CenterPoint Spring 2019

CENTER P INT SPRING 2019

CELEBRATING CREDIT UNIONS THROUGHOUT THE REGION AND THEIR GROWTH OPPORTUNITIES

BUSINESS FOR LIFE

HAPPY WARRIORS

DINOSAUR ATMS

GETTING CLOSER

Student Loans Start Of A Profitable Relationship

Hardware And Software Fast Becoming Obsolete

Stay Friendly Yet Competitive

Smart CUs Use CRMs To Overwhelm Competitors

SPECIAL SECTION GREAT NEW ENGLAND CREDIT UNION SHOW: PAGE 16

A PUBL ICATI O N O F A M E R I C A N B U S IN ES S M ED IA

Our 100 years means that wherever you are going, we can guide you there.

JOHN LEONARD, CPA PRINCIPAL

At Wolf & Company, we pride ourselves on insightful guidance and responsive service. As a leading regional firm, our dedicated professionals and tenured leaders provide Assurance, Tax, Risk Management and Business Consulting services that help you achieve your goals.

Visit wolfandco.com to find out more.

SPRING 2019

CONTENTS SPECIAL SECTION STAFF PUBLISHER Vincent M. Valvo All New MGM Spr ingfield

ASSOCIATE PUBLISHER Barb Dimauro EXECUTIVE EDITOR John Hassan

10

MANAGING EDITOR Keith Griffin

OPERATIONS MANAGER Kurt Schenher

ONLINE CONTENT DIRECTOR Navindra Persaud GRAPHIC DESIGN MANAGER Stacy Murray GRAPHIC DESIGNER Scott Ellison If you would like additional copies of CenterPoint Call (860) 719-1991 or email kschenher@ambizmedia.com

3.29.19

17 GNECUS AGENDA

18 SPONSORS

17 CONVENTION SPACE

21 EXHIBITOR FLOOR PLAN

Explore the extensive offerings

FLOOR PLAN Find your way at a glance

COVER STORY: OVERDRIVE Pg 4

Thanks to all for their support Visit and learn

TECHNOLOGY

COMPLIANCE

Are your machines going the way of dinosaurs?

Follow the rules, grow, and make your members happy

6 Extinct ATMs

25 Cut the Risk

BUILDING REVENUE

PAYMENTS

Turn them into a lifetime of income for your CU

PI will be king, but don’t disregard cash

MARKETING

30 Avoid Scrutiny

10 Student Loans 27 Money’s Future

www.ambizmedia.com ©2019 American Business Media LLC All rights reserved.

CenterPoint magazine is a trademark of American Business Media LLC. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher.

Advertising, editorial and production inquiries should be directed to: American Business Media LLC 345 North Main St., Suite 313

12 CRMs Mean Sales Understand how to turn the data into results

LENDING

Be more effective in mitigating risk

BRANCH DESIGN

22 Connections

Make your new branches right for their locations

West Hartford, CT 06117

Spring 2019 | CENTERPOINT | 3

BEST PRACTICES

KICK YOUR OUTSOURCED COLLECTIONS MACHINE INTO OVERDRIVE

I

By BRAD YOUNG, Special to CenterPoint

f your financial institution works with a third-party vendor for your collections efforts, you know how important it is to ensure your partners perform at an optimal level. The vetting and onboarding process alone can take months, so the “set it and forget it” mentality could be detrimental to the overall performance of your collections operation.

To ensure your outsourced partner performs at a high level, it’s wise to understand their company procedures and establish agreed-upon benchmarks to measure their performance.

To help kick your collections machine into overdrive, we’ve compiled a list of questions you can ask your collections partner.

INSTITUTE A PERFORMANCE CARD In order to set proper expectations and set all vested parties up for success, it’s important to establish a measurement tool.

A performance card creates a foundation for your financial institution and your vendor to fully understand how the collections program is being measured. Maybe you measure the success of the program on the number of monthly calls made by the collections team.

Or perhaps your idea of a successful program is the number of early or mid-stage payments collected. Whatever the metric, it should be clearly stated (in writing) so there’s little room for miscommunication when it comes 4 | CENTERPOINT | Spring 2019

to your collections strategy, goals, and overall program performance.

The best place to start is by having a conversation with your vendor’s primary contact. This is typically an account manager or business development officer. You will work closely with your rep to outline the performance card. If you already have an outsourced collection provider executing services on your behalf, it’s not too late to establish a performance card. This organization is contacting your borrowers on your behalf, so it’s important to ensure the performance metrics that are important to you are being met.

EVALUATE YOUR COLLECTION VENDOR’S QUALITY ASSURANCE PROCESS Every organization worth its salt has established quality assurance processes. Because their reputation is contingent on how they perform, they will invest in a number of quality assurance workflows. To help you evaluate your partner’s process, ask them these questions: What percentage of calls are reviewed by the management team and how often are these reviews conducted?

Is there an established feedback process and what does it entail?

Is there a documentation process for collection calls?

How and how often is borrower feedback distributed back to your institution?

The goal here is to determine if your vendor is continuously looking for ways to improve their processes in order to guarantee the best service and performance.

EVALUATE YOUR COLLECTION VENDOR’S TRAINING PROCESS A well-established training program is critical to the success and compliance of a collections operation. Since the type and frequency of training the collections staff gets directly impacts your borrowers, having a high-level understanding of the program is important. Three questions you can ask to help you better understand the training process include: A. How long is your training program and how is it structured?

At SWBC, we believe the best way to structure a training program is with a blended approach that includes both classroom and hands-on training. Our training programs typically last several weeks before collectors are placed on phones, under direct supervision. It’s a best practice to

find out how your chosen vendor handles their training program.

B. How is compliance training administered?

Compliance is an on-going challenge for most financial institutions. With something as regulation-intense as collections, it’s important that you understand how your collections partner administers compliance training to their staff. Compliance should not be a quick review, but rather in-depth so that their staff understands the importance of remaining compliant with the necessary regulations.

C. Do you have ongoing training for your staff?

In an industry such as collections where regulations and consumer behavior are constantly shifting, it’s important to work with vendors that are agile and consistently seeking opportunities to learn industry best practices. Ask your partner if they have ongoing training, how often, and if they monitor the latest compliance bulletins for industry updates.

ASK ABOUT ONGOING PROGRAM MONITORING Most financial institution executives spend a fair amount of time evaluating their partners’ performance, but it’s also important to work with a collections provider that proactively monitors and reports on their program’s performance.

Added value such as monthly status reports can help you identify data trends in order to make program tweaks, creating efficiencies. Likewise, a great partner will have tools and systems in place that allow you to selfserve, accessing highly visual, customized reports that give you the data that is most important to your institution.

In Memory: BRAD YOUNG

(Sept. 8, 1960 – Jan. 19, 2019)

The preceding article was written by the late Brad Young. On Saturday, Jan. 19, Brad left this earth too soon after a brave battle with cancer. He was a great friend with a big heart and had a significant impact in shaping the direction of SWBC’s Financial Institution Group over his 25-year career with the company.

As executive vice president of AutoPilot Services, Brad managed and consulted on all aspects of SWBC’s suite of risk and account management services which included collections, payments, and collateral and mortgage insurance protection.

He was a creative innovator who was always looking ahead. His strategic approach to all things financial services helped to put SWBC’s technology on the map. And it’s because of that strategic thinking his legacy will live on without end.

Please keep Brad and his family in your thoughts as we remember him and his contributions as a loving husband, father, and team member.

–Mark Hein, CEO, Financial Institution Group, SWBC

Spring 2019 | CENTERPOINT | 5

TECHNOLOGY

7 QUESTIONS TO ENSURE YOUR ATM IS WINDOWS 10 COMPATIBLE

By REBECCA CICARELLI, Special to CenterPoint

W

ith 2019’s arrival, banks and credit unions are another year older, another year wiser and another year closer to the full-scale rollout of Windows 10. The latest operating system has been available for several years now, but by Jan. 14, 2020, Microsoft will end its extended support for the outmoded Windows 7 OS and focus solely on Windows 10.

Migrating to the latest OS is a major undertaking, which is why several banks and credit unions have gotten a jump start with Windows 10-enabled ATMs up and running in their facilities. Those that haven’t face a significant challenge in the coming year, but one that, once overcome, will surely have positive ramifications for all financial institutions.

6 | CENTERPOINT | Spring 2019

Windows 7 has long been the industry standard OS and most legacy hardware supports it, but it is time to move to the next level.

Beyond superficial functionality improvements, Windows 10 represents some of the most advanced security features yet designed for an operating system – a critical consideration for FIs looking to combat threats to their ATM networks. As noted by ATM Marketplace, “Windows 10 is arguably the most advanced OS upgrade the industry has seen in quite a while,” and institutions that have already made the transition are experiencing some of the benefits, with cybercrime resilience being chief among them.

As we cruise towards 2020, financial institutions may look to replace legacy systems with

state-of-the-art ATMs to ensure compatibility with Windows 10.

The reality isn’t so simple.

Here’s the problem: Even though most ATM suppliers do have Windows 10-enabled ATMs available for purchase, some are still selling machines that run on a soon-to-be-defunct OS. Even reputable, well-known suppliers are scrambling to accommodate the new OS, sometimes resulting in a serious lack of transparency on the consumer level, driven by using verbiage that suggests that ATMs are “next generation,” when in reality they are relics of the past. This can create unintended compatibility headaches – magnified to migraine intensity when you are replacing dozens of ATMs throughout your branch network, both off-site and on premises.

In short, buyer beware. With such a significant investment in new technology and the 2020 deadline drawing close, the risk of being undermined by compatibility issues is nothing to take lightly. However, by asking yourself a few key questions prior to selecting replacement ATMs, you can ensure that the process goes smoothly and frustration free.

Here are some of the questions to ask your vendor before investing in a particular ATM model that’s Windows 10 enabled: 1. IS THIS MODEL TRULY CUTTING-EDGE? Make no mistake: Not everything that is “new” is “state of the art.”

Even new hardware can fall prey to issues that can result in technological obsolescence. And,

regrettably, some industry leaders in the ATM space are offering buyers “sunsetted” or outmoded hardware; fudging the truth by presenting these machines as “new” when the reality is that other machines on the market have already surpassed these ATMs. 2. IS THIS PRODUCT REALLY WINDOWS 10 ENABLED? This is perhaps the most important question of all: Is the model equipped with the Windows 10 operating system? As previously referenced, numerous suppliers have been selling ATMs that have the latest OS processors already built in; supporting banks’ and credit unions’ transition to nextgeneration retail banking.

They’re not ubiquitous quite yet, though, and some suppliers

are getting around having to offer Windows 10 by using nebulous language about what OS is included with the hardware. Be mindful of suppliers using vague descriptions of the listed OS such as “MS Windows” instead of Windows 7 or Windows 10.

If nothing else, make sure you specifically ask about Windows 10 and whether the model includes the appropriate modifications.

3. HAS THIS PRODUCT BEEN CALLED SOMETHING DIFFERENT IN THE PAST? Did you know that Corn Pops used to be called Sugar Pops?

The ingredients didn’t change, but to appear more health conscious, Kellogg’s supplanted the word “sugar” with “corn,” even though the breakfast cereal

Spring 2019 | CENTERPOINT | 7

is loaded with the sweet stuff.

The same standard applies for ATMs – a machine may be the same no matter its new name. A top-ofthe-line “new” model may have since been supplanted by a model of a different name or number. Do your homework on any model you are reviewing so you know when it first hit the market – the year, in particular – and whether anything more up to date has since been released. Ask your supplier if the model is indeed brand new or if it’s merely under an alternative moniker.

as bill payment, cash recycling, e-receipts and biometric authentication – they’re also configured in any number of ways.

That’s all well and good, but if it’s not certified to work with your network, you could face critical issues with getting the terminals up and running.

Processing network certifications can result in a six- to nine-month delay in full ATM functionality – a lifetime for bank branches and credit unions who rely heavily on ATMs to satisfy their customer base. Be mindful of your network prior to shopping.

4. IS THIS MODEL SUPPORTED IN THE U.S. MARKET? Cash is a universal language. But because the rules and regulations of monetary policy vary from country to country, ATMs used in Europe or South America often have different functionalities than those in the U.S. Make sure the Windows 10 ATM you’re considering is geared to the U.S. and is fully compliant with federal law.

6. WILL THIS PRODUCT OR MODEL BE SUPPORTED OVER THE NEXT 5 TO 10 YEARS? Windows 7 debuted in 2009, so 11 years of support is quite the track record. What’s great about Windows 10 is it’s expected to last every bit as long – if not longer.

Make it a point to ask about whether the ATM model you’re considering will be supported for the foreseeable

5. IS THIS PRODUCT OR MODEL CERTIFIED ON MY NETWORK?

Just as ATMs have an increasing number of functionalities – such

8 | CENTERPOINT | Spring 2019

future. Move on to something else if you’re told otherwise.

7. DOES THE SUPPLIER HAVE THE INFRASTRUCTURE TO SUPPORT THIS MODEL FROM A PARTS PERSPECTIVE? ATMs are subject to wear and tear, like any other piece of machinery.

That’s not a problem so long as components are available to replace them, be they broken dispensers or balky keypads. Ask your supplier about maintenance offerings and the long-term plan to provide assistance to fix what’s broken or malfunctioning.

At the end of the day, financial institutions need to pursue appropriate due diligence and partner wisely to ensure that they are ready for what comes next.

Rebecca Cicarelli is the director of marketing and business development at BranchServ.

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BUILDING REVENUE

STUDENT LOAN CUSTOMERS:

A Lifetime Of Opportunity

By LEWIS GOLDMAN, Special to CenterPoint

T

he private student loan market represents a significant and growing opportunity for credit unions and banks. Demand for private student loans is expected to increase as college tuition continues to rise, and many of these prime and highly-educated borrowers seek an alternative to the loan amount caps of a federal loan. Private student loans enable financial institutions of all sizes to improve yields and diversify assets, while standard underwriting practices help keep the risk of default in check as compared to federal loans with little underwriting standards.

10 | CENTERPOINT | Spring 2019

THE OPPORTUNITY TO CROSS-SELL STUDENT LOAN BORROWERS INTO ADDITIONAL PRODUCTS IS MEANINGFUL. One of the most persuasive arguments in favor of adding private student loans to a lender’s portfolio is the lifetime value of consumer relationships. According to a recent study, the lifetime value of a student loan borrower who uses five additional products, such as a checking account, mortgage, credit card, or investment account could be nearly $23,000. For a portfolio of 100 borrowers, using between one and six additional products, the lifetime value would approach a total of $650,000.

Financial institutions are also poised to position student lending as an entry-level product to attract new, younger members or customers: 60 percent of the borrowers who applied for a student loan from a lender other than their primary institution went on to add further products through their student loan lender.

The opportunity to cross-sell student loan borrowers into additional products is meaningful. The same study estimates that twothirds of consumers who take out student loans from their primary bank or credit union subsequently add additional products throughout their lifetime. For example: • 65% opened a checking account • 57% got a credit card • 44% opened savings accounts • 19% received a mortgage or home equity loan TARGETING CUSTOMER NEEDS A well-planned, sharply focused strategy is essential for credit unions and banks to realize the lifetime value of a student loan relationship.

Using easily-accessible customer

data to target the right products and promotional strategies to the consumer is essential. For example, borrowers who are still in school are most likely to need student checking accounts or student credit cards.

Offering services that make it easy for parents to transfer funds into a student’s account are likely to be a strong draw for in-school borrowers. That said, many of today’s students are accustomed to using mobile direct payment services and may not have checking accounts. Promotions such as a “free” deposit to their account, a fitness pass, or a travel voucher may attract these students.

Keeping the consumers wants and needs in mind is key when marketing or creating a custom product. The one-size-fits-all approach does not resonate with younger, digital-first borrowers.

After graduation, consumers’ needs and financial priorities change; perhaps they are in the market for a new car to commute to their first full-time job, beginning to save for retirement, or dreaming about purchasing their first home. A credit union or bank may be able to use data to fine-tune their product offers by determining, for instance, whether consumers may need an auto loan or a higher credit card balance. It’s also not too early to promote retirement savings products, as studies show that as many as 25 percent of Generation Z’ers are already saving for retirement.

MESSAGING AND MOTIVATION When marketing additional products and services, it is vital to do so in a way that will resonate with your target audience.

Many email marketing campaigns fail to gain traction with younger generation customers because the messages are a “hard sell” and heavily product-oriented.

This generation of customers is likely to be more receptive to messages that emphasize education on the value being provided, for example, a free financial review, an educational seminar on budgeting, or a tutorial on how to understand a credit report. Educational campaigns also should be promoted through multi-channel strategies such as social media, video, educational blogs, and hosted in-branch speakers to drive higher engagement.

A significant number of 18- to 24-year-olds will be applying for new student loans or increasing their level of student borrowing as they advance through college and post-graduate schools. By offering private student loans – especially via digital lending platforms that resonate with today’s “always connected” consumers – credit unions and banks have a tremendous opportunity to engage with this sizeable target audience and drive meaningful lifetime value.

Read the complete study here: www.lendkey.com/lend/research/ lifetime-value-studentloan-relationships/ Lewis Goldman is chief marketing officer at LendKey. He is a digital marketing and E-Commerce expert who has helped create and scale businesses and brands for leaders such as Citibank, MetLife and CNBC.

Spring 2019 | CENTERPOINT | 11

MARKETING

COULD THE RIGHT CRM REVITALIZE YOUR SALES STRATEGY?

By OLGA ZAKHARENKAVA, Special to CenterPoint

C

redit unions recognize that the industry is moving towards a relationship-based model, in which omnichannel delivery of highly personalized offers is becoming the norm. This approach aligns well with the underlying credit union philosophy of putting members first. But it does require new tools, and new strategies to make proper use of them.

The upside for credit unions who make the shift to relationship-based marketing is clear - better member retention rates, and a chance to extend wallet share as members’ needs change due to life events. These factors are the driving force behind the adoption of customer-relationship management (CRM) at many credit unions.

INCREASING

41%

of Credit Unions

WALLET SHARE IS A TOP PRIORITY 41% of credit unions adopt CRM to increase sales to existing customers

Source: CEB Retail Banking. Adoption and Investment: Customer Relationship Management, 2015

So, what’s holding other credit unions back from adopting this promising approach, and how can technology help them experience these benefits?

Barriers to a Relationship-First Sales Approach Converting your people, processes, and technology to a data-driven, relationship-first sales approach may seem daunting, but the rewards are substantial. Here are some of the reasons credit unions sometimes struggle to implement this approach, plus some proven ways to overcome these challenges.

•

Lack of insight into member needs. Financial services firms, including credit unions, often amass terabytes of data. But just possessing member data isn’t enough.

To revitalize their sales strategies, credit unions need to capture it all in one place, get a unified view of it, and then act. Legacy back offices and limited IT resources can

12 | CENTERPOINT | Spring 2019

complicate this effort. Thankfully, using an enterprise-wide CRM as a central repository can help credit unions establish one central access point for data without having to rearchitect the back office.

•

Lack of agility to respond to needs in a timely fashion. Even if credit unions can turn their data into insights and identify hidden sales opportunities, some struggle with not having the right technology to deliver the offer through a member’s preferred channel within the optimal window of time. However, if your segmentation engine integrates directly with channels like email, SMS and your banking platform, getting offers out can be a hands-off, automated task.

•

Limited resources to implement a new sales approach. Credit unions are often tasked with “doing more with less,” extending services in innovative directions without additional headcount. Making do with less means many credit unions find themselves trying to implement data-driven sales without the funds for an administrator.

STAFFING PLANS

CRM Solution

FOR CRM SOLUTION 10%

Budgeting for a CRM administrator

90% Will not hire additional CRM staff

•

When resources are a challenge, ease of use becomes a priority because it reduces the need for training. SaaS solutions can help to reduce the IT burden of new sales technology as well, making it possible for your credit union to implement best-of-breed technologies formerly reserved for only the largest banks.

•

Internal resistance to change. Credit union staff members often pride themselves on their customer service instincts, and studies of credit union satisfaction rates indicate that they are right to be proud. These staff members can become champions of your new sales approach, but only if they understand how it enhances their current approach, and don’t feel threatened by the move to data-driven outreach. When adjusting your sales strategy to make use of analytics technology, be sure to allot time for training and incentivize the use of your new systems. Doing so will ensure enterprise-wide technology adoption, which is one of the hallmarks of CRM success.

Breaking Down Barriers with the Right Technology for your Sales Strategy A data-driven, needs-based sales strategy doesn’t just happen. It’s the end product of investment in technology, process improvement, and cultural change, and a reflection of a broader understanding of the changing face of the financial services industry. To get started on the right foot, here are a few things your integrated CRM and marketing software must empower your staff members to do:

Spring 2019 | CENTERPOINT | 13

•

Conduct sophisticated segmentation via a user-friendly interface. To move towards relationship-driven sales, your marketers will need to slice and dice your data in many different ways to identify just the right offers for each member. A CRM with integrated data analytics makes it easier to identify the right segment and match the offer to it, without having to export and import lists. Less grunt work, in turn, means more time for your marketers to innovate.

•

Automate routine outreach, like delinquency notification. Delinquency notifications and other routine communications aren’t a sexy part of your marketing strategy, but they do help your credit union maintain a healthy bottom line and comply with regulations. Automating these through your CRM and communications management platform means less manual work for your staff, who can focus their attention on other revenuegenerating tasks.

•

Use integrated campaign management and tracking capabilities to monitor conversion rates and identify next steps. Marketing and sales work together to close deals at most credit unions. Help the be a unified team by simplifying the process of getting messages to your target audience, and by automating follow-up reminders. Using email as the first point of contact, then having your call center or branch staff follow up on the warmest leads, is a cost-effective way to extend your sales strategy and bring your sales and marketing teams together.

CRM

41%

Revenue Increases

ROI Revenue increases of up to 41% per front-line member service representative

Source: CRM: A Solution for Success 2014

Grow, Compete and Innovate by Putting Members First As the credit union industry follows the retail sector towards providing personalized offers, institutions that stay at the front of the trend will benefit most from increased member loyalty and satisfaction. To ensure you are at the head of the pack, consider investing in an integrated CRM, analytics, and communications management solution. Once you have the right technology stack in place, you’ll be ready to build your needs-based sales process.

Then start small, perhaps by automating a single trigger-based marketing campaign in response to a common member life event (for example, a campaign that identifies members who are coming to the end of a mortgage term and sends them an incentive to move their mortgage to your CU). The immediate ROI and positive feedback on a campaign on this sort should provide you with the evidence you need to progress further in the direction of needs-based selling. And once you get there, the sky’s the limit.

Olga Zakharenkava is vice president demand marketing at Doxim, a provider of cloud-based customer engagement solutions for credit unions and wealth management firms.

14 | CENTERPOINT | Spring 2019

O NE PA R T N E R T O M A N A G E Y O UR S E R VI CES To be competitive and agile in today’s credit union industry means finding the right partner. With so many solutions needed to conduct day-to-day operations, and so many options to choose from, the number of third-party vendor relationships to navigate can be daunting.

Credit unions perform better with Synergent as their trusted managed services partner. We become an extension of your team, providing Symitar® Episys® core processing and the most in-demand payments, marketing, and technology solutions. No matter the product, our team knows how to choose it, install it, integrate it, and help credit unions get the most out of it so they can focus on best serving their members. Our innovation is your competitive advantage.

We’ve been helping credit unions be successful for over 40 years – and have a 100% core client retention rate. Let’s connect. Please visit www.synergentcorp.com, or call 800-341-0180.

synergentcorp.com

R IG H T T IM E . R I G HT PLACE. RI G HT S OLUTI ON .

Spring 2019 | CENTERPOINT | 15

All New MGM Spr ingfield

3.29.19

CenterPoint Magazine Congratulates the 2019 Credit Union Heroes Award Winners

CREDIT UNION

LEADERSHIP, INTEGRITY,

COMMITMENT

These institutions were chosen as Credit Union Heroes because of their strong commitment to their communities that was shown in recent outreach, volunteer and philanthropic initiatives. Please join us in saluting these credit unions that answered the call and went above and beyond for their communities!

Franklin First Federal Credit Union Harvard University Employees Credit Union Liberty Bay Credit Union Navigant Credit Union Nutmeg State Financial Credit Union Polish National Credit Union St. Mary’s Bank St. Mary’s Credit Union These institutions will be honored at an Awards Gala on March 28th, 2019 on the eve of The Great New England Credit Union Show. More information and photos from the event will be available in the next issue of CenterPoint and via the CenterPoint e-mail newsletter.

PRODUCED BY

C O N V E NTI O N S PAC E F LO O R P L A N

MARCH 29, 2019

CONVENTION SPACE FLOOR PLAN

7:30 a.m.

REGISTRATION OPENS 7:30 a.m.

COFFEE & CONTINENTAL BREAKFAST 8:00 a.m. – 10:00 a.m.

SBA LENDERS FORUM We welcome the U.S. Small Business Administration as it presents an update and forum for banks and credit unions working to improve access to capital to our region’s growing small business economy.

• SBA updates from Jihoon Kim who is responsible for operations of SBA’s loan processing and servicing centers across the US. • Vincent Vieten of the NCUA and a discussion on NCUA’s revised member business lending rule which went into effect on January 1, 2017.

• Moderated panel discussion of credit union professionals from across the region. Hear about best practices and trends from your peers.

• SBA’s new SOP 50 10 5K and district office updates.

Meeting Room 2 8:00 a.m. – 8:45 a.m.

CONCURRENT SESSIONS THE NEW COMMUNICATION REVOLUTION WITH MICROSOFT OFFICE365 AND TEAMS As many credit unions have looked to shift their email function from on-premise Exchange servers to the cloud, they have explored a Microsoft Office 365 subscription. However, Office 365 is way more than email! Included in nearly all subscriptions is Microsoft Teams – a web-based communication and collaboration platform whose adoption has reduced internal email traffic in organizations by over 80%! Join us as we discuss the maturity of the Microsoft Office365 platform and ways that credit unions are already benefiting from Microsoft Teams in their organizations! Presented by Dave DelVecchio, President, and Mike Lareau, CTO, Suite3 Meeting Room 1 10 CRITICAL BENCHMARKS FOR STRATEGIC CREDIT UNION GROWTH Kirk Kordeleski, digital transformation strategist and former CEO of Bethpage FCU, joins Information Builders to present the strategy and crucial steps necessary to drive strong, profitable

MEETING ROOM 2

MEETING ROOM 1

BORGATA MEETING ROOM

SEATING BELLAGIO BALLROOM PREFUNCTION SPACE

MAIN STAGE

BEAU RIVAGE BOARD ROOM

PREFUNCTION SPACE

THE TERRACE

BROADCAST PLAZA

PREFUNCTION SPACE

ARIA BALLROOM

EXHIBIT HALL

RESTROOMS

FROM PREFUNCTION ESCALATORS SPACE HOTEL/CASINO REGISTRATION

growth for credit unions, and the use of analytics to measure and guide that progress through data-driven insight and decisions.

Discussion points will include: • How Kirk grew Bethpage FCU into a regional leader (over 450% throughout his tenure) • Digital recipe for growth • Initial steps toward action and multi-phased roadmap • Survey results from BIG illustrating analytics guidance for today’s competitive market Main Stage CONTINUED ON PAGE 19 Spring 2019 | CENTERPOINT | 17

2019 EVENT SPONSORS DIAMOND SPONSOR

PLATINUM SPONSORS

GOLD SPONSORS

LANYARD SPONSORS

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TOTE BAG SPONSORS

All New MGM Spr ingfield

8:45 a.m. – 9:30 a.m.

CONCURRENT SESSIONS 7 PROBLEMS ALL CREDIT UNIONS FACE AND HOW TO SOLVE THEM WITH INFORMATION TECHNOLOGY Learn how some of the highest performing credit unions leverage information technology (IT) to strike the optimal balance between customer service and regulatory compliance.

Can these financial institutions provide a richer customer experience, reduce cost, and minimize risk all at the same time? IT IS POSSIBLE! Presenters Bryon Beilman, President and CEO of iuvo Technologies, and Jeff Beard, Senior IT Consultant, and Microsoft 365 Subject Matter Expert, bring their broad experience in supporting and managing IT for Credit Unions and Banks. They’ve identified 7 critical ways IT can be leveraged to ensure compliance and better serve your members. Attendees of this session will leave with a detailed checklist of how to identify and solve the issues and use this knowledge to become higher performing organizations.

Main Stage DIGITAL MORTGAGES AND CREDIT UNIONS: CHANGING THE INDUSTRY The growing popularity of digital mortgages – full online applications, online underwriting tracking, e-closings — has changed consumer expectations of the loan process and has amplified the importance of credit unions forging strong business partnerships with the right lenders. Join Justin Glass, Chief Digital Officer at United Wholesale Mortgage, the nation’s leading wholesale lender, to get up to speed on all the latest digital trends that are shaping the mortgage industry. You’ll learn what systems CUs of all sizes should keep an eye on to best serve your members and grow your business. And you’ll find that an array of mortgage lending tools may be easier to access than you think.

Meeting Room 1 9:30 a.m. – 10:15 a.m.

SPECIAL MORNING KEYNOTE Joe Andruzzi Three-Time New England Patriots Superbowl Champion FINDING YOUR WINNING STRIDE From a slow career start to three Super Bowl rings; From a brutal cancer diagnosis to a survivor committed to helping others — the Joe Andruzzi story is a remarkable tale of overcoming the odds.

In 1997, Andruzzi was picked up as an undrafted rookie free agent by the Green Bay Packers. He was allocated by the Packers

3.29.19

PRODUCED BY

in February 1998 to play football in Scotland for NFL Europe.

Andruzzi was released from the Packers after three seasons. He was then signed by the New England Patriots in 2000, where he played five seasons and earned three Super Bowl rings. Andruzzi became a free agent in February 2005 and was signed by the Cleveland Browns. He played with them for two seasons.

In 2001, Andruzzi and his wife, Jen, were introduced to C.J. Buckley, who had an inoperable brain tumor. The families became very close and, therefore, it was devastating when C.J. died late in 2002. The Joe Andruzzi couple launched the C.J. Buckley Brain Cancer Research Fund at Children’s Hospital. Then, on May 30, 2007, Andruzzi was diagnosed with non-Hodgkin’s Burkitt’s lymphoma, predicted to double in size in just 24 hours. The family relocated back to New England where Andruzzi had an aggressive form of chemotherapy treatment over three months. Andruzzi’s last treatment was on August 6, 2007 after which he spent the following year at home in recovery.

After completing treatment, the Andruzzi family founded the Joe Andruzzi Foundation in 2008. They are committed to tackling cancer’s impact by providing financial assistance for patients and their families as well as funding pediatric brain cancer research.

Main Stage 10:00 a.m.

EXHIBIT HALL OPENS Aria Ballroom 10:00 a.m. – 11:15 a.m.

BREAK WITH EXHIBITORS 11:15 a.m. – Noon CONCURRENT SESSIONS THE ANATOMY OF A SOCIAL ENGINEERING ATTACK According to some studies, over 90 percent of data breaches involve some element of social engineering. Fortunately, there are many ways to improve your organization’s ability to detect and respond to social engineering attempts. This session will CONTINUED ON PAGE 20 Spring 2019 | CENTERPOINT | 19

All New MGM Spr ingfield

examine the anatomy of a social engineering attack and demonstrate how your organization can improve its ability to protect, detect, and respond to these threats. Presented by Nathaniel C. Gravel, Vice President of Information Security and Technology, Brian Brunelle and Michael Kannan, Senior Security Consultants, GraVoc Associates, Inc. Main Stage FASTER PAYMENTS — AN INDUSTRY PROGRESS REPORT Does it seem like Faster Payments such as Zelle and RTP are not yet faster? As member and credit union interest in Faster Payments continues to rise, it is important to stay informed of where the major industry players are in their development of these services. This session will give you an up-to-date review of where the industry is today and an overview of major technology investments being made in the short term. You also will receive suggestions on how to meet your members’ needs today. Bring your questions to a 45-minute presentation to help you stay informed.

Presenters are Ben Jordan, Senior Vice President, Product Development, and Rebekah Higgins, Product Owner, Payments, at Synergent.

Meeting Room 1 12:00 p.m. – 1:00 p.m.

BUFFET LUNCH INSIDE EXHIBIT HALL Aria Ballroom 1:00 p.m. – 1:45 p.m.

CONCURRENT SESSIONS 10 FINANCIAL INDUSTRY TRENDS YOUR CU CAN’T IGNORE Learn about the 10 financial industry trends that we see in our work with over 250 community financial institutions and the state associations. Attendees will receive insight into topics such as cybersecurity, capital, strategic, and market trends, among others.

Presenter: John J. Leonard, CPA, MBA, Principal, Financial Institution Group, Wolf & Company Main Stage 1:45 p.m. – 2:45 p.m.

SPECIAL CLOSING KEYNOTE Don Mann Navy SEAL, Bestselling Author, Endurance Athlete

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3.29.19

Don Mann

HOW TO RUN YOUR CU LIKE YOU’RE SEAL TEAM SIX When it comes to Navy SEALS, Don Mann is the real deal. As a member of SEAL Team Six for more than eight years and a SEAL for more than 17 years, he worked in countless covert operations, operating from land, sea, and air, and facing shootings, decapitations, and stabbings. He was captured by the enemy and lived to tell the tale, and he participated in highly classified missions all over the globe, including Somalia, Panama, El Salvador, Colombia, Afghanistan, and Iraq. Mann is a high endurance athlete, who has been in more than 1,000 races. At one time, he was the 38th highest ranked triathlete in the world.

Mann is the author of the autobiography “Inside SEAL Team Six: My Life and Missions with America’s Elite Warriors.” When Osama bin Laden was assassinated, the entire world was fascinated by the men who had completed the seemingly impossible mission that had dogged the U.S. government for more than a decade. SEAL Team 6 became synonymous with heroism, duty, and justice. Only a handful of the elite men who make up the SEALs, the US Navy’s best and bravest, survive the legendary and grueling selection process that leads to Team 6, a group so classified it technically does not even exist. Now, Don Mann – who holds a Masters in Management from Troy State University – will be our closing keynote speaker at the Great New England Credit Union Show. He’ll talk about goal setting, achieving against impossible odds, and building the fortitude it takes to succeed when it seems like everything is against you.

Main Stage 2:45 p.m. – 3:45 p.m.

OPEN BAR NETWORKING RECEPTION Aria Ballroom LAST CHANCE WITH EXHIBITORS RAFFLE PRIZES ANNOUNCED CONFERENCE CLOSES

PRODUCED BY

EXHIBITOR SPACE FLOOR PLAN

NEW ENGLAND DESIGN

LEXIS NEXIS

CSC

530

520

GUILD MORTGAGE

MAGTEK

KASASA

420

210

ZRENT

540 440

430

DOXIM

SYNERGENT

WORKS 24

320

330

220

230

SUITE 3

560

450

460

ALKAMAI TECHNOLOGY

INFORMATION BUILDERS

340 240

MAGEE

GRAVOC

COASTAL OUTSOURCED SOLUTIONS

350

360

250

260

MAGEE

CRIF

ALL MEETING ROOMS

TCI

FIRST DATA

550

ALL MEETING ROOMS

STRATEGIC INFORMATION RESOURCES

ALL MEETING ROOMS

FINANCIAL NORTHEASTERN

LENDKEY

NEW ENGLAND MONEY HANDLING

GREENPATH FINANCIAL WELLNESS

310

950 660

AMERICAN BUSINESS MEDIA

OM FINANCIAL

760

650

IMM: THE DIGITAL TRANSFORMATION CO.

130

20

30

IUOVO TECH

UNITED WHOLESALE MORTGAGE

MAIN ENTRANCE

140 40

CU DIRECT

150

160

50

60

SUNRISE CREDIT WOLF & CO.

CONNECTICUT COMPUTER SERVICE

NES GROUP

U.S. SMALL BUSINESS ADMINISTRATION

120

AVANTUS

THE WARREN GROUP

MVI MILLENNIAL VISION

10

BRANCH SERV

900

JMFA

110

REMOTE COMPLY

910

COCC

820

750

640

PRINTMAIL

BURROUGHS 810

740

EAST COMMERCE SOLUTIONS

410

SHESHUNOFF

800

730 630

SWBC

510

LOOMIS

620

COOPERATIVE SYSTEMS / BUCKLEY TECH GROUP

MINITER GROUP

SAGE DATA SECURITY

KONY

720

SOLIDUS

VISIBLE EQUITY

830

840

760 850

860

870

610

NATIONWIDE PROPERTY & APPRAISAL SVC.

940

710

OPEN LENDING

PW CAMPBELL

LIGHTHOUSE PAYMENT SERVICES

920

MIAC

LEE & MASON

RT. 66 EXTENDED WARRANTY DIEBOLD NIXDORF

880

890

FOOD & BEVERAGES

GNECUS 2019 Exhibitors Alkami Technology Avantus BranchServ Buckley Technology Group Burroughs, Inc. Coastal Outsourced Solutions COCC Connecticut Computer Service Cooperative Systems CRIF Select Corporation CU Direct Corp.

Customized Service Concepts Diebold Nixdorf Doxim East Commerce Solutions Financial Northeastern Companies First Data GraVoc Green Path Financial Wellness Guild Mortgage Company IMM: The Digital Transformation Co. Information Builders iuvo Technologies John M. Floyd & Associates Kasasa KONY Lee & Mason Financial Services LendKey LexisNexis Risk Solutions Lighthouse Payment Services Loomis Magee Company MagTek MIAC Millennial Vision, Inc. Miniter Group Nationwide Property & Appraisal Services NES Group New England Design Associates New England Money Handling Systems Open Lending, LLC OM Financial Group Print Mail Solutions PWCampbell Route 66 Extended Warranty Sage Data Security Sheshunoff Consulting Solidus Specialized Data Systems Strategic Information Resources Suite 3 Sunrise Credit Services SWBC Synergent TCI The Warren Group United Wholesale Mortgage US Small Business Administration Visible Equity Works24 Corporation ZRent/ZDeposit

Spring 2019 | CENTERPOINT | 21

BRANCH DESIGN

CONNECTING THE DOTS:

C

By IAN HOUGH, Special To CenterPoint

redit unions across New England are changing both externally and internally. As branch designs undergo dramatic strategy-based revisions, so too does an organization’s philosophy about member relationships and how clients can be serviced and retained.

Industry people today are aware of the ways branches in the region are being physically transformed; pods replacing teller lines, environmental branding, better technology, electronic retail displays, etc. Most CUs, though, aren’t currently supporting those efforts by using client relationship management (CRM) tools that will properly transform the dynamic between themselves and their members.

In the NGDATA 2017 Consumer Banking Survey, 61 percent of respondents stated that the offers they received from their financial institution were part of a campaign aimed at the broader market rather than offers based on their needs as individuals. This is a financial marketing fail. Nobody wants to receive direct mail or an email newsletter from their CU, asking if they’re interested in a new mortgage two weeks after they’ve secured a mortgage loan with their CU. But it happens.

There’s a process of interdependent steps that CUs can follow to produce the optimal member experience, one which relates hardware such as tablets and cash recyclers to CRM software with a single goal in mind: Enhanced relationships that serve the client’s every financial need in a

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FROM DIALOGUE TO DATABASE, HOW CUs CAN DELIVER THE ULTIMATE MEMBER EXPERIENCE timely enough fashion that they feel their CU truly knows who they are.

But before clients or potential clients can conduct business, the branch must be located, designed and built. New England CUs are developing a deeper understanding of who their customers are via strategic location experts using tried and tested mapping and analytics software. This granular information system breaks members up into specific segments whose finances, ethnicities, lifestyles, and general behaviors can be characterized by a great degree of accuracy. Armed with this information, branches can be located and designed to reflect the demographic and socioeconomic characteristics of the trade area they will serve, based on existing branches that have proved successful in similar markets.

According to Accubranch, a company offering strategic location expertise based in East Hartford, Connecticut, a significant number of credit unions and banks in Connecticut and Massachusetts are selecting locations for expansion in areas where their clients are concentrated and are like their existing member bases. Accubranch Chief Operating Officer Jay Fisher says, “Our clients are coming to realize that the days of locating new branches by gut analysis of towns and markets are a thing of the past. All of them are using refinements of data that sees well beyond static demographics and into socioeconomics, including how clients spend their time and money, and how they respond to the financial institution’s brand.”

Branch location and design are converging disciplines centered on data. Consequently, branch design strategy can be aimed at the consumer segment that is known to comprise the organization’s best clients. Highly trafficked urban

locations may be designed towards career-focused young people who may be more comfortable with technology. Rural branches (think Western Mass. or Northern Connecticut) might be designed for members driving work vehicles such as pickup trucks, who need drive-thrus and perhaps larger parking lots. Suburban branches (in Southern Connecticut or Eastern Mass.) could be different still, designed for families with younger members that play sports and whose parents spend somewhat more than they really should at high-end supermarkets.

One geographical analytics platform being used by a number of New England banks and credit unions has identified a total of 67 distinct client segments of this type, providing an accurate, detailed description of neighborhoods based on their socioeconomic and demographic composition—grouped under the headings of LifeMode and Urbanization Groups. These specific socioeconomic characteristics should also inform branding and merchandising concepts, refined at each location so that the appropriate scope of products and services are offered to members. As a result, new branch locations across New England will carry a much higher chance of successfully hitting deposit goals.

This brings us back to the activities within the branch, and the gathering and use of member data via CRMs, which is more personal than the data obtained by strategic location experts. Other areas of retail have long practiced these clientcentric methods, but the banking industry has been somewhat late to the idea.

We have all become familiar with the concept of “Big Data” over the past decade, and it is probably never going away, so the financial industry needs to

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WHEN CRMS ARE USED AND MAINTAINED PROPERLY, MEMBERS CAN BE SEGMENTED INTO SPECIFIC GROUPS AND MARKETED TO ON A LEVEL THAT LEAVES MOST OF THE COMPETITION BEHIND.

come to grips with and benefit from its use. Data is the core driver of successful businesses in this information age and the current business models of many financial organizations are in severe need of disruption for them to remain competitive.

Many credit unions have undertaken one aspect of this process without following through with the rest, and this is mainly because there’s a dearth of information available on how it all fits together, or even an indication that it does fit together. We are often told that dialogue towers (or pods) fitted with cash recyclers facilitate greater exchange of information between the financial institution and client, but we are never told what to do with that information or how it can actionably benefit the organization and member. The fact is that financial institutions should be reaping an abundant harvest from the “dialogue banking” model they’ve implemented (or are planning to) via pods, recyclers and new staffing models through the use of CRMs, but they’re not doing this.

Universal bankers, or even more traditional tellers, can enter this data into the CRM as they chat with members, while the recycler counts the cash. But beyond the conversation at the pod, it’s also possible to envisage a roaming universal banker with a tablet, greeting members as they enter and inputting information into the CRM as they determine who the visitor is and what they are looking for. This includes information that applies outside of the transaction or product being discussed at the time.

It can consist of personal data such as

24 | CENTERPOINT | Spring 2019

email addresses, birthdays, marital status, employer information, even hobbies.

This valuable information, properly stored in the CRM, can be segmented according to specific labels assigned to it and used to market special offers only to those who are most likely to need those financial services at that time. It’s not difficult to imagine a progressive credit union with a CRM so finely segmented that they’re able to send highly-targeted newsletters to members offering loans for boats, or farming equipment. This creates a closer relationship with members who will feel that their financial institution really knows who they are and is doing a great job of meeting or anticipating their needs.

If retail bankers’ eyes glaze over when they hear references to “data” it is possibly because they’re not visualizing the very human events and opportunities that data captures and provides. When CRMs are used and maintained correctly, members can be segmented into specific groups and marketed to on a level that leaves most of the competition behind. If there was ever a time for financial institutions to embrace and unleash the power of data, whether to determine prime branch locations, create superb branch designs, or deliver ultrapersonalized financial experiences, then this is it.

Ian Hough is director of marketing for Solidus in Bloomfield, Connecticut, which specializes in branch transformation for New England’s community banks and credit unions.

COMPLIANCE

5 WAYS CREDIT UNIONS CAN GROW WITHOUT COMPROMISING THEIR COMMUNITY APPEAL

By LINDA STRAUB JONES, Special to CenterPoint

I

love my credit union! It feels homey, familiar, and I know that, when I call, I will get someone on the phone who knows who I am. But, to continue to grow, credit unions must overcome the challenge of maintaining their unique, friendly atmosphere, while still competing with larger banks that have deeper pockets.

So, what can credit unions do to help them grow like the big banks, but still maintain that homey feel? Below are five examples of steps that big banks routinely take that, when implemented by credit unions, will help them to not only reduce their compliance risk but also compete with some of their larger banking neighbors.

1. Use data to minimize compliance risk in collections: Banks routinely use data to help identify compliance risks prior to beginning the collection process on accounts. A few quick checks can help avoid costly collections mistakes. These data checks can be set up to run automatically, or via a monitoring process, where your data provider may tell you if one of the below items happens on your accounts:

BANKRUPTCY If the consumer has filed bankruptcy, an automatic stay is in effect and you are not allowed to contact the bankruptcy debtor directly unless they are a pro se filer and you are providing information that you would normally provide to the bankruptcy attorney. At this point, collection efforts must cease, including calls and letters. You should also stop statements on all accounts involved in the bankruptcy. You should check your active deposit accounts and note them as bankrupt, as taking fees or fines out of the deposit account during bankruptcy can be a violation of the automatic stay.

DEATH If the consumer is deceased, calling the home number and asking for the decedent may cause damage later when trying to collect on that account. A best practice we have seen is to send a condolence letter to the family, stating the account information. Ask them to contact you, and if no contact has been made in 30 days, then start your calls to the family to determine the status of the estate.

Spring 2019 | CENTERPOINT | 25

CELL PHONES In today’s world, it is easy enough to do a quick scrub of your accounts to identify cell phones. The Telephone Consumer Protection Act (TCPA) has restrictions on calling cell phones from an automated telephone dialing system (ATDS) without the consumer’s express consent. To be on the safe side, many creditors are manually dialing all cell phones, even those where they have express consent.

CONTACT RISK OF LITIGIOUS INDIVIDUALS Another data scrub increasing in popularity is a scrub for consumers who have a history of suing creditors for FCRA, FDCPA, or TCPA claims. Approximately 35 percent of all suits filed for FCRA, FDCPA, or TCPA actions are filed by consumers who have filed a similar claim at least once before. By knowing this, you move that collection account to a more experienced collector who is familiar with the potential for call baiting and other strategies used by these consumers and their attorneys.

2. Use scoring to help streamline your collections process: Using scores to help determine the ability and willingness of a consumer to pay, as well as the collectability of an account, are a helpful way to segment your collection queue. This will ensure that you spend your time on the accounts that will result in a higher payment rate.

3. Use alternative data to help fund underbanked individuals: With the emphasis that the Consumer Financial Protection Bureau (CFPB) has recently placed on the underbanked population, credit unions will want to look at ways to increase their lending to individuals who have a thin credit file or no credit file. A good portion of these individuals are a good credit risk to lend to, but by using just the traditional credit reports, you will not be able to identify them.

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Using alternative data, such as public records, rental vs. ownership of a home, and utility data, you can get a picture of a consumer and their creditworthiness, without relying on the credit bureaus.

4. Network!: Mix with the banks and collection agencies in your community. You can learn a lot of best practices that can be applied to your credit union from others in similar industries. We see very few credit unions participating at ACA International, RMA, DCS, and other creditor or collector events. Branch out to network with these sister-industries to help round out your learning potential.

5. Know your vendors: Banks were some of the first to be audited by the CFPB after its formation and a big part of those audits were vendor awareness. The CFPB published Bulletin 2012-03 on April 13, 2012, that outlines its expectations for the use of service providers and vendors. The National Credit Union Administration has published Supervisory Letter 07-01, as well as a third party vendor checklist that you can find on their website. If you do not already, you should have a service provider/vendor auditing process in place to review annually any company or individual that you send any consumer personally identifiable information to, in the course of your business.

By implementing a few new processes, automating as much as possible, and using the above tools to streamline your existing processes, you can increase your efficiencies and help set your credit union on a path for growth, while maintaining compliance with the regulations.

Linda Straub Jones is director, market planning – compliance for LexisNexis Risk Solutions.

PAYMENTS

API IS DRIVING THE FUTURE OF PAYMENTS

By DEVON WATSON, Special to CenterPoint

T

he evolution of payments is an ongoing story.

Beginning with barter-based economies that led to the invention of money and cash transactions, the rise and near-fall of checks, the creation of cards and related infrastructure, to the rising adoption of mobile and digital payments today, to biometrics and wearables around the corner.

None of these “payment eras” occurred in linear order: there are overlaps, reversals, even surprising continuity.

Looking at historical payment instruments along this evolution, we see two methods faring quite differently.

Whereas checks have declined substantially, cash has remained the most constant — and so have predictions of its demise. We’ve heard it time and time again following technological advances that have introduced new payment capabilities.

Yet cash is unlikely to go anywhere due to several of its unique qualities: it’s extremely resilient, universally accepted, fully private, efficient and user-proof (your Spring 2019 | CENTERPOINT | 27

API TECHNOLOGY ALLOWS DIFFERENT SYSTEMS TO EASILY EXCHANGE DATA AND TRANSACT IN A MODERN WAY WITHOUT COMPLEX LEGACY INTEROPERABILITY ISSUES. cash won’t freeze up or malfunction on you).

According to the Committee on Payments and Market Infrastructures (CPMI), worldwide cash in circulation has actually increased since 2007, with 83 percent of all global transactions made in cash.

The next wave of payment innovations brought us the global card infrastructure comprised of credit and debit rails, which the card providers run and manage to provide interbank clearing. In the world of consumer payments, this innovation has for decades eaten into the use of checks and provided the core infrastructure for most digital payments we have today (point of sale, e-commerce, etc.).

However, we are seeing emerging economies invent and implement new technologies that are allowing them to leapfrog the developed world in their evolutionary arc and integrate mobile payments directly into their cash-based economies.

We’re currently in the midst of a global explosion of payments innovation, yielding a host of new payment products and services driven by unprecedented investment in the space (in the early part of this decade, more than $5 billion of venture capital was funneled into payments).

Besides shifting consumer habits, two market forces heavily influence where this trajectory takes us next: application programming interface (API) technology and changing regulations.

API technology allows different systems to easily exchange data and transact in a modern way without complex legacy interoperability issues.

This modern software is what drives mobile payments like Android and Apple Pay, or apps like Venmo and Zelle.

Coming back to emerging markets, we’re seeing API-enabled payments leapfrog all other methods. In China,

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the number of transactions made through nonbanking mobile apps grew from 3.8 billion to more than 97 billion, and in June 2018, Kenya had 42.6 million mobile payment accounts compared to 17 million payment cards.

The advent of this API-driven payment ecosystem might have moved slower if not for a change in the regulatory winds—specifically, the implementation of PSD2 (payment services directive) in the European Union that’s likely to start a cascade of similar policy change globally around the concept of open banking. Under this regulation, banks are required to open for integration, giving thirdparties access to their customers’ accounts via API and leading to simple account-to-account and P2P payments directly between bank account holders.

This democratized access to bank accounts could result in decreasing loyalty to banks, depending on how the cards are played. What’s become apparent is that the payment methods most existentially threatened are not the “oldest,” but rather the most disrupted.

Thought about in this way, the card infrastructure feels more precarious. Compared to an API-enabled system, it feels constrained by its own system, has limited potential for grander scale, and offers less convenience for the user. Revisiting our emerging markets example, technology innovation and the utility of both cash and digital payments created a surprise leapfrog that skipped a generation of financial technology and bypassed the legacy card rails.

So, while the future is clearly not cashless, it could very well be cardless.

Devon Watson is Vice President and Chief Marketing Officer for Diebold Nixdorf.

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R

HOW TO OPTIMIZE LOAN PERFORMANCE

apid growth in credit union indirect lending programs has triggered more examiner scrutiny and additional emphasis on the performance of these programs. Credit unions can be more effective in mitigating risk and optimizing performance within their indirect portfolios by taking a number of steps, including implementing a series of key metrics: dealer performance scorecards, multi-dimensional portfolio analysis, static pool analysis, and profitability analysis. These practices enable credit unions to identify risk and low-performing segments within their portfolio, take corrective action in a timely manner and maintain a sound and viable indirect lending program.

Here’s a closer look at how each of these practices can improve a credit union’s indirect loan portfolio performance.

DEALER SCORECARD Credit unions should develop and monitor a dealer scorecard for dealers with the highest concentrations of loans in the portfolio. The scorecard report should include metrics such as delinquency, cumulative losses, average LTV, average credit score, profitability by credit tier, exceptions, funding delays and audit discrepancies. A report with drilldown capabilities allows lenders to quickly identify problem loan segments and other unidentified risks within the portfolio.

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By JANE HAMMIL, Special to CenterPoint

STATIC POOL ANALYSIS Credit unions should conduct an analysis of static pools (by origination tier and year) on a monthly to quarterly basis to visualize how portfolios originated during specific periods are performing relative to other pools of loans. This analysis will help the credit union determine how policies and procedures are affecting portfolio performance, if new dealers are performing as expected, and provide predictability to portfolio performance.

of funds, and origination costs. The credit union should determine if each loan pool is profitable, and if so, when in the lifecycle the pool became profitable.

A WORD ON LENGTH OF TERMS Extended length of loan terms also seems to be a hot button issue according to the Supervisory Priorities published in the National Credit Union Administration’s letter to credit unions (17-CU-09) in December 2017. At CU Direct we’ve found the average length of term for all indirect CREDIT SCORE MIGRATION loans funded through our network ANALYSIS has not changed in the past three Credit unions can obtain new credit years (2016-2018). Looking at the scores for loans within a portfolio 1,100 CU lenders, 14,700 dealers, on a quarterly or semi-annual basis and 1,505,154 loans funded through to determine if creditworthiness is CU Direct’s indirect lending platforms improving or degrading over time.

(YTD December 2018), the average The report can be further segmented loan term has remained consistent at by dealer, credit tier, time of 70 months. origination, LTV, collateral value, etc.

Credit unions have valuable data to understand how the portfolio is at their fingertips, and effectively changing over time. The information harnessing that data to minimize risk can also be used to mitigate future and uncover new opportunities will losses through collections strategies or be a difference maker in today’s everto identify new areas for growth. evolving and growing competitive landscape.

PROFITABILITY ANALYSIS Credit unions should measure the profitability of the overall indirect portfolio as well as profitability at the dealer level by monitoring Jane Hammil is CU the average net yield, Direct’s VP of advisory annualized losses, cost services.

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905 South Main Street, Bldg B Suite 201, Mansfield, MA 02048 • 508-339-6600 • www.nes-group.com • www.drlarchitects.com 32 | CENTERPOINT | Spring 2019