Payment Industry Insider

Today I stumbled across the Credit Union Access website, a resource with statistics and data on over 9,000 credit unions,  listed by city and state.

The page I found most interesting was the listing of the top 50 credit unions in the U.S., ranked by assets and members. Based on hard facts and numbers, this list ought to be less controversial than Bancography’s top credit union brands list.

If you work for one of these credit unions, you probably already know your position, but this is a great resource for everyone else.

Top Six Credit Unions by Assets

1. Navy Federal Credit Union
   Merrifield, VA. $35.3 billion in assets.
2. State Employees Credit Union
   Raleigh, NC. $15.9 billion in assets.
3. Pentagon Federal Credit Union
   Alexandria, VA. $11.9 billion in assets.
4. Boeing Employees Credit Union
   Tukwila, WA. $8.4 billion in assets.
5. Orange County Teachers Federal Credit Union
   Santa Ana, CA. $7.8 billion in assets.
6. The Golden 1 Credit Union
   Sacramento, CA. $6.7 billion in assets.

Top Six Credit Unions by Members

1. Navy Federal Credit Union
   Merrifield, VA. 3,050,981 members.
2. State Employees Credit Union
   Raleigh, NC. 1,446,228 members.
3. Pentagon Federal Credit Union
   Alexandria, VA. 801,878 members.
4. The Golden 1 Credit Union
   Sacramento, CA. 690,605 members.
5. Security Service Federal Credit Union
   San Antonio, TX. 653,664 members.
6. Boeing Employees Credit Union
   Tukwila, WA. 542,748 members.

See the top 50 credit unions in each category on Credit Union Access.

If you are a Celtics fan, Boston that is, then you perhaps feel a little lighter of heart lately. They won the NBA championship a few of weeks ago! They are back - in their rightful place, at the top!! Not since the days of Bill Russell, John Havlicek, Sam Jones, et al has there been such a sense of “all is right with the world.”

I don’t think the Celtics being on top (although that is very good thing), other than being a momentary diversion, is going to have anything to do with “all is right with the world”, or a bringing of any solutions for the challenges we face today.

Although I do kind of remember it as such in that era – in the basketball world and in the world at large. Why is that do you suppose?

Probably because of the sense of prudent fiscal responsibility that most folks carried on their business with. They didn’t take undue risks, beyond their capacity. And, they didn’t have easy and ready credit to tempt them.

Their integrity lined up with their values, something we hear so easily slide off the tongue of so many today, only to find out that the words aren’t worth the spit it took to say them.

So what does that have to do with finance and credit unions and banks? I think we can take a few lessons from the past, in particular from some of those basketball greats.

They worked hard; they worked hard a lot - over an extended period of time. It took a lot of discipline, looking to the future, the long term, even when there were temptations to take shortcuts. They pulled together, as a team; they helped each other out. And look what it did for them – they won championships! The Celtics became the most storied basketball team in history.

Credit unions have similar character traits to lend to society, and boy do consumers need a dose of some of that today. And they need some hope, too. Credit unions, don’t grow weary in doing good! Look what it did for the Celtics.

Savings -  is it a thing of the past, or can it be the new rage with consumers? Particularly young adults, the millenials.  How can you be an influence?

Christopher Morris Suggests Developing New Ideas

Christopher Morris, CUDE and Web Manager for CUNA Councils recently responded to an email on the DE (development educator) listserv about this very issue of savings.

His comments started off noting that the savings rate in 2006 was -1%, the lowest since the Great Depression. And, young adults are part of that negative trend. They are not saving as much as they should, but instead are simply spending and borrowing more.

Morris noted that 61% of young adults cited “lifestyle purchases” as an impediment to savings. University administrators state that they lose more students to credit card debt than to academic failure.  And all the while,  millennials are the most socially conscious consumers to date.

The question asked and being studied is, “How can credit unions appeal to young adults to save money in a way that is meaningful, fun, exciting and rewarding?”

Christopher’s 30 Under 30 group is working on an idea of offering prize-based savings for young adults with a charitable spin.

Could Prize-Based Savings Be the Answer?

Prize-based savings accounts with prizes and messaging tailored to young adults. Everybody wins! Prizes for the young adults are tuition assistance, free food for a month, iPods, etc.  A prize of a similar dollar amount is given to a local charity of the young adult’s choice (selected when they first open the account).

Studies have found the prize-based incentives can be compelling, particularly for young adults. The approach described above is simply a win-win-win savings opportunity. The charities of choice win, the members win (they get prizes and they get to help their favorite charities) and the credit union wins (they see member and deposit growth).

Other DE’s have chimed in with prize based savings programs they have initiated and implemented and the results have been very good.

It’s a lot to think about, but deposit growth is a must if you are going to be around in the future.

Comments? Thoughts?

UPDATE: Chris is also continuing this conversation over at the YES CU Blog, which talks about issues CUs face when serving members in the 18-to-30s range. Stop by and give them a look. We hope this sparks some more great discussion on this topic.

Effective July 1, a new change in Visa’s Operating Regulations went into effect without much fanfare.  This change in regulations will allow merchants to route debit transactions through a PIN network even without a PIN being used.  While PIN-less debit transactions have been around for a while, they have only been available for use by online merchants or trusted recurring billers such as utilities.

As an issuer, this is an important change to be aware of for a couple of reasons:

1. PIN-less debit transactions will pay significantly less interchange to the issuer.
2. Merchants will likely start offering these payment options more aggressively to lower their costs of transaction processing.
3. Issuers have options available to limit the number of transactions that are processed through PIN-less debit.

Right now, I don’t view PIN-less debit as much of a threat to issuers for a few reasons:

1. Issuers have to “opt-in” to allow their cardholders to use PIN-less debit at merchants.
2. More than half of debit issuers offer rewards on their cards which incents cardholders to sign for transactions.
3. Merchants have to disclose to the cardholder their intention of routing a transaction through a PIN network versus the card association.

Regardless of those hurdles for adoption, as an issuer, it’s important for you to be thinking now about how you secure your cardholders’ loyalty and transactions through signature debit.

I spoke at the TMG Client Conference recently about ways to increase your cardholders’ usage of signature debit. A couple of the ideas that I shared are to:

1. Offer debit rewards. The economics of doing so are nearly a can’t miss.
2. Focus more than ever on gaining market share and new accounts.
3. Continue to market your advantages, track the success of your marketing efforts and require a positive return from every marketing dollar.
4. Educate your cardholders about the advantages of signature debit and what traps to avoid at the checkout line.

A friend of mine recently sent me an article written by Paul Saffo on “How to Do Well in a Recession.” It wasn’t really anything like what I was expecting. It was better! And, it fit so well with what credit unions are all about.

In his initial statements he was talking about a “startup” company and taking a long view of its place in the world if it is to succeed, especially in a recession. His view of the best way to achieve this is to “focus on doing good, in addition to doing well.”

Credit unions, that is us. This goes for whether you have been around for a year, a decade, or even several decades! We do good!

The big question is what does it mean to “do good and do well” in today’s world?

In a recent article on CreditUnions.com, the impact of declining rates and credit unions’ ability to compete in the marketplace is discussed.

One of the main topics of the article is a counter-intuitive, but good point. In a declining rate environment, while others are cutting interest rates on their cards, credit union cards are remaining relatively flat. So when the large issuer cuts their interest rates, how might this be good for credit unions and their ability to compete? It’s not an easy positive to see!

In my mind there are two advantages to the current rate environment:

1. Many banks are lowering their rates while increasing their fees and penalties to keep net income high.
2. Your current rate is still competitive in the marketplace so you can keep your spread high and still be competitive.

The big question with both of these is still, “Ok, so how do I compete?”

Emphasize Your Stability

Make it a point to emphasize that while large issuers are constantly changing their rates and fees, the credit union (typically) is not making those same frequent adjustments. Fees and penalties are the bane of many consumers so tell good stories about how your rates and fees compare to other issuers. Be an open book for your members with nothing to hide; make it evident that you won’t be taking advantage of them when rates start to climb. Better yet, guarantee that you won’t change your rates or fees for at least two years (or some other extended period of time).

Provide Education on Your Programs

The point is to make sure you are providing the education about your programs that your member needs to hear. Educate your staff on how to effectively communicate the value of your card and the potential traps that are out there. Teach your staff and your members how to compare different card offers.

Market Your Card Programs

Finally, remember that most often your card program is your highest returning asset. Just because it’s not the largest part of your lending portfolio, don’t forget to market it as heavily as you would an auto loan. Every dollar that is lent out on a card returns double the same amount of an auto loan!

Title borrowed from the Credit Union and Mutual Law Blog post about this same subject.

An important aspect of Web 2.0 that many people talk about is being more transparent to your audience. This means being honest and open in everything you do, explaining who you are and your intentions.

Blogs and social media have been a great way for credit unions and other financial institutions to open up these channels to their audiences, blogging about what they are doing, issues that concern them and fielding feedback.

America First is Using Ratings and Reviews

America First Credit Union of Utah has taken the concept of openness even farther with the recent implementation of user reviews for their website. Every product or service that America First offers is open for discussion, rating and review by its members.

America First leads into the discussion by stating:

“At America First, we value our members’ opinions.”

What better way to show that to their members than to open themselves up for criticism and commendation?

At this time, only AFCU members can post reviews of products (and rightfully so in my opinion). The credit union also lists a set of guidelines that they ask members to abide by when posting reviews. It asks users to refrain from using obscenities, personally identifiable information like social security numbers or physical addresses, and all the other legal mumbo jumbo, but nowhere do they say that members can’t leave negative reviews. In fact, they encourage it, and so it should be in a situation like this.

If you flip through the different products and reviews that have been left so far, there are some negative reviews (usually citing an issue the user had) and ratings with less than five stars, proving that these are not doctored or falsified. America First asked for their members’ opinions and they responded.

In the world of social media, companies and people have realized that receiving the bad feedback along with the good is actually beneficial because it provides an opportunity for improvement and possibly even further discussion.

Now that the bar has been raised, how are you showing members that you want to hear their views and opinions?

A speaker at the recent CUNA Mutual Discovery Conference covered a very interesting topic: Ignore boomers’ needs and a credit union’s relevance erodes. How many credit unions are actively engaged in providing for this huge demographic?

But for some time now I’ve mostly heard about the “Y” Generation. And while they are a very important demographic group, what about the Boomers? What will you do with and for them? This is a huge issue of need on the part of the Boomers, and quite frankly on the part of the financial institutions (credit unions).

After all, this is a lot of people we’re talking about here. Many have not planned well and they know it. Many don’t know they haven’t planned well and they don’t know it! Many have a lot of money; many don’t. Many will have a lot of money as the “Wealth” of their parents passes on to them. Many won’t know how to manage it.

There is a lot to think about here. What have you done to address this huge block of business?

Jeffry Pilcher over at The Financial Brand (a great resource for financial marketing ideas and information) writes about the commonalities in credit union names. For example, the word “Employees” shows up in 1,553 credit union names.  It’s a fun article to read and it started me thinking, “What’s in a name?”

As most people in the cards business know, platinum cards carry a certain mystique around them.  Prior to platinum, gold cards were the…well…gold standard.  Now issuers are starting to introduce plum cards, titanium cards, emerald Cards and even diamond cards. Is there any impact in using these new and different names to separate yourself in the market?  Possibly.

Part of the point that Mr. Pilcher makes is that you don’t have to change the name of your credit union just because it has the word “Employees” in it just like 1,552 others.  He just suggests that if you are already considering a name change that something more unique might be better.  And I agree with him.

Just because you offer a platinum card like everyone else does not mean that you should change to a new and unique color or brand.  If you are already considering a change though, especially if you are going through a conversion, now would be a great time to create some differentiation around your card brand. If you have a star as part of your logo, call your most exclusive card the “Star Card” and tie something special to it.  The name alone is not what will sell your card or make your members want to use it.

Unless of course you call it the “Spend all you want, we’ll pay the balance Card”! And if that is the case, I’d volunteer to be a beta tester!

Bancography, a positioning firm from Birmingham, Alabama, recently released its 2008 Bancography Brand Value Index, which ranks the most powerful financial institution brands among all U.S. banks and credit unions.

The Bancography Brand Value Index is a comprehensive ranking which scores brands according to the premium they contribute to each financial institution’s tangible value. The brand value is calculated by reviewing the institution’s reputation, service quality, image and market awareness. The index also identifies institutions that produce financial results beyond what their capital base, market conditions and competitive environments would predict.

Did your credit union make the list?

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