Open Source Project #1: The Hyperlocal Credit Union
Posted by Matt Dean on August 25th, 2009
As I mentioned in my previous post, the first idea I’d like to explore is one I presented at the 2008 Symposium. The idea is to conceptualize a Hyperlocal Credit Union – not “hyper-” in the sense of “very” or “super”, as is commonly used to describe such concepts as hyperlocal media, but “hyper-” in the sense commonly used in computer science to describe links or connections (think “hyperlink” or “hypertext”, the “h” in “http”). Each time a member makes a purchase he is part of an interaction, however brief, between himself and a merchant. The goal of Hyperlocal CU is to turn this interaction into something more than a line on a transaction register.
If you’d like to see an overview of the idea, you can check out the slides and video from my presentation. The screenshots you’ll see in the slides are just rough mockups created to communicate a vision, but hopefully you’ll get a sense of the direction.
Over the next few posts I’m going to explore specific aspects of the Hyperlocal Credit Union and hope you’ll be willing to provide feedback on the validity of the idea and your thoughts on how we can expand it. Also – if you know of a credit union or financial institution that’s already doing something similar, please tell us about it in the comments.
We’ll start with reviews then move on to rewards programs, “delayed gratification”, and whatever else we come up with. After we’ve discussed an idea we’ll incorporate it into a prototype.
Reviews
Companies providing local business reviews such as Yelp, Google Maps, and Angie’s List have demonstrated the value and power of user-generated reviews in shaping purchasing decisions. While I’m no expert in this area, it seems as though the biggest challenge for companies like this is the small percentage of purchasers who will take the time to visit their website, find the business they want to review, and leave a comment (possibly requiring the user to create an account and log in). In addition, there’s no mechanism to guarantee the reviewer actually ate at the restaurant or bought a car from the dealer—it’s a system requiring a certain level of trust between readers and reviewers and is one reason why Yelp has focused on social-networking features in order to establish reviewer reputation.
Credit unions already have a mechanism for providing members a list of the businesses they’ve interacted with (eliminating the need to search for them) and validating that the transaction actually took place. By offering something as simple as a 5-star review choice along with a comment box as part of the transaction list in online banking, credit unions could make the review process painless for their members and drastically increase the number of people submitting reviews. These reviews could then be shared with other members or integrated with existing services like Yelp or Google Maps. For example, in exchange for access to reviews from non-members the credit union could offer Yelp “verified” reviews backed by actual purchases. Of course members would be able to opt-in/-out of this service and could control the amount of information they’re willing to share with other members.
Member View
In addition to the value provided to members, a high volume of reviews (micro-reviews?) would provide local merchants the ability to gauge the quality of their service in real time and work towards continuous improvement.
Merchant Dashboard
How does this fit in with the credit union mission? What better way to promote thrift than to help members make better purchasing decisions and get the most for their money? It would also create opportunities to increase business accounts among local merchants.
Your thoughts?
Could this idea work and is it worthwhile? What opportunities and challenges do you foresee? Let me know in the comments.
I saw you discuss this last year and am very excited to see you wanting to start moving this forward. It’s a great idea to connect the credit union to the community even more and cross market local business. Speaking of local business there is a new movement starting which i will follow up with in a post.
On the note of the concept, this will help both members and local business. It will keep local business honest and striving to be better. Otherwise, people will say they suck and will hate them.
I look forward to watching the progress on this as it develops.
You’re on to something big. First time I’ve heard an idea like this, and I’m bowled over by it’s many possible implementations.
It reminds me of the Netflix review system, when I log in I see what movies my friends just rented and commented on. I know for sure they watched it and aren’t just making it up. I frequently pick out something a friend watched based on these reviews.
I can see vast “word of mouth” advertising potential for the Hyperlocal CU. Just like when my parents pressured me into switching to Verizon for my cell phone plan to get “In-Network”. Members would recruit new members for you, just to join their social review network.
Also, I like how it breaks down our walls around finances. You could learn if a member bought a snowblower for cheaper at Lowe’s than your Home Depot model. You could see actual data about restaurants on member’s level of satisfaction versus the price to find the best value meals in town. You could also see if you’re spending too much on eating out in comparison to your friends.
All in all, Hyperlocal CU would be a powerful social networking tool for credit union members. I see a bright future for this idea. Can’t wait to see your next update about it!
I too saw this at the Sympiosium. As impressed with it today as I was back then. I thought for sure that someone would sign on and get it into production by now.
Good stuff. We have been brainstorming on a way to do something very similar to this. It’s not an easy project to plan and launch.
Absolutely brilliant work.
It’s a tangible differentiator for the credit union brand. It makes us relevant to local businesses, who may have previously ignored credit unions as legitimate financial services partners.
It also helps us reinvest in our communities in a creative and responsible way, and defend against some of the CRA-based attacks thrown at us by bankers (like at www.creditunionruse.com).
I’m looking forward to watching this concept evolve.
Hey Matt!! Great out-of-the box creative thinking!! I love brainstorming and coming up with stuff like this. And I love OpenSource…I’m a huge fan of yours. I’ve been chewing on this idea for a few days now, and I can’t seem to let it go because….
I’m not sure that this is where cu’s belong. Oh how I hate being the buzzkill. Let me preface this by saying I want to be convinced that it’s a good idea.
If you’ll pardon the Dirty Dancing reference, this just doesn’t feel like our “dance area.” You can make an arguement that your idea relates to smart financial management. But is that a relationship that we (as cu pros) justified, or does Joe and Mary Consumer really feel that way?
Years ago (when “portals” were the buzzword of the day), folks tried to convince us that cu’s needed to be the portal for purchasing household items. It’s a neat idea, but never panned out.
It feels like the electronic version of the “community bulletin board” that many of our cu’s have/had. Ours never worked out.
We have a tough enough time convincing members to think of us first for our financial stuff. Is it realistic to expect them to come to us to find the best deal on lawn mowers?
Tell me what I’m missing here. I want to believe…I just don’t yet.
xoxo
Matt I love the idea. I think its a brilliant way to give our members a better perspective on their spending habits, as well as connect with the communty.
Susan, I feel like the “deals” within the system are more of a secondary function. Financial management being the reason members would use the system, and the deals being more of an incentive to frequently check in on it and rate the businesses they use.
I think that this is exactly the type of direction we need to take as credit unions. It’s like internet banking. Back when the internet was a novel thing, and not many people used it or even had internet connections, it was not necessary. Today, you would be foolish not to provide this. At one point, internet banking was a competitive advantage, but now it is a necessary part of your operations. Looking to the future we need to ask ourselves, where is the market place taking us? What competitive advantage that is available now, will become our disadvantage later if we don’t get on board?
I believe that the market place is becoming much more competitive due to technology. This is especially the case in catering to Gen Y’ers. They are not going to remain loyal to their credit union just because their parents were members, and it was where they got their first savings account. If we can’t provide them the products and services they need, which to Gen Y’ers means the latest most convenient technology, then they will go elsewhere. Why not jump ahead of the game? We may not be concerned with Gen Y’ers right now, but eventually they will comprise the majority of our members. Are we prepared to fulfill their needs?
In the budgeting software category, Mint.com is already taking a similar approach, and it is quickly catching on, and becoming a disadvantage to credit unions. Mint will show consumers where they can get the best rates on CD’s, loans, credit cards, etc. Not many credit unions are in there; consequently, technologically dependent consumers may transition to banks because convenient information is being presented to them that shows where they may improve their budgets. They won’t even see the credit unions.
We need to consider what the landscape is going to look like in the future, and I don’t think that means your Daddy’s credit union. Technology definitely will have a role in this. I haven’t seen Matt’s idea thoroughly explained yet, so I am making a few assumptions; however I think his idea is on the right track.
This is very similar to a program by Southwest Airlines, the Rapid Rewards Dining program (http://www.rapidrewardsdining.com/). Southwest customers register their debit and credit cards on this website, and then when they eat out at qualified restaurants they can get credits toward flights. Then when you log in, the system asks you to rate your dine. It’s verified that you’ve eaten there, and you see ratings from other diners. I’m sure the restaurants love it, and Southwest has a customer base who is very vocal about loving things, so it’s GREAT word of mouth!
I’m feeling a little bit like Susan though in that I’m not sure what the tie-in back to the credit union industry is. What exactly would this gain us? With Rapid Rewards Dining the customer has an incentive to use this program- flight credits! Although the rating system is not mandatory, you feel so happy about racking up those credits, you don’t mind reviewing at all. With the credit union, there’s just no incentive. Why take another 10 minutes to write up a review?
The idea of having it all in one place does make a big difference though, because if I’m already signed in to the Rapid Rewards Dining system, I’m much more likely to enter a review of a restaurant where I dined.
I’d almost want to suggest that to make this work you’d have to have an incentive like “do business with these companies and you’ll get a higher rebate on your check card”, but then you get into the mess of how you decide which businesses to endorse.
Dagny, I like the comparison to the Rapid Rewards Dining plan. Thanks for making it! I’m going to check it out. As far as the incentive to participate goes, I agree that it doesn’t have the mathematical satisfaction of racking up points, but it helps reduce barriers to purchasing big-ticket items while promoting thrift, which is an incentive in and unto itself.
If you take a longer-term look at the client (member)/vendor (credit union) relationship, the ease of the transaction (say, the credit union can offer a discounted loan if you’ve saved 50% toward your purchase of a vehicle…more for 75%). The specificity of the savings goal allows the credit union to facilitate the conversation without endorsing a particular business. If I’m saving for a Mustang, then I’m limited to Ford Dealers within the Credit Union’s geographical location. Even if two Dealers are within that location, competing offers are always in the best interest of the member.
Personally, I call one credit union when I need a loan for a big-ticket item like a car. And even when I lived out of state from that credit union, I wanted them to handle a mortgage when I was considering purchasing a house. Why? They made it easy on me in the past and I trusted them.
To me, this is an extension of that ease of transaction while also acting as an advocacy for savings – not just selling me a loan. And though that ease of transaction may not be in the form of rewards points or direct incentives (or, as a modification in a future iteration of the program, points and direct incentives COULD be employed), by acting as an advocate for savings, making transactions easier and facilitating trust that banks simply cannot provide, it will make for more loyal members.
Sounds like a great way to reinvent OSCU. Your point that “that social media doesn’t really need OSCU as a cheerleader anymore” is very true – Twitter has become the water cooler. OSCU as the cheerleader kicked this whole thing off and you should be proud of it’s place in the history of credit unions. Rock on