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The MARKeTInG ISSUe UnDeR The hooD Data and Analytics A Powerful Combination august 2012 VOLuME 7 IssuE 8 9.95 An Interview with Datamyx s Ceo Ben Waldshan The Debit Roller Coaster Top 10 Attributes of Successful Women Leaders WITH C d t U all CU24 s d t k s ha g ATMs s st p vd v a d val t b s GET R s E G ll a MORE SURCHARGE-FREE ATMS Th la g st ati al dt d PIN d b t t k P s d t CEO A g t F d al C d t U Ch st fi ld VA MORE th CU Call Judy Lazzerini toll-free email visit MORE OUR MEMBERS GET CONTENTS Credit Union BUsiness AUgUST 2012 V O L U M E 7 I S S U E 8 4 6 8 13 pov Old expressions Quickly Becoming Ancient History Tim O Hara AChIevInG SKIllS 23 26 30 32 36 40 CUSToMeR SeRvICe Tara McCall CU ConTenT Managing Client expectations The Value of Disconnecting... and How Overworked Credit Union CeOs Can Do it Laura Enock pRoDUCT ShoWCASe Living a Profitable Life Holly Herman DeBIT MATTeRS Suzanne Savage UnDeR The hooD 4 Areas To Consider the Profit involved The Debit Roller Coaster Data and Analytics A Powerful Combination Joyce Moed Editor STAff RepoRT Guardian Analytics Unveils new Behavior-based Fraud Prevention solution for ACH Transactions MARKeTInG MATTeRS On Results Tony Rizzo An interview With Datamyx s CeO Ben Waldshan Analyzing Two Forms of Loan Acquisition Campaigns leADeRShIp 16 20 Consumer Confidence stronger Among Credit Unions Cfo CURRenCy Women in Leadership Dr. Sandra L. Torres CU SpoTlITe Sharon Sweda Top 10 Attributes of successful Women Leaders net economic Value and net income simulation Analyses Emily Hollis Digital Communication sweeps sCCU www.cubusiness.com August 2012 Credit Union BUSINESS 1 ABOUT US Publishing Team Tim O Hara Publisher tim cubusiness.com Joyce Moed Managing editor joyce creditunionbusiness.com Iliana Nord Operations Manager iliana cubizmag.com Patti Manzone Designer Mary Lynn Rogers Copy editor Audrey Green intern THE MARKETING ISSUE UNDER THE HOOD Data and Analytics A Powerful Combination AUGUST 2012 VOLUME 7 ISSUE 8 9.95 An Interview with Datamyx s CEO Ben Waldshan The Debit Roller Coaster Top 10 Attributes of Successful Women Leaders Staff Writers Emily Hollis CFO Currency Suzanne Savage Debit Matters Sharon Sweda CU SpotLite Subscriptions Credit Union BUSINESS is published monthly (12 issues per year) by CU Business Magazine inc. A one-year subscription costs 89. An online subscription form is available at www.cubusiness.com. Contributors Laura Enock Holly Herman Tara McCall Tony Rizzo Dr. Sandra L. Torres Contact Information Credit Union BUsiness Magazine P.O. Box 2223 Palm Beach FL 33480 (561) 282-6015 (561) 588-7711 (fax) info cubusiness.com Sales and Advertising Bernie Fitzgerald Advertising executive Bernie cubusiness.com or 561-282-6015 1 Greg Halpern Advertising services Manager Greg cubusiness.com or 561-282-6015 4 2 Credit Union BUSINESS August 2012 www.cubusiness.com EXECUTIVE RECRUITING COMPENSATION SERP DESIGN MARKET RESEARCH MERGERS Credit Unions stand for fairness and honesty WE STAND BEHIND YOU. As a credit union your team is committed to helping people. And so are we. Our goal is to stand behind you in all you do to help your credit union be the best it can be. From compensation and SERP design to executive placement and many more customized services D. Hilton Associates Inc. is here to support you with decades of credit union expertise. EXECUTIVE RECRUITING COMPENSATION SERP DESIGN MARKET RESEARCH MERGERS Call us at 1.800.367.0433 or visit dhilton.com To download our app scan t his Q R code o n y o u r iP hone or search for D. Hilton on iTunes app store. FROM tIM Publisher s POV Old Expressions Quickly Becoming Ancient History The other day one of the young people in the office came in wearing a shirt with schlitz emblazoned on the front. i asked our summer intern a brilliant young lady on her way to new York University in the fall if she knew the name. no idea i explained that schlitz was at one time the best-selling beer brand in America but fell from grace over a combination of science and marketing (long story). i then asked if anyone remembered the princess phone. no clue to what that was either. There is one very old expression that leads nicely into the subject of this month s Under the Hood cover feature Build a better mousetrap and the world beats a path to your door Presenting Datamyx a company way ahead of the curve in fact Datamyx looks very much like the answer to every credit union lending department s prayer A technology company that is so tied into all three credit bureaus (equifax TransUnion and experian) that it can report when one of your members is looking for an automobile purchase and warn you with an in-The-Market Alert just in time ...to provide them with a great offer according to CeO Ben Waldshan. it s very unique how we incorporate and leverage all three credit bureaus Waldshan said. We layer in demographic public record home valuation models and vehicle data. We have a very rich and broad database. We are not a marketing company. We are a data-driven marketing technology company. Datamyx works from a streamlined office located in a modern glass office building just a few miles south of here in Boca Raton Fla. i visited just prior to editor Joyce Moed s interview with Mr. Waldshan. Although i missed Ben during my visit i was able to spend some time talking with some very impressive marketing executives and came away with brand-new knowledge of how to cross-sell. Please read Joyce s interview beginning on page 13. i know you ll be impressed with Ben Waldsham and the company he s helped build it gives me great pleasure to officially welcome our newest contributing writer for CU BUSINESS Dr. sandra sandi Torres. Check out her article on page 36. Based in Miami sandi is an author speaker and consultant on leadership . she has researched leadership practices around the world. More than 20 years of experience in the credit union industry has made her an ardent believer and practitioner of the credit union philosophy people helping people. Her specialty is women s leadership and we look forward to sharing her wisdom with you in each monthly issue Thanks for reading Get it for the entire executive team www.creditunionbusiness.com subscription 4 Credit Union BUSINESS August 2012 www.cubusiness.com AChIEVINg SkILLS Living a Profitable Life 4 areas to Consider the Profit Involved By Holly Herman P 6 rofit is simply the surplus of something after taking out the cost. Classically profit is defined through numbers or more specifically money. You can also apply the concept to many areas of your life. it can help with the choices you make. Here are some areas where you might want to consider the profit involved. Time That s why the phrase is spending time the cost of your time is expensive. Time is one of the few things you can never get back or have more of. spend your time on things you enjoy that you benefit from. experiment and track how you re spending your time for a week. Beside each activity indicate if it is a benefit to you and something you enjoy. see what percentage of your overall time is spent on those activities. Social media There are so many platforms to connect with others. Keeping up with all the sites can be exhausting. Make a list of all the sites that you re part of. Write out the benefit you receive from each site such as personal connection new business building market awareness or traffic driven to your credit union website. Track how much time those sites take to review Relationships Profitable relationships have some benefit to them. The cost to you is the time energy and emotion you put into the relationship. The profits are the positives that come from that relationship which range from great memories of times spent together knowledge from others wisdom or emotional support to name a few. You ll know it s an unprofitable relationship when you re feeling an emotional drain you may want to cut your losses. Credit Union BUSINESS August 2012 www.cubusiness.com AChIEVINg SkILLS and maintain (your cost). evaluate the profit associated with each site are they all profitable Exception if you re just starting to use a particular social media venue you may want to do the evaluation after three to six months. done unplug the set once again. Do this for one week and see what happens. is your life filled with profit or are you operating at breakeven or a loss What costs (activities) could you eliminate Live a profitable life. The rewards are endless. Holly Herman is a former CEO of two credit unions Chief of Staff for National Credit Union Administration Chairman Johnson and currently an Achievement Coach helping individuals and organizations. She can be found at www.AchievingSkills.com or contact her at Holly AchievingSkills.com. Television A bit of television can be very profitable you can get the news quickly enjoy a show that teaches you something or relax and unwind with another that s entertaining. i know some people who turn on a television as soon as they step in their door and leave it on until they fall asleep. Constant background noise clutters up your thought process it stops your creative mind from thinking. The noise can exhaust you over time very unprofitable. if this has become your habit play with this exercise. Unplug your television. When there is a program you consciously want to watch plug it in and sit down to watch it. When it is www.cubusiness.com August 2012 Credit Union BUSINESS 7 DEBIT MATTERS The Debit Roller Coaster C By Suzanne Savage redit unions have been riding a debit revenue roller coaster of late. After 15 to 20 years of steady gains we are now facing certain headwinds to this important source of revenue. Payment innovations have led to shifts in the mix of payment transactions and regulatory action is causing changes in income and expense for this previously stable recurring revenue generator. While the ride has its thrills and chills our collective goal is to return to the days of steady transaction growth we have come to enjoy. and began to pick up speed expansion of debit card acceptance and new payment innovations continued to drive debit card use. The growing use of debit fueled by convenience and the push for card acceptance into smaller ticket merchant locations contributed to the displacement of checks at the point of sale. The growth in internet shopping grew transaction volumes in the card-not-present channels and provided higher interchange than the face-to-face transactions. new payment innovations like Mobile speedPass paved the way for widespread contactless card acceptance. in addition to displacing checks debit usage also curbed Where We ve Been On the slow lurch to the top of the first hill credit unions enjoyed the use of cash. The following chart shows debit transactions steady gains in interchange income as network partners did the growing at a faster pace than the decline in paper checks. heavy lifting to grow merchant acceptance. The networks were successful in making the business case to merchants that acceptDebit Card and Check Volume Trends 45 000 ing debit card transactions would speed settlement and provide 40 000 a payment guarantee for all approved transactions as well as 35 000 provide some protection against losses. Merchants enjoy these 30 000 Annual VISA and MC Debit benefits today and pay interchange in exchange for giving up 25 000 Volume 20 000 some of the risks of check acceptance and cost of cash handling. Annual Commercial Check Volume 15 000 The economics allowed merchants to justify investments in POs 10 000 devices. For our part as issuers credit unions taught members 5 000 that card transactions are convenient and secure while zero li0 2005 2006 2007 2008 2009 2010 2011 ability protections insulate cardholders from fraud losses. The industry s collective marketing and education campaign coupled with efforts to increase merchant acceptance kept provided a Transaction shifts have had important implications for the overall profitability of the DDA account. As checks were displaced steady revenue climb for many years. credit unions traded check processing expense for interchange revenue. As cash was displaced we gained interchange income Payment Innovation Impacts Card-based payments coupled with other innovations in the pay- that was previously non-existent. The trend above has a positive impact on another favorite ments industry served as great vehicles to grow non-interest income. in 2010 approximately 22 percent of noninterest income source of noninterest income nsF courtesy pay fees. Debit card came from debit card interchange second to nsF courtesy pay transactions are now the number one trigger of overdraft fees. income according to Callahan & Associates non-interest income survey. As we crested the first hill of the roller coaster Millions 8 Credit Union BUSINESS August 2012 www.cubusiness.com A partner to take you where you want to go... Over a quarter century spent helping credit unions like yours grow. That s true partnership. At CUNA Brokerage Services our financial planning tools rewards programs and turnkey marketing solutions have made us the credit union industry s preferred broker dealer. Work with dedicated consultants enjoy direct access to our senior management--and start seeing green today. Get growing. Call 855.261.2194 or visit www.cunamutual.com cbsi FRO51217-561B 2012 CUNA Mutual Group. All Rights Reserved. ...and understands where you come from. Our Business Is Growing Your Business DEBIT MATTERS Unknown 2.8% Other 4.0% ATM 7.8% ACH 14.2% POS Debit 41.0% Check 30.2% Source Callahan & Associates FDIC While our roller coaster ride is thrilling and everyone loves the income generated by debit cards we have not been able to throw our hands in the air to completely enjoy the ride. slowing through a couple of curves we are jostled by a few bumps that have impacted this key non-interest revenue stream. Regulation Speed Bumps in 2010 the Federal Reserve made changes to Regulation e to require members to opt-in before receiving overdraft services. For members that do not opt-in ATM and debit transactions are denied when an insufficient funds situation exists. Under these circumstances credit unions lose both the interchange revenue and the nsF fee revenue. The ReG e changes were implemented as a consumer-friendly amendment to educate consumers about the nsF Courtesy Pay programs and to give members the option to opt-in to these services. For proactive credit unions that actively sought opt-in through multiple channels branches online banking and call center success was achieved in very high opt-in rates some up to 97 percent. While this speed bump took plenty of effort we re-affirmed our knowledge that nsF courtesy pay products are well liked by the membership and fees are not deemed to be egregious. Whew credit unions dodged that bullet and through the corkscrew we go Around the next curve came the Durbin Amendment to the Dodd-Frank Wall street Reform and Consumer Protection Act. You ll remember that Durbin requires institutions to participate in two unaffiliated debit networks. Durbin also carved out an exemption for institutions under 10 billion from the reduced interchange rates that are mandated for larger financial institutions. This meant that interchange for the under 10 billion in asset crowd could go up or down but would not be set by the Federal Reserve. With Durbin in the rear view mirror credit unions are seeing some of the negative impacts of the legislation. First since Durbin required all institutions to participate in two unaffiliated networks many credit unions were required to add a new network partner for debit. second Durbin gave merchants control over transaction routing decisions. With every institution now having two different network paths through which to route transactions merchants began to rationalize their routing schemes to ensure transactions would travel through the least expensive network route. As issuers added an additional network partner VisA and MasterCard lost transaction volume that was previously enjoyed under exclusive issuing arrangements. VisA responded with the enforcement of long standing rules that require issuers to accept VisA pinned POs transactions when they issue VisA signature debit cards. With lower interchange for VisA pinned transactions VisA could recoup lost transaction volumes when merchants choose to route to VisA instead of another network. The overall impact to many credit unions of the Durbin Amendment has been a decrease in interchange income for both the signature and pin debit transactions even when transactions volumes grew or stayed flat. Across the board the average decrease is approximately 0.03 per transaction according to the Federal Reserve. Couple this with the cost of adding an additional network and the increase in fees assessed by some networks for Durbin compliance and the revenue picture is further dampened. Financial Institutions Respond The cost of regulatory compliance and associated reduction in interchange has put downward pressure on revenue streams from the deposit accounts. How has the industry responded Bank of America and other large banks attempted to impose additional per month fees for debit card usage. This writer suspects the motive for the fee was two-fold. First it was an obvious attempt to recoup the soon to be lost debit card revenue. But secondly it was meant to convey a message that this government regulation merely caused a shift in who pays for payment processing functions. The banks ultimately relented but no doubt found other ways to recoup reduced revenues from consumers. 10 Credit Union BUSINESS August 2012 www.cubusiness.com DEBIT MATTERS an industry we experience lower losses on pinned transactions compared to signature debit yet pricing decisions like the one at my credit union serve as a disincentive to use. OK here s another one. if i lose my debit card my credit union charges me 10 to replace it. Really The only source of revenue generating transactions on the DDA comes from that card. shouldn t my credit union want to replace it for free...and as quickly as possible Have they not seen the 20 transactions i perform with that card each month Fortunately i have yet to be dinged with an nsF fee but shouldn t my credit union know that 41% of nsF courtesy pay income is triggered by debit card use The things i get for free from my credit union are the ones that generate expense. Free checking free bill pay free branch transactions free online banking and free ACH transactions. i m not suggesting that my credit union should start charging me for these things indeed from a competitive perspective most of these should remain free. But when making pricing decisions about the deposit accounts credit unions need to evaluate all the ways that account is accessed and consider the relative weight of the associated income or expense generated by the various transactions. This should lead credit unions to remove disincentives for use of the income generating transactions and place fees where needed on the more expensive services. Another mistake we make in pricing DDA services comes from not evaluating the mix of transactions. Writing checks and making trips to the branch are infrequent occurrences compared to the electronic self-service transactions most members perform. While credit unions have been successful in moving members to lower cost transactions we have done little to manage our pricing schemes commensurate with the shift in transaction usage. While our roller coaster ride is thrilling and everyone loves the income generated by debit cards we have not been able to throw our hands in the air to completely enjoy the ride. The bank reaction spawned a win for credit unions in the Bank Transfer Day events that prompted consumers to give up their bank relationships in favor of credit unions. Inadvertent Disincentives to Debit Card Use When you think about it the banking industry s response to Durbin in the form of increased fees was a ridiculous response given the sources of revenue and expense from the deposit accounts. services that we routinely give away for free like ACH transactions ATM transactions bill pay and check writing all generate an expense to the institution. Debit card transactions both Pin and signature represent the only transactions that generate income from the DDA account. Fees on debit cards and debit transactions only serve as a disincentive to the single income generating transactions available pushing account holders back to the transactions that generate expense. Banks aren t the only ones that have made errors in debit card pricing credit unions have fallen into the same trap. The mistake in thinking about fees on debit cards comes from evaluating the transaction types too narrowly. instead of evaluating all the ways to access the DDA account then making pricing decisions accordingly credit unions tend to look at payment methods singularly. This often leads to mistakes in pricing. The most common mistake credit unions make is in pitting the signature debit transactions against the pinned debit transactions. i offer up my own credit union who shall remain nameless as the poster child for poor debit card pricing decisions. At my credit union i am assessed a fee of 0.25 per transaction when i use a pin at a POs location. There have been many studies that show consumers prefer pinned transactions. Right or wrong consumers view pin transactions as more secure. As www.cubusiness.com The Next Threat to Debit Interchange Income As a result of the Durbin Amendment and the debit interchange reductions at large banks there is a renewed effort on the part of banks to grow the credit card accounts. Yes when Chase bombards the airways with What s in Your Wallet ads they are not just targeting your credit card transactions they want your debit card transactions too. The easing of underwriting requirements coupled with generous one-time and on-going rewards is driving new credit accounts to banks. Rich rewards create incentives to shift debit transactions to credit transacCredit Union BUSINESS 11 August 2012 DEBIT MATTERS tions. The extent to which credit union members replace debit card usage with reward rich credit transactions may drive a an erosion of debit revenues even further. not a bad strategy on the part of the banks it is perfectly logical given the new regulatory constraints on debit. Credit unions should also be looking at their credit card programs to make sure any shift away from debit stays inside the credit union s four walls with robust credit card options. As the coaster pulls into the station and the wind stops making a mess of your hair stop to ponder the thrill ride this roller coaster provides. Maybe we should leave the roller coaster to the theme parks. it is a great time to reflect on the response to all the events that have impacted debit over the last three years. Have you pursued member opt-in to satisfactory levels Have you inadvertently created disincentives to debit card use with transaction pricing Have you made your credit card programs competitive to erosion of the member relationship if not it is not too late to take some defensive measures to protect your debit revenue stream. Suzanne Savage founded the Savage Consulting Group (www.savagecg.com) in 2001 after holding a number of management positions in various financial institutions networks and consulting firms. Savage Consulting Group provides credit unions a wide range of consulting and project management services with a primary focus on the card programs. Ms. Savage specializes in strategic development business planning and operations market research and the evaluation of payment systems products services and technologies. Ms. Savage holds an M.B.A. from the California State University at Fullerton and a B.A. in Business-Economics from the University of California at Santa Barbara. Suzanne is also a certified Project Management Professional (PMP). 12 Credit Union BUSINESS August 2012 www.cubusiness.com UNDER ThE hOOD Data and Analytics a Powerful Combination an Interview With Datamyx s CEO Ben Waldshan In a perfect world financial marketers would know when their members are ready to shop for another product or service enabling them to ultimately increase their cross-sell lift for more profitable products such as auto loans and mortgages. Cross-sell initiatives that go well beyond the one-size-fits-all marketing program yield optimal ROI as evidenced by an innovative program that was created by Datamyx LLC. D History By Joyce Moed Editor atamyx is a technology provider of data-driven marketing solutions that have proven to drive quantifiable ROi for direct marketers. its clients have achieved record-breaking results from their marketing campaigns. The company based in Boca Raton Fla. was founded by Ben Waldshan CeO 15 years ago along with two partners. We re former marketing executives Waldshan said. We saw the opportunity to start a business leveraging technology. At that time we were doing this within the mortgage banking world. We had the opportunity to start the business anywhere. We started it in Florida because there s no state tax down here and it s beautiful weather-wise. This location gives us an edge in attracting top talent. already in the mortgage space and then we started to build out a growth strategy within additional markets automotive banking and credit unions and insurance. in 2008 Datamyx acquired a company called Marketernet. This benefited Datamyx because at the time it had equifax as its only credit bureau source. Marketernet brought experian and TransUnion into the mix. They also bought a sophisticated data access technology platform Waldshan said. We had one-plus-one-equals three Datamyx grew substantially throughout the next nine-year period helping financial institutions acquire customers. its original niche was on the home equity and mortgage side. We were then acquired by TRAnZACT in 2006 Waldshan said. They were our customer for about a year before they acquired us. We became their data and analytical support and we continued to support our own direct revenue streams. We were www.cubusiness.com August 2012 Credit Union BUSINESS 13 UNDER ThE hOOD when we acquired Marketernet three credit bureaus as well as a technology platform that allowed us to provide more efficient services. Today Datamyx has a powerful combination of data analytics and technology. The company has both direct and indirect clients. As for its credit union customers it typically works directly with the top 100 000-plus credit unions. We re pursuing credit unions with 100 000 members Waldshan said. Datamyx also has channel partners who support its entire credit union and banking space from a marketing perspective who are selling their products on a private label basis. We are well-positioned to help solve some real problems for a variety of financial institutions Waldshan continued. if [the financial institution] already has the customer relationship we can help them cross-sell their customers more effectively into loan products. it s very unique how we incorporate and leverage all three credit bureaus Waldshan said. We layer in demographic public record home valuation models and vehicle data. We have a very rich and broad database. We are not a marketing company. We are a data-driven marketing technology company. deserve options. Banks and credit unions can identify when their customers are shopping for products at the right time and provide them with a great offer. Waldshan explained that the product really started to catch on within the banking and credit union space even more so than Datamyx s core vertical which is mortgage. Cross-selling is a key growth driver for most credit unions and banks. We are very excited. Our growth has been phenomenal. since 2008 through this year our revenue has grown 150 percent all through the diversification into these new markets. Waldshan stressed that whether interest rates are low or high Datamyx has a whole suite of products that can help financial institutions target and acquire customers. How It Works Take a credit union with a 100 000 member base. Datamyx would take those members host them in its environment and inform the credit union which of its members are shopping for loans. (Typically this process would uncover between 3-5 percent of their members shopping each month.) in this example the credit union would receive 100 to 150 leads a day. it would execute email offers and overnight or send first class mail offers. in addition it would call its members and make a compelling offer. Credit unions typically reach about one-third of its members within a short period of time. in this example about 30 to 50 conversations with members will happen each day. Of those 10 percent on average will convert into a loan. That s 65 to 100 incremental loans a month. All of this is monitored and delivered through our technology. That s the heart of it said Waldshan. The metrics are outstanding. it s the most cost-effective way to cross-sell mortgages auto loans or auto-refis into the member base. When you look In-The-Market Alerts One of the unique services that Datamyx is providing to financial marketers is in-The-Market Alerts. A bank or a credit union sends us a list of their customers and we monitor it on a daily basis and let them know when one of their customers is shopping for a mortgage auto loan credit card etc. They quickly reach out to these consumers providing them with a firm offer of credit Waldshan explained. These are consumers in the market at the time. Consumers definitely 14 Credit Union BUSINESS August 2012 www.cubusiness.com UNDER ThE hOOD As we re getting closer and closer to our clients and the credit union space we also see that this product is going to evolve Waldshan said. We re also planning on enhancing the product. We are looking into monitoring against life-changing events such as members getting married members having a new child etc. These are events that lead into new loan products and could be very compelling. Waldshan added that he also feels that Datamyx could play a bigger role in tracking and analytics in the credit union space. in addition credit unions are starting to generate and acquire its own leads online he said. We have real-time technology to help these credit unions optimize their spend and resources around these leads. We can embed our instant lead qualification into their back end so they can route them accordingly. We help organize these strategies as well. in all Waldshan stressed that the key message is really the in-The-Market Alerts a product that is little more than one year old. This is the no. 1 way a credit union can cross-sell their members into new loan products. it s not predictive. it s factual. And it s extremely powerful. it should be in every credit union s repertoire. For more information contact Datamyx at 888-707-7600 or visit the company online at www.datamyx.com. Joyce Moed is the Editor of Credit Union Business magazine. Moed has worked for 15 years as a newspaper and magazine reporter and editor covering news features business politics religion and community news. Since 2007 she has focused on writing about the credit union industry. Contact her at joyce creditunionbusiness.com. Cross-selling is a key growth driver for most credit unions and banks. We are very excited. Our growth has been phenomenal. Since 2008 through this year our revenue has grown 150 percent all through the diversification into these new markets. at the cost to acquire the loan there is nothing more effective than in-The-Market Alerts. Another benefit according to Datamyx is that the more products and services a member has with its credit union the less likely they will be to leave. Therefore being able to successfully cross-sell multiple products to members is extremely important. not only does Datamyx monitor when customers are searching for a loan or other products it also searches if that consumer qualifies for the product or loan. Waldshan noted which core loan products are most popular with credit unions mortgage loans auto loans and credit cards. Do they have a credit score greater than 620 Waldshan cited as an example. Those nuances are also layered in. These people are not only interested but they also qualify for the loan. That saves a huge step for the credit union as well. After they layer in their passing credit criteria they press go. everything is automated from that step forward. every morning we are serving the feeds of leads to each credit union for solicitation. Clearly we see credit unions as a very important segment. They all have member bases that are mostly untapped. The members may only have a savings or checking account. We can help them learn (literally overnight) when their members are shopping for another product on a daily basis . www.cubusiness.com August 2012 Credit Union BUSINESS 15 STAff REPORT Consumer Confidence Stronger C Among Credit Unions redit union members attitudes about the economy remain stronger than non-credit union members according to data released from the credit union member demographic of the Discover U.s. spending Monitor. While credit union members grew slightly more pessimistic from earlier this year they generally are more positive about the economy and their personal finances than non-credit union members and are more optimistic than they were at this time last year. Views of Personal Finances Also Stronger Credit union members have stronger views of their personal finances than non-members and are more positive about their finances now than over the same time period last year. Credit union members who rate their personal finances as excellent or good remained the same as April 2012 at 42 percent while non-credit union members with the same view declined 5 percentage points to 31 percent. However credit union members rating their finances as excellent or good increased 7 points in July 2012 from what was reported a year ago. Forty-five percent of credit union members believe their personal finances are getting worse in July 2012 a 3-point increase from April. Fifty-one percent of non-members feel their personal finances are getting worse also up 3 points from April. More than half of credit union members expect to have money left after paying bills at 54 percent while only 45 percent of non-credit union members report the same this month. Credit Union Members More Confident in Economy Year over Year Credit union member respondents rate the economy more favorably than non-credit union members. Forty-eight percent of credit union members rated the economy as poor in July 2012 a 14-point improvement from the same time period last year. By comparison 57 percent of non-credit union members rated the economy as poor in July 2012. Looking at a year-over-year comparison credit union members who expect the economy to get better increased 13 percentage points in July 2012 to 33 percent versus the same time period last year. The number of credit union members expecting the economy to get worse declined 8 percentage points to 49 percent in a year-over-year comparison from July 2011 to July 2012. This compares to 56 percent of non-credit union respondents who expect the economy to get worse which is 4 percentage points lower than a year ago. 16 Credit Union BUSINESS Spending Intentions Increase Among Credit Union Members intentions to spend more on household expenses increased month-over-month for credit union members from 30 percent in June to 38 percent in July 2012. However this is still lower than the 43 percent who expected increased spending at this time last year. www.cubusiness.com August 2012 STAff REPORT Additionally intentions to spend more on discretionary entertainment (up 4 points to 12 percent) household improvements (up 5 points to 18 percent) and major personal purchases (up 2 points to 17 percent) were all up year-over-year in July 2012. The findings among credit union members are part of the Discover U.s. spending Monitor which polls more than 8 200 consumers each month. Beginning in June 2010 the survey asked participants to indicate if they were members of a credit union. Of those polled each month on average 2 500 are credit union members. asked consumers to indicate if they were members of a credit union. Of those polled between 2 000 and 3 300 each month are credit union members. Findings for the credit union member demographic are released quarterly. The Monitor began in May 2007 with a base index of 100. surveys are conducted by Rasmussen Reports an independent survey research firm (www.rasmussenreports.com). For more information visit www.discoverfinancial.com. CEO SUBSCRIPTION WITH BENEfITS Benefit your CFO COO CMO CCO CLO CIO HRD With fREE Monthly E-Newsletters About Discover U.S. Spending Monitor The Discover U.s. spending MonitorsM is a monthly index of consumer spending intentions and capacity that is based on interviews with a random sample of 8 200 U.s. adults conducted at a rate of 275 per night. in addition to spending the survey asks consumers their opinions on the U.s. economy and their personal finances. Beginning in June 2010 the survey Subscribe NOW www.cubusiness.com Credit Union BUSINESS 17 www.cubusiness.com August 2012 LEADERShIP 2013 CU BUSINESS DIRECTORY LISTING FORM Publishing Date November 1 2012 8 200 C-Level Readers. Mailed to entire CU Business circulation of ders. E-mailed to thousands of digital E-CUB rea year long And on the web www.cubusiness.com all ADVERTISING CLOSING DATE October 15 2012 CfO CURRENCy Net Economic Value and Net Income Simulation Analyses T By Emily Hollis he nCUA s interest rate risk (iRR) advisory letter and now the mandatory iRR policy are placing ALM analytics in the limelight. Credit unions are performing advanced ALM analytics to tackle the daunting task of comprehensive iRR measurement. But periodically it s important especially with required board education to go back to the basics and understand the underlying context of these tests. What exactly is an net economic value (neV) and net interest income (nii) analysis nii simulation measures volatility as a consequence of different interest rate conditions. The credit union s balance sheet is entered into a system that executes a base case model involving no change in the market interest rate environment and records the resulting net interest income. (net interest income is defined as interest income minus interest expense neither operating expenses nor fee income are included.) normally simulation is performed throughout one to three years. net interest income is then expressed in a nominal amount (e.g. 10 million per year) and in basis points (bps) as a percent of assets (e.g. 350 bps). The balance sheet is then subjected to extreme market environments and the net interest income generated is compared with the base case over the same time period. A higher variance in these results equates to higher interest rate risk within the balance sheet. Generally a variance greater than 30 percent in a shock up 300 bp environment (e.g. 7 million in the up 300 scenario compared with 10 million in the base) borders on unacceptable. income is a measurement that board members understand and monitor. However using nii as a sole test is shortsighted for several reasons not the least of which is that institutions have failed with acceptable short-term nii result tests. Here s a brief explanation The experience of many savings and loans from the late 1980s to mid-1990s (and credit unions in the mid 1990s) showed that market-based measures of risk deteriorated long before the book value of capital www.cubusiness.com 20 Credit Union BUSINESS August 2012 CfO CURRENCy signaled the need for intervention by management and regulators. in some cases intervention was needed just months after positive earnings were reported. And many times the institutions experienced cash withdrawals precisely when liquidity tightened higher interest rates prevailed and the institutions were maxed-out in borrowing. if an institution cannot borrow assets need to be sold. in the case of the late 1980s longer-term and more complex assets had suffered real depreciation in their value. institutions were forced to sell at these low valuations which caused significant realized losses and subsequently alerted depositors to potential financial instability. Additional withdrawals caused even greater losses and a quick depletion of capital immediately threatening financial viability. in these situations institutions could fail in a lightning quick amount of time. A test to analyze fair value and the potential need to sell is the (neV) analysis. neV is the difference between the fair value of the credit union s assets and the fair value of its liabilities. Cash flows are generally valued using a market rate A test to analyze fair value and the potential need to sell is the (NEV) analysis. NEV is the difference between the fair value of the credit union s assets and the fair value of its liabilities. for the assets and an alternative borrowing cost for the liabilities. However no value is given to future development such as growth of membership branch openings or new products because the purpose of the analysis is to isolate interest rate risk. Along with these assumptions the base value is figured as if the financial institution were sold as a non going concern or as if assets and liabilities were liquidated as parts of the www.cubusiness.com August 2012 Credit Union BUSINESS 21 CfO CURRENCy ALM first believes that more credence should be put in the NEV analysis without it long-term cash flows and embedded options (i.e. caps) are not adequately tested and measured. whole entity. This should not be confused with a valuation of the complete ongoing business. The neV analysis sheds light on the value of each asset and liability sector. The base economic value is the remaining worth of the fair value of the assets minus the liabilities. if the financial institution has no gains or losses on both its assets and liabilities this base economic value would equal its capital. Asset gains are added to capital and losses are subtracted. On the liability side fair value gains occur when liability rates are lower than market and are added to capital and subtracted when liability rates are greater than market. This balance sheet fair value analysis is completed given multiple scenarios generally up and down 300 bp scenarios in 100 bp increments. The base economic value is compared with the up and down 300 bp scenarios as a measure of risk. Generally a variance greater than 50 percent in a shock up 300 bp environment borders on unacceptable. in other words this means the up 300 bp net economic value drops by more than 50 percent when compared with the base scenario. neV is a more powerful tool used to measure true interest rate risk when compared with the nii simulation. Performing a net interest income simulation over a traditionally limited forecast horizon (e.g. five years) demonstrates no difference in interest rate risk between five-year term and longer-term assets. On the other hand an neV perspective would demonstrate that the projected fair value of the longer-term assets would decrease by much greater amounts if rates moved higher. if the balance sheet contains complex or longer-term assets a substantial amount of economic value risk is likely to exist which is of course what you need to know. Because neV relies upon a standard discounting of cash flows it is a timeless measure eliminating the forecast horizon problem altogether. Although board members are more comfortable with bottom line income neV is the more robust measurement in that it captures the risks inherent in longer cash flows outside the nii simulation horizon. But in my opinion both analyses are important. Emily Hollis CFA is a Partner with ALM First Financial Advisors LLC. 22 Credit Union BUSINESS August 2012 www.cubusiness.com CUSTOMER SERVICE Client Expectations Managing By Tara McCall i f you have spent any time on the phone lately with a personal or professional service provider you have no doubt realized that the service provided today is vastly different from even a few short years ago. it is only on very rare occasions that the first voice you ll hear is a human one. instead computer-generated voices keep you on the phone for minutes at a time asking you a myriad of questions in an effort to help guide you on your request. if you re lucky eventually your last option will be would you like to speak to a representative Real customer service requires human interface and a personal touch to understand the client s needs and respond in a customized fashion to a request. As executive compensation and benefit consultants executive Compensation solutions (eCs) has learned that nowhere is this more true than when the subject is strategic confidential and essential to the success of the credit union. A relationship at this level must be a partnership not a vendorship. What defines your partner as the right one to meet your needs is both objective and subjective. in finding the right partner for strategic decisions that have long-term implications the credit union should ask a number of questions including is this firm a fit for how we do business While the mainstay of any long-term service provider s business is meeting the initial needs of its clients the real core of the business is centered on maintaining those clients through ongoing customer service. in an executive benefit program a collaborative process results in an effective design and imple- mentation of a program that supports the long-term objectives of the credit union but the proof of a true partner is one that will stay with you and provide you with all of the various reporting elements that are necessary for these plans at implementation and for years beyond that. To do that a credit union cannot rely upon a computergenerated voice to help navigate its options. in order to effec- tively manage an executive benefit plan there are at a minimum three levels of service that should be performed by your service partner Transactional service Periodic service and Proactive service. Transactional Service Transactional service is the completion of the necessary steps to implement a plan for the credit union through consultation design documentation submission installation and communication. This service level includes providing regular updates as to the status of the implementation what will be completed next www.cubusiness.com August 2012 Credit Union BUSINESS 23 CUSTOMER SERVICE and who will be responsible for those tasks. These items should all be identified on a timeline that is used by both the credit union and the consultant to keep the project on track. An example of transactional service Your plan documentation has all been completed and executed for your new top hat plan. Have you filed the brief disclosure statement with the Department of Labor to comply with the reporting requirements of eRisA for nonqualified plans Attached is a sample letter for use in your reporting purposes. At implementation the ongoing reporting requirements for the credit union should be discussed and determined as this will enable the consultant to create a unique experience for the credit union that addresses its particular needs and reporting preferences. An important question to ask during this phase would be whether your partner has an online administration system and if so does it allow for desired customization that may be important to the credit union. it is also important for the credit union to have a designated contact an actual human being that will be available to answer questions and assist in navigating the online tools provided. email or within a secured online administration system. examples of items that clients should have the ability to access from an online administration system include quarterly benefit accrual reports quarterly projected accruals for the life of plan imputed income reporting monthly plan asset reporting participant statements and copies of all documents that have been executed for all participants. At a minimum your service provider should be completing this on a quarterly basis keeping in mind the reporting required on a state and federal level. An example of periodic service it s year-end which means there are a variety of tax forms to be completed related to executive compensation and benefits (regardless of whether you are a federal or state-chartered credit union). The information necessary to complete your Form 990 as well as information needed to complete the annual required filing of iRs Form 8925 (which reports on employer-owned life insurance contracts) is available on your secure online administration site and as always we are here to discuss this information and how to use it. Proactive Service Proactive service is the commitment to being diligent in keeping clients aware of changes in the environment that could affect their compensation and benefit programs as well as their informal funding. Does your executive benefits adviser provide you with regular mailings that touch on important emerging topics in a world in which change is a certainty you need to be com- Periodic Service Periodic service is unique for every client. This level of service is completed through information gathering data compilation and communication back to the credit union (as well as with their auditors) and should be reported either by encrypted 24 Credit Union BUSINESS August 2012 www.cubusiness.com CUSTOMER SERVICE fortable that someone is monitoring what is going on in their specific area of expertise and will keep the credit union board and senior management aware of anything that might impact its decision-making process and its fiduciary duty to manage the members money in a prudent manner. An example of proactive service The nCUA is considering imposing new rules for certain credit unions related to the ability to offer executive benefits designated as golden parachutes. The enclosed provides an explanation of the proposed rules and its impact on the Credit Union Movement. We have reviewed the proposed regulations and can assure you that they will have no immediate impact on your plans but we will also be following up with a phone call in the near future so that we can discuss this with you in person. When evaluating a strategic partnership that may last for years in to the future it is important to cover these bases and to be sure that your service provider is expert in handling all these levels of service. is your service provider motivated and committed to you Lacking the right resources decisions to make important Tara McCall is a Principal and Director of Client Services at ECS. She is responsible for the underwriting and administrative functions thatECS provides to its clients. McCall received her associate s degree from Scottsdale Community College and holds her life insurance license FINRA series 6 and 63. The best decisions can only be made using the best resources. For nearly a decade The Survey has been providing credit union boards with the knowledge they need to structure executive compensation and benefi t plans to attract retain and reward their key value creators. Participate Now Visit www.ecs-m.com and click on the The Survey 2012 Questionnaire link. For every credit union that participates ECS will donate 10 to Credit Unions for Kids. Not only will you be helping to create a valued resource for the credit union movement you ll also be helping to raise funds for a very worthy cause. www.cubusiness.com August 2012 Credit Union BUSINESS 25 CU CONTENT The Value of Disconnecting... and how Overworked Credit Union CEOs Can Do it C By Laura Enock Full disclosure i m writing this from the departure lounge of an airport coming back from 10 days abroad. not only did i leave work back in the good old Us of A i actually left my family behind too--a real vacation it wasn t planned it was a spurof-the-moment now-or-never kind of decision and it s the first time i ve done this in more than 20 years. And while i brought my laptop along i ended up doing much less work than initially planned. And you know what i have no regrets. i m not going to quote the studies and psychologists that prove beyond a shadow of a doubt that relaxing is good for us. You ve probably seen and heard it so often you d tune out anyway. But the more you feel you can t get away from it all the more you probably need to do just that. That doesn t necessarily mean you should board a plane and spend a week in Japan. But your work will be better your tolerance and patience levels higher and your creativity will be stronger when you recharge. The most luxurious vacation can be stressful if you re in a place you don t want to be or with people you don t want to be near. sure a week out of the office can be relaxing but it may not be. We ve all seen (or been) tourists who come home more tired than before. so having said that here are some ideas for recharging both in small and big ways. 1. Make it happen. Take responsibility and get in charge of your recharge. if you re like me you ll need to convince yourself that stepping back is the only way to keep your energy level high and that you ll be more productive if you invest some time in recharging. 2. Do it often. A once-a-year vacation won t cut it. Plan a miniwww.cubusiness.com redit union CeOs and other senior staff are notoriously overworked. Between tight deadlines stretching a limited budget and juggling several hats in the workplace and beyond life can get hectic. if you re running behind schedule and have a to-do list that leaves you with little time to breathe you may think that the last thing you can do is take is some time away from that list. But that s exactly what you need to do. 26 Credit Union BUSINESS August 2012 CU CONTENT mum of two hours a week to recharge doing something you love. Whether its ice skating mountain climbing or visiting a local spa the time you spend completely detached from your responsibilities at the credit union is important. Take your work elsewhere. see if you can work from home once a week. if not ask about switching offices or desks with someone else at the credit union. it may be awkward at first but a change of scenery brings a change of outlook. set aside time to focus. Make a conscious effort to keep one entire hour a day that s e-mail free. if you ve read nicolas Carr s The shallows you re familiar with the concept of doing too many things at once ... and none of them really well. By avoiding email (and if you can phone interruptions) you ve disconnected from a lot of what s going on and can better focus on what you really need to do. Come in early and stay late. Work before and after credit union opening hours. While this may sound like the exact opposite of recharging it ll give you quiet uninterrupted time to get things done. i get most of my productive work done during late nights and or early mornings. Besides you may be able to work outside of business hours from your home office giving you a chance for a fresh perspective even if you re needed in the office full-time. Take a walk. Use your lunch break and any other time when you need a quick pick-me-up. Take a walk outside even if it s cold and there s no pretty garden to walk in-- and especially if there is. Try it. it s better than having another cup of coffee. i m in no position to lecture about the ills of caffeine because i probably drink at least as much as you do but we both know it s better to get a 10-minute brisk walk in than to do starbucks ... again. Daily distraction. Bring something relaxing to the office a book you re reading a relaxing music or guided imagery track anything that takes you away from what you re doing and gives your mind a little time-out. Take a nap. no it isn t kindergarten but if naptime was mandatory in the workplace we d be pretty close to world peace. Ronald Regan was known to turn his chair around put his feet up and think deeply --with his eyes closed. Winston Churchill was known to nap and many other productive people throughout history took a little time for shut-eye at their desks. Too bad it s not socially acceptable in this country to take a siesta. But don t let that stop you--no one needs to know. A little snooze during the day will go a long way towards getting you refreshed. in fact some workplaces are beginning to provide a room for brief spells of peace and quiet - where employees can doze off for 20 minutes or so. even if yours isn t one of them see if you have more energy throughout the day when you allow yourself some zzzs. 9. Create an atmosphere of respect for recharge-time at the credit union. Make sure your employees and coworkers get chances to recharge too. They ll thank you for it and will be more productive to boot. Hectic times in life are a given. i believe that is truer for credit union CeOs than it is for CeOs in many other industries. someone in your same position at a bank probably has fewer responsibilities and more resources at their disposal than you do. And that s why the need to unplug is real. Although summer is almost over it s not the only season of recharging. schedule a weekend getaway if you can. But also focus on the little things you can do on a daily basis building recharge-time into your routine. When you get your time outs periodically through the year your staff will feel the difference and your members will benefit from it. so get the time you need to recharge. And now i ve gotta board that plane and get back to reality. And here s the thing i can t wait Laura Enock CEO of CUVA Publishing provides credit unions nationwide with content for their websites newsletters and social media through CUcontent.com. Author of the popular CUES column Teaching Smart Money Management and provider of political cartoon. Most recently Enock launched a Groupon-like deal-style website exclusively for credit unions. Find out more at CUponDeals.org and sign up for free content at CUcontent.com. Enock can be reached at laura cucontent.com. 3. 4. 5. 6. 7. 8. 28 Credit Union BUSINESS August 2012 www.cubusiness.com PRODUCT ShOWCASE guardian Analytics Unveils M New Behavior-based fraud Prevention Solution for ACh Transactions cally analyzes ACH batches and transactions and prioritizes the highest risk payments for review. This proactive approach increases operational efficiency and reduces the risk of lost profits and clients. With ACH transaction volumes growing and criminals more eloquently tampering with ACH files financial institutions are expending significant resources monitoring for fraudulent ountain View Calif.-based Guardian Analytics the market leader in behavior-based fraud prevention solutions announced FraudMAP ACH the latest innovation in the company s multi-channel product portfolio. Using the same behavior-based anomaly detection technology proven to prevent fraud at hundreds of banks and credit unions in the online and mobile banking channels FraudMAP ACH automati- How Fraudsters Bypass Traditional ACH Monitoring As fraudsters get better at burying their attacks deeper into ACH files ACH operations staff must spend more time and effort to find high risk transactions increasing the risk of financial losses and customer churn Progressive levels of fraud infiltration Effort to find fraud with traditional rules-based monitoring and reports Substantial Fraudster takes over corporate account LEVEL ONE Fraudster submits a new ACH Batch file all of which is fraudulent. Fraudulent files may or may not violate caps or calendar rules. Mode rat e e inabl sta su Un UNDETECTED FRAUD LEADS TO LOST CUSTOMERS AND PROFITS 56% LEVEL TWO Fraudster breaks into an existing batch file and adds new payments which will change the number of transactions in the file and the total amount of all transactions in the file. Files may still be below established caps limits. Mode rat e Substantial 56% of businesses said it would take only 1 fraud incident for them to lose confidence in their financial institutions ability to protect their accounts. e inabl sta su Un LEVEL THREE Fraudster breaks into an existing batch file and adds some new credit transactions (steals some money) but simultaneously adds some new debit transactions that leave the total dollar movement for the file as a whole unchanged. Mode rat e 73% Substantial 38% Of businesses that were hit by fraud 38% took some or all of their businesses elsewhere as a result. So banks are losing customers. e inabl sta su Un In 73% of corporate account takeovers money was successfully transferred. LEVEL FOUR Fraudster breaks into an existing batch file and edits specific parts of existing transactions (e.g. The payee account number) which leaves the number of transactions and the total dollar movement for the file as a whole unchanged. Mode rat e 54% Substantial ACH FraudMAP ACH reduces the risk of fraudulent ACH payments. Using proven behavior-based fraud prevention techniques FraudMAP ACH analyzes all ACH origination files batches and payments for unusual or suspicious activity relative to normal payment activity. FraudMAP ACH detects all levels of fraudulent activity including fraudulent transactions buried deep within large batches. It eliminates the need to maintain rules caps limits and negative lists or to manually review long and complex exception reports. e inabl sta su Un Data Courtesy of the 2012 Business Banking Trust Study When a business loses money through a fraudulent ACH transaction the bank reimburses some or all of the money 54% of the time. So banks are losing money. 30 Credit Union BUSINESS August 2012 www.cubusiness.com PRODUCT ShOWCASE transactions and in many cases failing said Craig Priess founder and vice president of products and business development at Guardian Analytics. This is not a sustainable model. FraudMAP ACH fundamentally changes both the manner in which and how successfully a financial institution manages ACH payments risk. FraudMAP ACH is the industry s first complete behavioral analytics-based fraud prevention solution for ACH transactions. nACHA the electronic Payments Association released sound Business Practices for implementing Provisions of the supplement in July 2012 in which they reinforce the need for anomaly detection capabilities called out in the 2011 FFieC Guidance supplement. The practices encourage Fis to monitor accounts for unusual and out-of-pattern transaction flows. of fraud prevention reduces risk and stems losses from attacks on ACH payments. Guardian Analytics also released an infographic that explains varying manipulations of ACH files and the impact fraud has on financial institutions and their client relationships. The recently released 2012 Business Banking Trust study by the Ponemon institute highlights that financial institutions should consider not only fraud losses but also the complete impact of fraud which include operational losses and customer churn. Findings in this annual study specific to the ACH channel include seventy-three percent of corporate account takeover instances led to money leaving the bank before anyone noticed. Fifty-six percent of businesses said it would take only one fraud incident for them to lose confidence in their financial institutions ability to protect their accounts. Of businesses that were hit by fraud 38% took some or all of their businesses elsewhere as a result. so banks are losing customers. When a business loses money through a fraudulent ACH transaction the bank reimburses some or all of the money 54% of the time. so banks are losing money. FraudMAP ACH is available immediately and is offered as a saas solution which speeds deployment decreases implementation costs and eliminates ongoing maintenance costs. Guardian Analytics is a provider of behavior-based fraud prevention solutions for financial institutions. Guardian Analytics is privately held with venture funding from Foundation Capital Sutter Hill Ventures Split Rock Partners and Triangle Peak Partners. For more information visit www.GuardianAnalytics.com. FraudMAP delivers precisely these capabilities by Using the company s proprietary analytics Dynamic Account ModelingTM FraudMAP ACH monitors originator and recipient behavior for anomalies relative to typical behavior. Automatically identifying high risk batches and individual transactions buried deep within very large ACH files including payments where only details of single line items have been modified. eliminating the need to maintain rules limits and negative lists and then manually comb through long exception reports. Focusing payment staff efforts on the most suspicious batches and transactions by rank ordering alerts and providing rich details on the unusual activity and client s payment history. Independent Studies Reveal Need for Proactive Fraud Prevention Strategies The recent Fs-isAC Account Takeover Task Force survey performed by the American Bankers Association shows the instances of corporate account takeovers are significantly increasing year over year said Bill nelson president and CeO of Financial services information sharing and Analysis Center (FsisAC). The study also shows that investing in advanced layers www.cubusiness.com August 2012 Credit Union BUSINESS 31 MARkETINg MATTERS On Results By Tony Rizzo Analyzing Two forms of Loan Acquisition Campaigns nnual planning season is upon us. it is time for marketing professionals to present their plans for loan growth during 2013. One of the most overlooked areas for loan growth comes from those members who have loans at other financial institutions. This low hanging fruit is a source of ongoing new loan volume that you cannot afford to ignore. each month we reach tens of thousands of credit union members with various loan recapture messages. One thing rings true with each and every message it s better to borrow from your credit union. Do your members a service and tell them why the credit union is still the place to borrow. This article will look at two forms of loan acquisition campaigns and highlight some results. A only those members who we felt based on payment analysis we could save money each month. notice in the headline an incentive was used to grab the member s attention. The Classic Recapture Campaign By conducting an analysis of your members loan activity outside your institution you can quantify the number and dollar volume in terms of loan potential that s waiting for you. Because this type of analysis is drilled down to the FiCO level you can pick and choose exactly which members to whom you choose to make an offer. This is a smart way of doing recapture campaigns as you are not making an offer to everyone just those members who qualify and for whom you can save money. Recapture offers are typically stratified across four main categories auto home equity personal loan and credit card. no matter which product you are targeting it is important to make a compelling offer that focuses on saving the member money each month. To further enhance this effort consider offering a cash incentive to beat their rate or payment. Figure 1 highlights two examples of a recent auto and home equity recapture campaign. Both are prequalified and are targeted to Direct mail letters were sent to the target group as well as a follow-up e-mail. This 1.6-billion financial institution has been executing recapture offers for a number of years. in fact they execute a minimum of four recapture campaigns annually. Over a 12 month timeframe this credit union gained new balances directly attributed to the campaign totaling 8.4 million. The return on investment varied for each product and campaign but on average was more than 250 percent. in other words for every one dollar invested in this annual effort the institution earned a profit of 2.50. The strategic take away from this initiative is that recapture campaigns are executed on a continuous basis to only those members who can save money by taking advantage of your offer. www.cubusiness.com 32 Credit Union BUSINESS August 2012 MARkETINg MATTERS Figure 2 shows a combination recapture campaign based on a significant amount of data analysis. This piece highlights the savings a member could realize across up to four different loan categories. This type of campaign is also referred to as a member savings statement. As with the other recapture campaigns this letter is targeted to only those members who we feel can save money each month across each loan promoted. As with the other campaigns a theme of monetary savings is highlighted as the central benefit. Also notice the very simple call to action. The best way to ensure success with this type of an offer is to have a direct conversation with member and not delegate the sale to a piece of paper or website. Therefore a phone call is the preferred response. The Daily Loan Recapture A second method of ongoing loan solicitation comes in the form of monitoring credit activity on a daily basis. By analyzing your membership every 24 hours against credit bureau activity you 00000000 It s nice to pay less. Refinance your auto loan and save up to 200 on your payment. Dear Carson Could you use an extra 200 in your budget each month It s easier than you think. Smart Financial Credit Union has pre-approved you to refinance your auto loan and if we can t save you money we ll give you 100 You re pre-approved for a rate as low as 3% APR. With our low rates and terms up to 72 months you can have a brand new payment quickly and easily. The minimum loan amount is just 5 000. Why pay more than you need to Refinancing your auto loan is a smart move. There are no refinancing fees so your savings will start right away Just say Yes We re ready to handle all the details. Call us at 800.392.5084 (select option 2) or visit the secure personalized website below to take advantage of this offer. Questions Just call or stop by any branch. Double your loan volume by communicating with members who have loans at other financials. Our proven strategy will add loans to your portfolio today. ri-bureaureviewofmembers T loansoutsideofyourCU. orldclassdirectmaildesign W andproduction. 30 000 PLUS Pre-approved for 455 PLUS Monthly payment as low as 200 OR Monthly savings up to 100 800.555.5084 (select option 2) Savings guarantee www.personalURLforCarson.com You can choose to stop receiving prescreened offers of credit from this and other companies by calling toll-free 1-888-567-8688. See PRESCREEN & OPT-OUT NOTICE below for more information about prescreened offers. NOTICE SEE REVERSE SIDE FOR TERMS & CONDITIONS OF THIS PRE-QUALIFIED OFFER. Letter Template Tony Rizzo at 214.778.3037 tonyr gomarquis.com GoMARQUIS.com MARQ73-05-11-06202011 CU Ad www.cubusiness.com August 2012 Credit Union BUSINESS 33 MARkETINg MATTERS can determine which specific members are applying for loans at other institutions. Armed with this knowledge you can send a preemptive letter or phone call explaining your particular offer. Figure 3 highlights a 176 million credit union s attempt to recapture loans on a daily basis. Targeting real estate loans vehicle loans and credit cards the institution analyzed bureau activity and made specific prequalified offers of credit. This was done every day and provided a timely relevant and personal method of communication. A side benefit to this type of strategy is that you are not sending thousands of letters out at a time. This drip campaign is sent to just handfuls of active borrowers each day. This makes phone follow-up communication easier on your loan staff. We also found the use of daily credit triggers to be a profitable marketing investment. For this institution more than 1 million in new loans were attracted and for every one dollar invested in the campaign 3.25 in profit was earned. Don t Forget to Track With either of these ideas the most important element of the campaign should be results tracking. This is often overlooked by many marketers. The most common reasons for not tracking range from too little time to not being sure of exactly what to track and report. We suggest focusing on one or two tracking metrics that are consistently reported for every campaign. Response rate and return on investment are the most common. Also consider incorporating tracking into any incentive plans for your marketing team. Loan recapture is a profitable strategic marketing initiative. As you review marketing plans for 2013 be sure that loan recapture is one of the top priorities for your credit union s marketing department. Tony Rizzo is the General Manager Creative Director of MARQUIS Creative. For the past 20 years Tony has served the Credit Union Movement in many diverse roles ranging from auditing to advertising. Tony pioneered the concept of 1 1 marketing for credit unions and has been involved with thousands of campaigns designed to do one thing get results. Prospecting Using The Loan Recapture Strategy With either of these two strategies you can target prospective members within your branch footprint. Typically this is done by analyzing relevant zip codes credit scores monthly payments and current balances. By making offers to only those prospective members for whom you could save money you reduce the expense of broad-based acquisition campaigns. 34 Credit Union BUSINESS August 2012 www.cubusiness.com LEADERShIP Women in Leadership Top 10 Attributes of Successful Women Leaders By Dr. Sandra L. Torres ou will automatically spot her when she walks into a room. she has elegance poise and polish but most of all she projects a hard to define confidence. it s not conceit or sense of self that is at the foundation of this confidence but rather a genuine belief in her self-worth and abilities. You know she has it and she gets it . The ability to fly to new heights and engage others along the way across many domains and settings is the it she projects. Yet at times we may find ourselves wondering How in the heck did she ever make it that far We see a woman who does not necessarily have the sophistication or sparkle we expect leaders to possess. she may even seem a bit plain. in exploring the matter more carefully we notice that one trait stands out above the rest one which has nothing to do with outward appearances. The distinguishing quality is an extreme measure of confidence. Of course there are certainly other characteristics which define her as a leader but confidence is dominant. The characteristics and traits of women leaders have been explored from many perspectives. Much research has been conducted and numerous articles written on key issues confronting women s leadership. Most will agree that there are certain top attributes of women leaders that steer toward successful professional and personal lives. in 2005 a year-long study conducted by Caliper a Princeton new Jersey-based management consulting firm and Aurora a London-based organization that advances women identified a number of characteristics that distinguish women leaders from men when it comes to leadership qualities Y The Caliper study findings are summarized into four specific statements about women s leadership qualities 1. Women leaders are more persuasive than their male counterparts. 2. When feeling the sting of rejection women leaders learn from adversity and carry on with an I ll show you attitude. 3. Women leaders demonstrate an inclusive teambuilding leadership style of problem solving and decision making. 4. Women leaders are more likely to ignore rules and take risks. These innate characteristics are normally attributed to women based on what is commonly accepted as their traditional familial role. They may also be fundamental in gender studies that have yielded results demonstrating that women leaders are www.cubusiness.com August 2012 Credit Union BUSINESS 35 LEADERShIP often more effective than men leaders. These studies support the premise that the behavior of women leaders who possess definite leadership characteristics is not simply unique but very possibly at odds with what men practice. Confident women who aspire to be leaders would gain valuable insight from engaging in a self-examination exercise comparing their own attributes and the Top Ten Attributes of successful Women Leaders. These attributes gathered from many different sources will help future and present women leaders discover The many different leadership practices demonstrated by successful women leaders the qualities of these capable women leaders and how they can prepare themselves to become effective leaders in an often gender slanted environment. for failures. Research has shown that women consistently ranked higher in this trait compared to their male counterparts. Women perform better on measures of soft skills this most likely stems from traditional nurturing competencies such as developing others and building relationships. 5. Humility. A humble leader is not self-effacing but rather tries to elevate everyone. Women have learned they can be both strong leaders and humble women at the same time. They can stand perfectly balanced in the middle and not be perceived as too arrogant or over confident. 6. Communication. successful women leaders have good communication skills. They are also excellent listeners. They tell people what they need to know in clear and compelling words both verbal and written. Their communications are frequent and to the point. People always know where they stand and what is expected of them. 7. Tenacity. successful women leaders keep a glass hammer in their leadership tool box they are tenacious. They are willing to break through whatever barriers are necessary to achieve their goals. Taking risks are part of the landscape. nothing just falls in their lap. They are persistent and achieve their goals and sometimes more. 8. Visibility. successful women leaders like to be seen and heard. They lead by example and serve as role models for other people. Followers take their cue from their leader. Visible leaders are intentional and not shy about what they say and do. Women leaders do so keeping in mind their impact and influence on their surroundings. 9. Empowerment. Women leaders excel in training mentoring and a creating support network to give followers the tools to initiate or expand their own leadership abilities. They help others take charge make decisions listen inspire influence motivate and empower others while offering support trust understanding direction and guidance. 10. Serendipity. A sense of humor is vital to relieve tension and boredom as well as to defuse hostility. effective leaders know how to use humor to energize followers. Humor is a form of power that provides some control over the work environment. And simply put humor fosters good camaraderie. Top Ten Attributes of Successful Women Leaders 1. Confidence. successful women leaders radiate confidence and are not overly concerned with outside criticism. They know exactly what they want and focus their energies on achieving their goals. They are darn good at selling their achievements and those of their team. 2. Vision. Women leaders are more adept in communicating their vision clearly and passionately. enthusiasm and confidence are two qualities that stem from passion. Women leaders can leverage passion enabling followers to buy into their vision with a strong sense of belief. They usually have two visions a personal vision and a vision for their business both based on goals aligned with values. 3. Integrity. A leader must have the trust of followers and therefore must display integrity. Her actions are value based. successful women leaders act on their values with veracity. Their behavior is always consistent with these values. They live for integrity and absolutely will not tolerate disrespect in fact they chastise it. This strength of character allows them to lead from their authentic selves. They know what they want and they stand up for what they think is right. 4. Magnanimity. This means giving credit where it is due. A magnanimous leader ensures that credit for successes is spread as widely as possible throughout the organization. Conversely a good leader takes personal responsibility 36 Credit Union BUSINESS August 2012 www.cubusiness.com LEADERShIP en leaders. This stereotyping can misrepresent the true talents of women leaders potentially undermining women s leadership roles. The real issue is for women to better understand and accept the challenges facing them as they rise to the top in a rapidly changing landscape to share best practices among themselves and their followers and to continuously develop actionable items based on the above Top Ten Attributes of successful Women Leaders. This will ensure they get it and keep it. Author speaker and leadership consultant Miami based Dr. Torres has researched leadership practices around the world. More than 20 years of experience in the credit union industry has made her an ardent believer and practitioner of the credit union philosophy people helping people. Leadership Si offers bilingual leadership expertise via her writings training workshops and speaking engagements. Her specialty is women s leadership. Get to know her better by visiting leadership-si.com. Dr. Sandra Sandi Torres These attributes can certainly be applied to women and men. The thought of categorizing men and women leaders with totally separate qualities is complicated. There are numerous exceptional men leaders who perform extraordinarily well. Yet there is a growing body of research that shows that women tend to have more leadership potential and transformational qualities that enable them to lead more effectively than men. On the other hand a study sponsored by General Motors revealed that gender-based stereotyping persists when it comes to wom- ANALYZE behavior and mine your data for opportunity. MAIL letters with offers based on behavior the next day. CALL requests are generated for your call center to contact your member to close the sale. RESULTS are tracked daily so you immediately know the effectiveness of your efforts and investment. Tony Rizzo at 214.778.3037 tonyr gomarquis.com GoMARQUIS.com MARQ73-05-11-06202011 CU Ad www.cubusiness.com August 2012 Credit Union BUSINESS 37 CReDIT UnIon BUSIneSS Marketplace Card Processing Payment Solutions Branch Services Coin Counters Coin Counters Branches still matter Bancography builds branching strategies Branch site analysis Current branch performance Branch network optimization Branch profitability Staffing review Sales goals www.bancography.com branch info bancography.com 205.252.6671 CReDIT UnIon BUSIneSS Marketplace Insurance Services Facilities & Design CEO SUBSCRIPTION WITH BENEfITS Benefit your CFO COO CMO CCO CLO CIO HRD With fREE Monthly E-Newsletters Subscribe NOW www.cubusiness.com vISIT The MARKeTplACe pAGe AT WWW.CUBUSIneSS.CoM foR ADveRTISInG InfoRMATIon Call GreG Halpern 561-282-6015 4 GreG Cubusiness.Com CU SPOTLITE Digital Communication Sweeps SCCU By Sharon Sweda sk marketing professionals the value of company newsletters and the response is a cautious affirmative. Momentary hesitation or lack of enthusiasm stems from knowing the labor intensive demand of providing constant quality content the strain to sustain its production and finally the cost to do the job well. At the Wisconsin-based superior Choice Credit Union newsletter issues have been resolved. While many marketing departments handle the newsletter dilemma by simply not engaging in their production at sCCU they are partnering with iMn to meet and beat the challenge. iMn is a vendor whose initials stand for i Make news. iMn is in the business of creating and distributing electronic newsletters that are consistent filled with compliant content and designed to educate members about sCCU s products and services. We began our relationship with iMn last summer when they offered us a free trial subscription of 9 000 newsletters explains Annie Leper AVP of marketing and sales at superior Choice. We made the decision to accept the trial offer because superior Choice was embracing the concept of phasing out print newsletters and statements in lieu of digital communication and it was a great way to test the water. The trial subscription proved worthy immediately. An important piece to any marketing effort is the ability to monitor response and the feedback from members of sCCU was an easy read. The recent director election really tipped the scales Leper adds. Our election edition provided a link for on-line voting. Within an hour of launching the newsletter we were tallying votes. it was fast and immediate. it was a clear signal that our members were reading our publication. superior Choice Credit Union is a community-chartered credit union that actually began as a co-op in 1932. it was during the mid-1960s as co-op popularity started to wane that superior made the transition to community charter. The mid40 Credit Union BUSINESS A 1990s brought two mergers with additional branch locations in addition to two service centers located in grocery store kiosk sites. The latter two failed when the grocery stores failed thus the credit union serves members with five traditional branches that are located to cover a broad geographical area of the midwestern state. The 24 000 members are well-served by superior s vast product platform. it offers competitive mortgage lending products for both residential and commercial borrowers. While some of its loans are sold in the secondary market they retain in-house servicing which is a win-win for the institution as well as its members. Other products include everything to personal and business credit cards reward points recreational vehicle loans and optional loan protection coverage policies. Yet business development is the guarantee for the future and key to longevity of any credit union and the iMn partnership is the edge that sCCU is relying upon to maintain a strong channel of communication with members. Branded newsletters with general information combined with product and institution-specific material keeps sCCU in front of members in a medium that increases monthly. The ability to monitor the obvious cause and effect helps sCCU to hone into members likes and dislikes while also helping to ease them to acceptance of electronic delivery. We realized that while we were anxious to transition to electronic statements it would also reduce our ability to insert product literature and marketing pieces Leper concludes. The support of our newsletters and the assurance that they are being read makes that transition less of a leap. Our goal is to create an electronic platform that utilizes social media web presence and electronic communication in a way that strikes a good balance. We want to be useful not annoying. Sharon Sweda is a freelance writer who has worked in the real estate and finance industries for the past 28 years. Contact Sharon at SharonSweda SwedaSweda.com to SpotLite your CU. www.cubusiness.com August 2012 Managing Payments Driving Solutions We re Vantiv. Dedicated strategic professionals with 40 years of experience developing innovative payment processing solutions for financial institutions and merchants. We o er an extensive suite of debit credit prepaid ATM and merchant services to provide you with new sources of revenue. And we ll help protect your business with our comprehensive data security and fraud prevention solutions. Our people technology and partnerships are the Vantiv di erence. Let s discuss your future success. 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