The incumbent dilemma

I posted a new article on the CU Water Cooler Weekly Discussion blog this morning. At the heart of the topic:

It's difficult to pivot and reinvent when you are busy servicing a going concern. It's risky to think about leaving the old way of doing things for an untested new way. It's expensive and hard to invent the future. It's really hard when you are small and in a highly regulated industry that frowns upon risk. And it's exceptionally hard when you are in the technology business, but you are not in control of the technology that runs your business. 

Please read the whole article.

And speaking of the CU Water Cooler, the CU Water Cooler Symposium is coming up quick in Fishers, Indiana. On September 29 and 30, more than 125 credit union pros will be attending. The price is right at just $349—join great speakers and great people talking about credit unions. 

Tim

And then it happened...

For awhile now, rumors and speculation have been swirling about the next generation of smart phones doubling as virtual wallets with payment capabilities. Looks like Google has scooped Apple by striking first. From Google's blog post:

Today in our New York City office, along with Citi, MasterCard, First Data and Sprint, we gave a demo of Google Wallet, an app that will make your phone your wallet. You’ll be able to tap, pay and save using your phone and near field communication (NFC). We’re field testing Google Wallet now and plan to release it soon.

Up until now, mobile banking has largely been a novelty. Checking balances and transferring funds are fine, but being able to swipe your phone to pay is the killer app. The possibilities are incredible.

Because Google Wallet is a mobile app, it will do more than a regular wallet ever could. You'll be able to store your credit cards, offers, loyalty cards and gift cards, but without the bulk. When you tap to pay, your phone will also automatically redeem offers and earn loyalty points for you. Someday, even things like boarding passes, tickets, ID and keys could be stored in Google Wallet.

As the mega tech players charge into the banking business, where will this leave credit unions? With Visa and MasterCard making early exclusivity deals with the biggest banks and the branding and marketing muscle of Apple and Google set to dominate this new space, how will credit unions compete?

Credit unions continue to dump money into new branches and member service, but technology is the future. The future is about code and unfortunately, credit unions don't write much code. They are at the mercy of slow-moving core providers, legacy systems and the malaise of burdensome regulations.

As I heard Brent Dixon say recently, "Self-service is the new service with a smile." If I am Joe Consumer and I am presented with the choice between a quaint caring credit union or a future-focussed bank or technology provider that offers a superior online banking experience on my desktop and now in my pocket, no amount of friendly neighborhood service from the local credit union can compete.

At this point, credit unions or the technology partners that service credit unions need to figure out how to get in the game fast. How do credit unions make sure that they are included in the Google and Apple wallets?

Tim

Thing 22 of 30: Act like there is no tomorrow

September is 30 things I would implement or consider implementing at my credit union if I was a credit union leader.

Thing 22: Act like there is no tomorrow

Have you noticed that things are changing pretty fast? That the status quo gets you nowhere? Did you know that technology is changing everything and putting the consumer in charge of every facet of their lives?

Established service industries are being turned on their heads. Here's a few examples:

• The Internet has all but killed the printed daily newspaper business. The publishing titans did not see that coming.
• The iTunes Store has changed the way consumers buy music. Record stores are gone. iTunes is now the #1 music retailer in the world. It has no physical presence and it did not exist five years ago. The recording industry did not see that coming.
• Netflix is doing the same thing to the movie rental business. I'll bet Blockbuster did not see that coming.
• Tivo has changed the way we consume television. The traditional 'Madison Avenue' ad agencies did not see that coming and have yet to adapt from the 30-second (skippable) spot mentality.
• The Amazon Kindle is attempting to do the same thing to the book publishing industry. I'll bet the print industry didn't see that coming.

If anything, history repeats itself. Old business models don't last forever. It's ironic that credit unions are celebrating 100 years of history. And in all of this celebration of the past, there is very little talk of the future.

There was an event held in New York yesterday called Finovate2009. About 50 companies gave seven-minute demos of their products.

That's about 50 companies all thinking and doing something about the future. About 50 companies all trying to be the iTunes that sets the traditional banking industry on its head. Where were the credit unions? Here is a Twitter search to read the real-time buzz from yesterday.

The irony of Finovate 2009 was that the best of show winner was Kasasa. (read Kasasa: A third-party national checking brand on the Financial Brand for a really good overview). Kasasa is reinventing the most basic of financial products—the checking account. The very domain of the credit union. What they have done is revolutionary. And simple. And awesome.

If I was the leader of a credit union, I would remember the past but I would spend way more time thinking about the future and less time sitting on our laurels.

UPDATE: Morriss Partee added a video link in the comments. It proves the point so well, that I have embedded it below.

Tim

Thing 21 of 30: Implement a white-label PFM

September is 30 things I would implement or consider implementing at my credit union if I was a credit union leader.

Thing 21: Implement a white-label PFM

Just as soon as we replaced that nasty-10-year-old website at my fictitious credit union, I would jump straight to implementing a personal financial management tool (PFM) inside my credit union's online banking site.

If this PFM term is new to you, imagine the desktop software Quicken or Microsoft Money sitting right inside your online banking system with robust budgeting and tagging (categorization of income and expenses) right there, without requiring your members to download or manually enter transaction data.

Sound impossible? Or futuristic? Not only is it possible and available right now, there are a number of vendors clamoring to offer this service to banks and credit unions.

Web service firms like Mint.com have been doing a bang-up job of sucking the data right out of your credit union online banking sites and giving consumers a slick representation of all of their accounts at various financial institutions for a while now.

You can either live with this reality or fight back with a white-label PFM that sits right inside your online banking system and gives your members everything they need without having to rely on a third-party.

I have personal experience with the public Wesabe service, and I would give it five out of five stars. Wesabe is now offering a white-label version called Springboard. In addition, I know of a number of others worth checking out. Jwaala MoneyTracker, Geezeo, FinanceWorks from Digital Insights and a local Canadian company, PennyMinder. I am sure there are more, but this will give you a good start.

I know in Canada, many credit unions are on a standardized online banking system and having a PFM may not be available to you. You need to pressure your provider to put it on their roadmap pronto. There is a tremendous opportunity for credit unions to differentiate themselves if they can implement a robust PFM solution before their bank competitors.

If you believe this is a passing fad for a niche audience, ask yourself, "Why did Intuit, the makers of Quicken, QuickBooks and QuickTax, just pay $170 million for Mint.com?"

Tim

Thing 12 of 30: Replace our ten-year-old, super-nasty website

September is 30 things I would implement or consider implementing at my credit union if I was a credit union leader.

Thing 12: Replace our ten-year-old, super-nasty website

In hindsight, this should have been my number-one thing! If I were a credit union leader, I would make it priority one to develop a modern website that included:

1. A beautiful, 980-pixel-wide layout with completely integrated online banking like Vancity's website
2. Integrated blogs from a number of credit union employees like Vantage Credit Union's website
3. Crisp writing and a clear personality like Coast Capital Savings' website
4. Product ratings and reviews like San Francisco Fire Credit Union's website
5. Online account opening and an integrated personal financial management tool like South Carolina Federal Credit Union's website
6. A public-facing discussion forum like Addison Avenue Federal Credit Union's website
7. Mobile texting capabilities like Mount Lehman Credit Union's website

You may balk and say that I have described a very expensive website. Maybe so, but at my credit union, before I opened another branch or upgraded the administration center, I would have a positively kick-ass website!

Tim

Thing 10 of 30: Tear down the silos by merging marketing and information technology

September is 30 things I would implement or consider implementing at my credit union if I was a credit union leader.

Thing 10: Tear down the silos by merging marketing and IT

Being on the marketing side of things, I hear the credit union marketing folks griping about the IT folks. I wrote a long post about this recently on the CUES Skybox Blog.

I imagine if I travelled more in the IT circles, I would hear the horror stories about the marketing prima donnas. I believe much of this adversarial situation stems not only from the complete separation on the org chart, but also from the physical division of these teams within the administration center. Sometimes in completely different buildings!

In my fictitious credit union, I would take a cue from the Silicon Valley and San Francisco tech start-ups and mash everyone together in a big room. Tear down the eye-height beige cube farm. Sit marketers next to technologists, designers next to developers, writers next to sys admins.

Everyone would be encouraged to participate in brainstorming sessions and ideas and responsibilities would be shared amongst the whole team.

The photos above are from a great blog called Office Snapshots. They depict the no-nonsense open office layouts that I am talking about. Nothing fancy. A few rectangular Ikea tables pushed together would really promote team work and understanding.

Tim

Thing 3 of 30: Develop an Android app

September is 30 things I would implement or consider implementing at my credit union if I was a credit union leader.

Thing 3: develop an Android app

While considering developing an iPhone app, you should also take a look at the Google Android platform.

Unlike the closed Apple iPhone platform, Android is an open-source software stack for mobile devices that includes an operating system, middleware and key applications. The Android SDK provides the tools and APIs necessary to begin developing applications that run on Android-powered devices.

According to Wikipedia, Android was announced almost two years ago on November 5, 2007 with the founding of the Open Handset Alliance, a consortium of 48 hardware, software and telecom companies devoted to advancing open standards for mobile devices. Google released most of the Android code under the Apache License, a free-software and open source license.

Now that there are a number of handsets from various manufacturers in the marketplace, Android seems to be gaining momentum.

And, also unlike developing an iPhone app today, you can be one of the very first financial insitutions to lay claim to publishing an Android app. Here is an article on the Net Banker blog that compares banking Apps in the Google Android Market vs. Apple iPhone App Store. As you can see, only Bank of America and Alliant Credit Union are represented in the Google Android Market to date.

If you don't have internal developers, consider partnering with another credit union to co-develop an app or look for a small independent Android app developer in your area or even look overseas to get it done.

Tim

Thing 2 of 30: Develop an iPhone app

September is 30 things I would implement or consider implementing at my credit union if I was a credit union leader.

Thing 2: develop an iPhone app

There is a lot of talk about mobile banking these days, but very little action by most credit unions on the subject.

With tens of  millions of iPhones and iPod Touches in consumers' hands and a  seamless way to download and install apps through the iTunes App Store, the iPhone platform represents a unique opportunity to create a mobile application that could actually get used by your members.

Before you say, "We can't do that!" The development platform and options range from the simple to the complex. It could be as simple as TDECU's CULoc8, branch and ATM finder or as complex as USAA's iPhone remote deposit capture application. If you don't have internal developers, consider partnering with a credit union that already has an iPhone app that they may be willing to license to your credit union or look for a small independent iPhone app developer. You could even consider looking overseas to India for an inexpensive way to get it done.

My point is, don't wait around for your core banking system provider to come up with a solution. Develop something useful now and then let every member know about it, teach them how to use it and also get the word out in your marketplace that you have an iPhone app.

Tim

Should the 100-year-old credit union movement start acting like a boot-strapped start-up?

About 18 months ago I wrote a blog post entitled, "The dinosaurs didn't have broadband, what's your credit union's excuse?" I wrote it after witnessing an incredible array of innovative new financial web applications coming onto the scene. At the time, I wondered what was stopping credit unions from really innovating.

I was once again reminded of this question when my Twitter feed was filled with the hashtag #finovate on Tuesday. You see, FinovateStartup09 was held this past week in San Francisco and 57 of the latest-and-greatest financial web apps where demoed. Only one of them—Jwaala's Money Tracker—has any roots in the credit union industry. From what I understand, Jwaala was spun out of Amplify in Austin, Texas.

For all of the talk of innovation in the financial services industry, the really good stuff is not coming from credit unions (or banks for that matter), it's coming from tech start-ups with good ideas and the knowledge, skill and determination to get the job done.

As they say, ideas are a dime a dozen, the real trick is implementation. What do you think?

I'm also interested to hear if you feel that innovation is a careless waste of time and money. Should credit unions just put their energy into serving their members well? Or is innovation necessary to continue to serve members well? Please add your thoughts in the comments.

Tim

Part 2: "Our credit union doesn't allow Facebook or YouTube"

In part 1, I presented the two main reasons why companies block employees from participating in social networking sites like Facebook and YouTube while at work: security and time wasting. In this follow-up, I'll give you three reasons for your credit union to consider throwing caution (and productivity) to the wind by openly embracing the social web.

Reason 1: Employee retention

Many employees, especially the Gen X and Y set, actively participate on social networking sites. In-mail (messaging services within these sites) is replacing e-mail as a primary means of keeping in touch with friends, colleagues and family. This new breed of employee resents being blocked from sites like Facebook and LinkedIn.

This is from the Government Technology Magazine:

"While Web 2.0 sites clearly pose a threat to corporate network security, making them off limits to employees may not be the best solution," said Sheinbaum. "Many companies understand that being able to access social networking and Web services sites during work hours is important to overall Employee 2.0 satisfaction and may also benefit their business."

This is from a News.com article entitled Can social networking co-exist with the workplace?

There is no question that companies that have embraced the Internet have benefited over those that have ignored the changes overtaking the business world.

Social networking sites truly do provide robust features that provide a richer means of online communications. Rather than ban employees from using the medium, managers should think ahead how to turn it to their advantage. Careful thought should be given when considering the use of any networking features that could be detrimental to an enterprise. From there, policies can be crafted on a company-by-company basis to guide employees and gain their buy-in.

Reason 2: Connecting with your credit union community

There are 69 million registered Facebook users. This is a huge group of engaged users. In my neck of the woods, there are more than 700,000 members of the Vancouver network alone! For a credit union looking to connect with members and potential members, there are definitely opportunities for your credit union and for your employees to have a presence on the social web.

This is from the Cutter Consortium article on social networking:

On the one hand, the blocking of social media sites continues apace. On the other hand, the adoption of social media in enterprises is on the rise.

Jeremy Burton, president and CEO of Serena Software in San Mateo, California, USA, supports bringing social networks to work. Socializing is good for your business, and your employees could help your business via social media to gain customers' trust and to improve research, product design and development, and innovation. If your customers indicate a strong preference for a certain social-media service, it makes sense to give your company a semi-official presence there, run by real humans, for informal customer service and true public relations.

"No matter what, people will find ways to socialize and share during work hours," Burton says. He encourages businesses to exploit this socializing to their business advantage by arguing, "If your employees are going to 'do it' anyway, why not encourage them to channel their social-media impulses in smart, safe ways that can potentially help your business?"

There are a number of examples of credit unions connecting with members and potential members with Facebook pages. Here are a few that I am a fan of:

• Oklahoma's Tinker Federal Credit Union page
• Ohio's Wright-Patt Credit Union page
• California's Valley Credit Union page
• Alberta' Common Wealth Credit Union Young & Free page

There are also a number of examples of credit unions creating community and dialogue within the social web with their own online communities and blogs.

• British Columbia's Vancity Change Everything community
• Washington's Verity Credit Union blog
• New York's UFirst Boardcast blog

Reason 3: Marketing and sales

There is an unwritten rule that the social web is all about connecting and building community. This makes it tough for the number crunchers to calculate ROI, but what if you could sell products and services?

This is from Evolving Solutions:

"Whether you're selling widgets, or selling software, or working at a restaurant, Facebook is a great social platform that allows anyone who works for an employer to let all their friends know who they work for and maybe what they're selling," points out Nadeau.

"So, if (companies) use it in their favour then it can be a very useful tool."

For example, a restaurant owner could have its staff create and join a Facebook page devoted to people who are a fan of a popular appetizer the restaurant serves, friends of those staffers may see the page and be interested in going to the restaurant to try it, said Nadeau.

Facebook is also a quick and easy way for staff to stay connected with colleagues and customers, and has the potential to help people build up their business contact lists, adds Spinks.

Regardless of strategies and policies around Facebook and Internet use in general it is pretty much a given that office workers will use the Internet daily for non-work-related reasons.

Here are some examples of credit unions utilizing the social web to actually sell products and services.

• North Carolina's Carolina Postal Credit Union's I love My Hoopty blog
• Alberta's Common Wealth Credit Union's Young & Free Alberta blog

What do you think?

I have presented you an overview of the two major reasons to block and the three major reasons not to block social networking sites. This brings us back to the two intertwined questions that need to be considered:

1. Should we allow our credit union employees to participate on the social web while at work?
2. Should our credit union have a presence on the social web?

The answers will vary from credit union to credit union, but I believe the answer needs to be yes to both questions or no to both questions. If you decide to block employee access to the social web, but also have a credit union presence on the social web, you are sending contradicting messages and your credit union will be unable to create the employee buy-in needed to generate the success you are seeking.

On the other hand, if you grant employees access but decide not to have a credit union presence on the social web, you will constantly be questioning the value of this "time wasting" and will resent your employees.

Personally, I would answer yes to both. But then again, I have a handful of employees, not hundreds!

Tim