such things, probably because of my personal background.

In this case, the photo caught my eye because it was an entirely different person!

And I’m supposed to feel safer in a taxi?

That ride proceeded without incident by the way.

They almost always do.


Say Goodbye to “Do Not Disturb” Signs at Hotels


By Robert McGarvey


The Orlando Sentinel has the, well, deeply disturbing news about the apparent demise of “Do Not Disturb” signs at four Disney Florida hotels, with the door left open to expanding the policy to more hotels.  

The paper reported: “The tighter security measures come months after an Oct. 1 shooting in Las Vegas, where a gunman shot from the 32nd floor of the Mandalay Bay casino-hotel tower and killed 58 people, wounding hundreds more.

“Disney declined to say whether the shooting prompted the change for its policy but said it made the decision for a variety of factors, including safety, security and the guest experience.”

Excuse me but this is even clumsier than the typical hotelier response to out of the normal events.

Other hotels – see below – are beginning to hop aboard this trend.

It makes no sense and, for many of us, it represents a substantial inconvenience.  I say that because over the years I have heard from many dozens of business travelers who routinely pop the “Do Not Disturb” sign on the room door when they check in and it stays there until they check out a day or two later.

Of course if a stay is longer just about all business travelers will surrender to the need for fresh towels and a bit of buffing up of the accommodations and will take off that sign – but as soon as housekeeping has done its job the sign goes back up.

Some business travelers have complained to me about the theft of personal electronics from their rooms, iPads especially – and it’s a rare inroom safe big enough to hold a full size iPad. Others tell me they suspected somebody had fiddled with their computer or maybe sifted through papers – looking for intel on a competitor?  Still others just don’t like the idea of a stranger having private time with their belongings even when that stranger is an employee of the hotel.

These business travelers will just love Disney’s new “right to enter” policy which replaces “Do Not Disturb” signs with “Room Occupied” signs and explicitly gives the hotel a right to enter daily

If you have a problem with this, Disney told the Orlando Sentinel it will discuss the issue with concerned guests individually.

Lots of people will have problems so Disney better be prepared. When travel blogger Gloria Atanmo surveyed her Facebook followers, 55% said they would rather housekeeping not tidy their rooms.  Mainly for privacy reasons.

A problem with this new Disney policy – just one of many problems – is that it sets on a collision course the desire of housekeepers to clean an unoccupied room with the desire of many business travelers to never let their unoccupied room be entered to safeguard their own privacy and security.

Many hotels of course have a policy of not allowing housekeepers to enter a room when the guest is present, I hear because of concerns over incidents where guests have sexually harassed housekeepers. These are very real issues and the housekeepers have my full support.  

But there is no plain path to satisfying both the housekeeper desire for security and the guest’s desire for security.

Let’s go back to the Stephen Paddock incident. Apparently on at least two separate occasions hotel staff helped Paddock bring gun stuffed bags up to his room via the service elevator.  

Then, too, alert staff surely might have noticed that Paddock was bringing a lot of luggage into his room. That alone would have been worth a visit by security.

But that does not mean that every guest needs to have his.her room inspected for security purposes on a daily basis.

On a business trip I typically travel with one carryon bag and one laptop case.  Most business travelers I know travel equally lean.  I scarcely have space to smuggle in a small bag of pretzels and a Diet Coke, no less an arsenal.

Why – exactly why – would my room warrant a daily visual search?

We all understand the panic triggered by Paddock’s mass killings on the Strip, just as we all felt the horrors of the 30+ murders at the Taj Mahal Palace Hotel in Mumbai in 2008, killings perpetrated by two gunmen inside the hotel.  

Definitely hotels need better but also smarter security.

What Disney is implementing is neither. Let’s hope it doesn’t spread.

Now Hilton has climbed aboard.  Reported USA Today: “The McLean, Va.-based company is now suggesting that a team member alert a security or duty manager if a Do Not Disturb sign or light has been in place on a guestroom door for more than 24 consecutive hours.”

Hilton is a smarter take on this issue.  Not brilliant but much better than Disney.

What might hotels do better? It starts with training the front desk staff to be alert to unusual levels of baggage going into a room.  It may be harmless. The guest may be smuggling in warehouse-bought party supplies to circumvent paying for room service provisions for a soiree, for instance.

Ditto for training security staff.

Most hotels have a policy for dealing with longterm display of a “Do Not Disturb” sign by a guest but, according to the Las Vegas Review Journal, there is no industry standard. Post Paddock just about every hotel chain has scrambled to come up with an effective, coherent policy. But as the Disney fail shows, it’s not easy.

Personally, by the way, I am much more concerned about meth labs at hotels than I am about snipers – there just are a lot more meth labs and they can explode, catch on fire, and otherwise endanger the lives of unwitting guests in the same hotel.

That’s also why I say again it starts with being much more aware about what guests are bringing into their rooms as they bring the stuff in.

Not the next day when they hole up behind a “Do Not Disturb” sign.



The Non-Bank Threat to the Mortgage Business: What Credit Unions Must Do


By Robert McGarvey

For Credit Union 2.0


There was a time when traditional financial institutions owned the home mortgage business. No more.  Non-banks now are eating up this business. Their share is 45% of home mortgages, according to the Federal Reserve.

Just about all experts expect it to climb above 50% pronto.

In 2011, just three big banks – Chase, B of A, and Wells Fargo – lent a staggering 50% of mortgage money.  By 2016 their share had dropped to 21 percent, according to calculations by the Washington Post.  

By 2016, six of the top mortgage lenders were non banks, with Quicken Loans leading that pack with 4.9% of the mortgage market, more than Bank of America with 4.07%.

Also among the nation’s top 2016 mortgage lenders were PHH Mortgage, loanDepot, and Freedom Mortgage.

Credit unions so far are holding their own.  In 2015, they lent 8% of US mortgages, up from about half that in 2010.  

Before applauding, though, recognize that credit unions face big challenges when it comes to just maintaining the current market share as mortgages become more digital. More on this below.

So, why have non banks grabbed so much market share, so quickly? Mainly because money center banks have largely pulled out of the mortgage market and it’s the non-banks that have nimbly moved to fill the void.

Many money center banks pulled out for two reasons.  They were blindsided by the tidal wave of defaults on home mortgages in Great Recession.  Maybe five million homes were foreclosed on. Big banks lost a lot of money – and a lot of positive reputation – in the meltdown.  Many bankers accordingly resolved to get out of issuing home mortgages.

Enter the Consumer Financial Protection Bureau which sent more big banks running away.  In their minds, the CFPB was anti bank, hostile, capricious and just bad news for mortgage lenders – so why make home loans?

That set the stage for the rise of non banks which plainly saw there are many, many consumers who have gained more confidence shopping online, they also became more comfortable applying for credit cards, car loans, and, eventually, yes, home mortgages online.

Non banks also have higher tolerance for consumers with less than perfect credit than do big banks and many credit unions. Most non banks also have found ways to live with, or avoid, the CFPB.  And – crucially – they are pioneering and perfecting home mortgage processes that are essentially totally digital.

That means much lower loan origination costs.

It also means much, much faster processing, Quicken, for instance, has a “Rocket Mortgage” — where approval can be had in minutes. Not weeks. Not days. Minutes.

How many credit unions can match that – and know that this kind of speed is becoming crucial to holding onto a chunk of the mortgage market.

BMW and Mercedes can finance and roll a new car with $50,000 in paper in a matter of minutes and that car loses 20% of its value in the first year.

A house, in most markets, is very unlikely to depreciate.

Can credit unions match what the car companies and non banks can do in terms of speed?

A survey of banks and credit unions by Fairfax VA consulting firm CC Pace offered worrisome news. Some 80% of respondents said they were not even halfway there to being able to offer a fully digital mortgage experience. Said CC Pace: “Everyone recognized that this is where the future lies, but many owned up to the fact that they have barely begun the process.”

Keith Kemph, a CC Pace consultant, noted that credit unions have particular – and particularly troubling – challenges and may in fact now be falling behind even community banks in the battle to stay relevant against non banks.  Kemph said credit unions “have not been as agile in the marketplace,” especially as the marketplace changes.  

And he said “they are still plagued with technology challenges that limit their ability to grow without increasing their overall operating costs.”

Bottomline: there are big opportunities in the home mortgage market especially for credit unions.  But credit unions may also lose this market unless they adapt to the changes that are transforming it – especially the push into digital mortgages.

Why MRDC Hasn’t Fulfilled Its Promise: What Your Credit Union Can Do


By Robert McGarvey


For Credit Union 2.0


A new research report from Javelin on “Why Digital Banking Often Fails to Reduce Offline Volume” has an infographic that just popped my eyes. The subject: “Reasons Why Consumers Avoid Mobile Banking and Turn to the Branch or ATM for Check Deposits.”

Javelin offers answers but, first, why do you think your members do this?  Especially when, in theory, nothing could be more convenient than using a smartphone at your kitchen table to deposit a check that came in the day’s mail.

But lots and lots of consumers don’t use MRDC.  Why? The Javelin report explores that question.

I can give you a hint about why. A few months ago I opened a new account at Arizona Central Credit Union.  I deposited a check for around $25,000, drawn on Capital One (closing an account), and I deposited it at a branch a few blocks from my apartment.

Recently I opened the ACCU app to make a deposit and saw my MRDC limit is $500. I shut the app.

I opened a Chase app, where my limit is many times that, and deposited the check.

I’m not alone. 15% of the consumers who don’t use MRDC told Javelin they were afraid their check was too big.

They’re probably right.

Even Mitek, the principal MRDC cheerleader, in its 2017 Mobile Deposit Benchmark Report, moaned about this barrier to wider usage: “Deposit-limit policies at three quarters of FIs essentially represent penalties for customers who use mobile deposit, representing an unsustainable barrier to digital migration and growth….Many consumers state they have been prevented from using mobile deposit by the FI’s dollar limits, yet conversations with industry executives tell us that advanced risk management policies can enable customer-friendly deposit limits that also limit misuse.”

Yep, and that’s been true for years. But still most credit unions retain absurdly conservative deposit limits.

As for long holds – and I have personally seen holds as long as seven business days on a mobile deposit – there is no defensible reason for the practice, other than a desire to thwart MRDC usage.

Could be that’s exactly what some credit unions want to do. Processing fees are involved with deposits via vendors such as Mitek. Force the consumer to walk the check in and there’s no Mitek fee.

But maybe there also is no consumer, as the consumer does as I did and calls up a friendlier app such as Chase and makes the deposit.

Note, too, Javelin said 17% of consumers who did not use MRDC said their reason was that “I needed the funds quickly.”  Long holds chase away members.

Probably the biggest barrier to MRDC usage, per Mitek, is insecurity about the technology.  Reported Mitek: “Fear of fraud is the most powerful impediment to widespread mobile deposit
adoption, cited by 43% of non-users from large FIs. FIs must unequivocally assure customers that mobile deposit is every bit as secure as an ATM or bank branch. Immediate feedback and receipts upon deposit acceptance, and notification of funds availability will help resolve these fears. Walking customers step-by-step through their initial experience may also alleviate worry, as fear over making a mistake is holding back 34% of non-users at large FIs.”

According to Javelin, 14% of non users said: “I didn’t feel safe depositing a large check via the phone.”

A last, huge obstacle to MRDC usage – fortunately seen at ever fewer financial institutions – is charging fees for MRDC. That never made sense and certainly doesn’t make good business sense today.  Reported Mitek: “In 2017, for the first time, none of the major banks reviewed charged a fee for standard processing of mobile deposits. Still, worries over fees remains a block to nearly one out of three FI customers. Therefore, marketing the costfree nature of mobile deposit is an imperative to boost channel migration.”

Now, just maybe MRDC will never capture all deposits. Javelin research found that 27% of non users said they had to go to the branch for other reasons. 32% said they had to go to the ATM for other reasons (presumably withdrawing cash).  So they made their deposits through those channels.

But there remains huge growth potential for MRDC if credit unions raise deposit limits, erase unnecessary holds, stop charging fees, and go on the offensive to assure consumers that MRDC is as safe as making a deposit at an ATM.

That’s because, among those who do use MRDC, a consistent comment according to Mitek is praise for the “ease of use.”

But there’s even hope for capturing the non-users. Advised James Robert Lay, CEO of Digital Growth Institute who specifically addressed how to gain usage by those who so far are resisting MRDC: “What will increase mobile deposit use is credit union staff working with account holders that come into the branch to deposit checks. Hold account holder’s hands (and their phone) to guide them through the process. Heck, employees might find the account holder does not even have a credit union’s mobile app downloaded to their device.

It’s a bit of a paradox but to increase digital product use requires human interaction and intervention as change is hard, even though the mobile deposit is easy.”

So right. So smart.