The what-if that fuels growth
Posted by Trey Reeme on June 22nd, 2006
Robbie and I have been talking on his blog about why credit unions don’t offer high-yield online-only accounts.
Robbie mentions, “I know many CUs are shying away from such a product because they’ll have 65 year old members coming in wanting to get 4.75% on their prime share.”
I hadn’t thought of it like that. The last thing I even considered was the one or two members complaining about such a good deal being offered. That fear stifles growth.
It’s counter-intuitive; it says, “Let’s be mediocre – it’s safer that way.” (Tip o’ the hat to Kathy Sierra’s Creating Passionate Users blog and the amazing post Death by risk aversion).
Robbie brings up a great point – this is what’s holding credit unions back! (I know Robbie doesn’t agree with that argument either. He’s an innovator!) Yep, Robbie got me thinking, and here’s what came out:
Last week I heard Doug Fecher, Wright-Patt’s CEO, speaking about a payday lending program that his credit union offers. When countering arguments about why they shouldn’t offer the program, he said something to the effect of, “You can always find a reason not to do something. We looked for reasons to do it anyway.”
I hear the “what if” argument a lot in credit union land, particularly when CUs throw the idea of blogging around. “What if someone says something negative about us? What if we say something wrong and get sued?” No one ever says, “What if this is a huge success?!” IMHO (In my humble opinion), that’s the “what if” that fuels growth.
Maybe it’s the entrepreneur in me; I want to hear more credit unions saying what Doug Fecher, Sunmark FCU, VanCity and every other innovator in the credit union space (you know who you are) says: “What if this is a huge success?!”
I so want to insert a sound clip here of me screaming: “Stop being mediocre!”
I posted this comment on Robbie’s blog while Trey was writing this post, so I figured I’d share it here too:
“What if” is an essential question to ask in business, not a sign of weakness. If the cost of a savings account exceeds the amount that account generates then the credit union is operating that account at a loss and is therefore using its members’ money inappropriately.
An account can be operated at a loss if it’s part of an effort to encourage a longer-term relationship with the credit union (unprofitable youth savings accounts come to mind) but there should be an expectation of future profit. By the way, the word “profit” doesn’t have to be a negative word in CU land—the members who put their money in a credit union are rightfully expecting a “profit” (it’s just called a “yield”).
Sunmark answered this particular “what if” by separating their online-only product into a separate brand, thus eliminating the expectation of branch access. I doubt they would like the negative word-of-mouth they would receive from the member who got a “no, you can’t use this branch.”
Yes, credit unions should be innovative and look for ways to offer new products to their members. But it’s also ok to ask the “what if”s. The members are counting on them to use their money wisely.
The what-if questions and no answers always kill me in the CU industry.
What if a member moved all their money to our new high-rate online savings accounts? No we can’t do that, our core system doesn’t support it.
I’ve started to encourage some employees in our CU that instead of saying “no, we can’t do that” to find ways to say yes to problems. Don’t say our core system can’t do it, say we can do it this way. Don’t say what if our member change accounts and increase our cost of funds. Say what if we gain $15M of new money!!
Here’s a what-if: “Our credit union offers zero percent student loans”. Sounds crazy? The present value of an undergraduate education is $1M, not to mention the PV of a professional education. Why not differentiate the CU early in the member’s life with an offer like this?
I like the idea -> but how do we cover loan losses, etc.? How can we make this a viable product – not a loss-leader?
As a brand coach I often have clients that know what kinds of processes need to be reinvented. But…
Fulfillment processes, customer service (members for CU folks) and the like all need to have “what if” applied to them. And frontline people usually can tell you all about it.
But there is no culture that supports “what if” thinking. The organization has not made room for the ideation process.
And behind that is a mindset that forms the culture. “what if” innovation is not needed or it’s too much like play or it is too risky or nothing is broken…and so it goes.
Sorry for the ramble – but this is a hot button for me.
Thanks for the conversations you extend here!
I’m all for “what if” so long as a good understanding of economics follows it. Every business still has to make money, even credit unions. The prime reason that online banks can offer higher rates is that they don’t have brick and mortar. Credit unions are steeped in brick and mortar. It’s a completely different business model.
BTW, thanks for turning me on to another credit union blog. Any chance you can list all the CU blogs of which you are aware for us?
Our blogroll is up at http://www.opensourcecu.com/pages/blogroll. We’d tried keeping the full list in our sidebar but it got overwhelming there.
I wish I had a better answer for not having these online-only products become loss leaders. I’m not advocating credit unions beat ING Direct’s 4.25% or HSBC’s 4.8 or whatever. I’m saying that if my CU offered 3.5 on a similar product, I’d stick with my CU.
Even if it’s a break-even product, people who’ll use such a product are going to be the most profitable members in their prime lending years. Plus, 19% of members with $100k + annual income are already using electronic only accounts.
I’m not trying to get out of my league here, because if there’s one thing that I’m an outsider on it’s CU operations. But I am saying it should be a priority for credit unions to find a way to do this in a manner that’s economically feasible.
In ten years, what percentage of transactions are going to be paper-based anyway? Ten years ago, few of us had ever sent an email, let alone fathomed online banking.
I’ll keep watching for how Citi and traditional brick-and-mortar institutions are moving into this product offering. I know Citi’s eSavings is paying 5.0% today.
Trey, you lament the mediocre condition that so many CUs settle into. It seems there is an intense fear of upsetting a few members with programs that might realistically benefit the masses.
We all know that barrier exists–and not just in credit unions. It takes courage to break through that ceiling of doubt and take a risk. But it doesn’t have to be done blindly. It makes sense to gather as much data as possible before trying something new.
There are many ways to gather that data. One you’re not yet using but that you might find beneficial is the “ask brutally honest and tough questions” approach. Want to find out what people–from your customers to your tellers and on up to board members and execuitives–are thinking? Ask them in a unique and dynamic way. In a way that piques their interest and fosters an attitude of openness and honesty.
And one more thing: so often it seems that it is that lack of data that fuels the prevelant skepticism. Open the dialogue and the naysayers often change their thinking.