Members in Nevada and California hit hard by economy

As I was neck deep in NCUA reports this week, I noticed a few interesting things about the state of delinquency in CU’s.

Not too surprising, but the state with the credit unions that have been the hardest hit by this recession has been Nevada.  Nevada credit unions, on average, have a reportable DQ (accounts over 60 days late) of greater than 5%.  For those not great at math, that means if you have a $100M CU, you have $5M in accounts that are currently 2 months or more late.  Utah is on Nevada’s heels.  And surprisingly, at least to me, Delaware is in the top ten states by DQ%.

Cutting the same numbers a different way, California is having a hell of a time with delinquency as well.  Nearly $2B in overdue accounts.  The 20 states in these two top tens are having real estate problems.  Rather their credit union members are.  So what are credit unions to do facing these types of numbers?  California and Nevada both share the same league, the California and Nevada Credit Union Leagues.  Is there an opportunity for the league to help out?

Oh, and don’t get down on CU’s.  Banks have an average DQ rate of 7.03% for the 3rd quarter.

All information was computed using the 3rd quarter 2009 call report.  The raw data can be found here.

When the hand that feeds you starts feeding themselves

Warning: Slight technical discussion ahead follow by shallow stabs at credit union marketing.

Google announced today their new Google Public DNS service.  For those not in the know, recursive DNS, which is what Google is offering, is simplistically a phone book.  It translates “Mr. and Mrs. Johnson” to 800-555-5555.  Applied to the internet, it translates cuemployee.com to 74.208.31.243, which is the IP address of the server running my blog.  As is the Google norm, it is free.Every computer you use to get on the internet has to use a DNS server and normally these are managed by your ISP, but there are other options.

Enter OpenDNS.  They’ve been around for a while now and provide both a free DNS service as well as paid options.  With their free option, you as a consumer get very fast resolution when you type a domain name in and it is smart enough to send you to the correct page when you type in google.co.  When a domain name is mis-typed or does not resolve, you are directed to one of their search pages which contains ads, by Google of course.  Here’s an example.  So OpenDNS pays for their servers, staff, etc by the AdSense revenue they gain from their sponsored search pages.

So what do you do when the company that pays your bills goes into the exactly same business you are in?  Does OpenDNS now race against Google for the fast DNS resolution?  Nobody can compete on price since it is already free.

Sounds familiar, doesn’t it.  How are credit unions supposed to differentiate their free checking accounts from one another?  I’m sorry, is it a checking account, share draft account, or a spending account?  Is your checking account free-er than your neighboring credit union?  Wait, you focus on member service, so that’s your differentiation, right?

Outsourced CU

Back in September, Filene issued a call out to the industry for assistance in creating what boils down to an Applied Research division.  So far, we’ve already seen the CU Water Cooler come out of Matt Davis and I know we’ll be seeing some good stuff from Brent Dixon shortly.

I’m going to take  a gamble and put my more detailed response out for comment.  I feel very strongly that by collaborating and removing operational barriers to success, credit unions can bust out of the funk we’re in and take it to the next level.  I’ve put together a rough draft white paper on what I call the Outsourced CU.  I want to use the many Filene collaboration initiatives to make this happen.

If you’ve got a few minutes, give it a read.  If you love it, email George Hofheimer at Filene and let him know what you think.  If you think I’m crazy, well, just go easy.

Alltop and Credit Unions

I must have been asleep at the wheel, but through the magic of Google’s Webmaster tools (which I hardly look at) I noticed I had been linked to from Alltop’s credit union page!  First I said, “Sweet, Alltop has a credit union page!”  Then I said, “How’d I pull that off?”

For those of you not in the know, Alltop is arguably the biggest news/blog aggregator out there.  They place a handful of sites into categories and let people subscribe to all of the feeds in a given category.  They’ve got everything from the standard fair Politics section to the slightly more obscure Lego section.  If someone is trying to keep up with an industry in general, this is the place to go.

Honestly, I’m slightly disappointed with the selection of the credit union page.  It doesn’t include many of the blogs that I would consider mandatory reading.  I know Alltop’s secret sauce for coming up with the included feeds is really just by the seat of their pants, but I’m still curious as who suggested the category and how they came up with the site list.  I’m more impressed with their banking site as it included Jim, Colin, James, and Jeffry, all of which I would say is required reading.

Anyone one heard how or when the Alltop credit union or banking site got started?  What blogs do you guys feel are missing from the list?

PS – I really want to put one of their cheesy badges on my blog.  They make me laugh.

Like this one:  or this one: 

A piece of cake or the whole cake?

Pricing a product always seems to be problematic.  You can’t always price it on the high end and expect to be the luxury good and you can’t always be the “value leader” with the lowest price and expect people to come flocking to you.  Early technologies tend to price themselves at the per unit cost.

For example, in the early days of online storage and backup pricing was almost always centered around usage and still is by some companies.  1GB for X dollars, 10 GB’s for Y dollars.  As the market matures, it drifts to the proverbial “all-you-can-eat” plans which provide unlimited backup so consumers don’t have to worry about quotas of any sort.  I remember when my cell phone plan had 60 minutes and my phone had a reminder beep 10 seconds before another minute ticked by.  Now the cell phone market is rapidly progressing to unlimited plans.

Two observations:

1. Nearly all utilities (water, gas, electricity, etc) are based on actual usage except broadband internet.  Why is that?  Internet is much cheaper do deliver than power.
2. Would there be a profitable model in offering an NSF package or Courtesy Pay package in which a member would pay a fixed fee for unlimited NSF’s or overdrafts?  Could this be an additional line of fee income for struggling CU’s that could make their members who use the service happy while at the same time boosting their bottom line?

Windows unsafe for online banking

Take a look for yourself here.

What a load of crap.  That’s like saying people die wearing seat belts, thus it must be the seat belt’s fault so you shouldn’t wear your seat belt.  The reason there are so many viruses and malware for Windows is because it is such a big “prize” for hackers.  MS owns the desktop OS market, thus making them the biggest target.  If you were going to rob a bank, wouldn’t you pick the branch that had the most money in it?  It doesn’t make much sense to write a virus for Linux because it owns such a small portion of the market that the payoff would be nothing.

The FFIEC guidelines for multi-factor authentication are a pain.  But the concept behind MFA is a must.  There are three ways to identify someone online: something they know (Q&A), something they are (bio-metrics or computer ID), and something they have (cell phone or email).  If an FI really, truly applies 2 of those factors, it will make it nearly impossible to directly hack a person’s account.  The article speaks of the proverbial “man in the middle” attack in which a hacker somehow manages to gain access to the user’s password, either through a keylogger or a fictitious webpage made to look like the real thing.  Both of these are easy to stop:

1. Don’t download anything from anyone you don’t know.
2. Don’t install anything from anyone you don’t know.
3. Don’t follow a link to an FI website, type it in or bookmark it yourself.
4. Look at the url of the webpage you are on and make sure it says mycu.com.

Now some will argue that most people aren’t smart enough to figure that out on their own.  True, it is possible to build such a great phishing site that even an employee couldn’t tell the difference, but it is highly unlikely.  This is where the FI has to step in.  Companies like Trusteer have built a glorified browser add-on, but it works.  It prevents any type of keylogging software from detecting what is being typed into the webpages that the browser is serving up.  They’ve done the right thing and they count on the users machine already being infected.  Additionally, FI’s could help with 3 and 4 by offering other security measures like RSA keys.  Make it optional for users if they want it or if a member has had fraud on their account, make it mandatory.

However FI’s and online banking companies handle their security, two things need to happen: The users have to take some responsibility for their actions (don’t log into phishing sites or download shady applications) and FI’s have to offer appropriate security measures to make unauthorized access to someone’s account extremely difficult.

Cinch Online Banking Design Contest

Our design contest at Crowdspring is over! We had over 200 entires and have narrowed it down to a few that we like. I now have even more respect for designers. Design by committee, or rather approval by committee, is tough!

Pick your favorite three!

Put on your tin foil hats

I think that John Anderton and Winston Smith must have visited me in a dream a few months back because I’ve been brewing up an idea that could revolutionize member service or scare the bejesus out of any Libertarian.  Half Minority Report, half Nineteen Eighty-Four; I call it CUcard.

CUcard utilizes existing RFID technology that has been integrated into credit and debit cards.  Small, powerful sensors, similar to those used in automated toll booth systems, will be placed in door frames and in the floor of all credit union branches using the CUcard.  Upon entering a branch, a member will pass through the sensors in the entry doors and the CUcard software will read the information from their RFID-enabled credit union card and log it into the system.

The information will then be relayed to the teller/MSR/FSR computer systems where a screen can pop-up and display the member’s information, their scanned driver’s license from the imaging system (with their picture), a timestamp of when they entered a branch, and any other actionable information a credit union deems necessary from any of their systems.  Such information may include the most likely transaction the member will complete that day, based on information data-mined from the core processor using day of the month, date of the month, transaction amounts, and other variables.

The CUcard system will replace the traditional queuing system in a credit union lobby.  No more take-a-number systems or filling out a sign in sheet.  Once the member enters a branch, all of their information is logged and they are placed into a queue.  The next available representative will walk to the lobby to retreive the next member waiting, enabled with both a picture of the member and their first name.  Imagine this following scenario:

Joe Johnson walks into a credit union branch.  A screen pops up on all of the teller computer screens and displays Joe’s full name, his driver’s license and his top 5 most frequent branch transactions.  Joe walks up to the line and waits to be called.   “Good morning Joe, come on up here.  How was Starbucks this morning?  Are you here to deposit your social security check today and transfer 20% to your savings account or just taking out $100 in cash?”  Joe says, “It’s the fifth today.  Here’s my social security check.”  The employee then clicks on “Complete transaction” on their computer screen, at which point the CUcard software initiates a transaction, matching the last 43, removing the additional labor of having to manually enter in all of his information again.  By recognizing the date of the transaction (the 5th of every month), the amount of the transaction (~$1200), the frequency of the transaction (every month for the last 43 months), and any corresponding transactions (the transfer immediately following the deposit), the teller is able to provide outlandish member service that would never have been able to occur in the past.

Leveraging the CUcard system, credit unions will be able measure new statistics never before available without immense time and effort.  With sensors placed at the teller windows, the credit union will be able to break down the member’s visit into how long they waited in line or in the lobby, how long the actual transaction took (time at the teller window), and the total length of their visit.  This will enable the credit union to streamline the operations to gain the greatest efficiency and shortest time possible in the branch, or inversely, measure member dwell time, potentially reinforcing a credit union’s brand.  Putting in free WiFI in branches, for example, should increase member dwell time, while an in-store branch in a high traffic retail environment or airport should focus on the shortest transaction time possible.

If a credit union wishes to take CUcard to the next level and get the most of of the system, they will also enable to Share of Wallet module.  Using the exact same technology, the CUcard system, in addition to scanning the RFID for the CUcard, can scan for other RFID’s in the member’s wallet or purse.  No more focus groups, surveys, or ethnographic research.  Once the member enters a credit union branch, any card emitting an RFID signal will be read and identified.  Credit unions and their front line staff will immediately know that Joe Johnson, the member who just walked in the front door, not only has a CUcard from your credit union, but also has a Wells Fargo debit card and a Chase Rewards credit card.  Armed with this new information, credit unions will be able to launch new direct marketing campaigns tailored so exactly that response rates will spike.  Pair this new share of wallet information with existing data from the core processor, such as the destination outgoing ACH’s, bill payments, and debit card transactions, and the credit union will be able to market and cross-sell their products with incredibly unique campaigns and un-heard-of accuracy.

So which is it?  Revolutionize member service or securely affix your tinfoil hat?