It's Not Nice to Tease

I hate teaser rates.

Don't get me wrong, I understand why financial institutions use teaser rates. After all, getting new customers/members in the door is immensely easier when you can boast 0.9% APR car loans or 10% APY certificates. Truth be told, I have taken advantage of at least two credit card offers that promised a 0% APR intro rate for 12-18 months. For the responsible, intelligent consumer these teaser/intro offers can be great deals. Let's be honest, though, these companies don't offer teaser rates to be nice. And they surely expect to make money off of the deal.

What does that mean to most consumers? At least one of three things: 1) Deep in the 45 lines of fine print there is a "GOTCHA" line (assuming you can decipher the legalese) that explains how the deal will make your financial institution very wealthy; 2) The CMO behind the offer understands that most people receiving the offer will be either too irresponsible or too lazy to take full advantage of it; or 3) The deal you THINK you're getting is likely a far cry from what you are actually getting in the long run.

The message that your company is willing to deceive people to get their business is bad enough. But something I received in the mail yesterday has convinced me that teaser rates are wrong for yet another reason.

Sallie Mae sent me a letter to tell me that they lowered my interest rate on student loans to 3.010% APR because I have made 48 consecutive on-time payments. A reverse teaser rate? What a concept! Instead of raising my price over time because I'm hooked into a contract, Sallie Mae lowers my rate because I am paying as agreed. I scratch their back, they scratch mine.

Financial institutions, take note. Want a relationship with me? Want loyalty? Then don't give me your best deal up front. Instead, reward me through time for being a good customer/member. Offer a good rate up front, and promise your audience that the deal only gets better through time.

Want transience? Want disloyalty? Keep proving to me that my first impression was as good as it's going to get.

Will you be able to sell this to everyone? Maybe not. But you won't find yourself wondering why you can't retain your membership/customer base when your competitor down the road comes out with his latest/greatest teaser rate.

The Smaller the Better? (Maybe size does matter)

At the age of twelve I was a towering 5’7”. As one of the first boys in my class to have my growth spurt, I was able to experience what no one in my family could. I was tall. I was in the back row of my basketball team photo. I was bigger and stronger and hairier and had a deeper voice than most of my classmates. It was good to be big.

Seventeen years later, I’m still 5’7”. With the passing of every year I was able to see my contemporaries grow taller and taller, while I became (seemingly) smaller and smaller. I went from being one of the tallest people I knew my age, to being one of the shortest. Tough? You betcha! I’ve heard every short joke ever created, and have been the unwilling recipient of countless comments on my height, or in this case, lack thereof. It’s been tough to be small.

Or has it?

Yesterday I flew from Charlotte to Houston to speak at the Texas Credit Union League’s Mid-Asset Summit. My seat was in the exit row. While nearly everyone else on the plane over the age of 7 looked cramped, uncomfortable, and displeased with their seating arrangement, I was nearly able to stretch my legs straight ahead of me. Sure, I felt cramped shoulder to shoulder (such is life on airplanes), but in terms of legroom I thought the plane was quite spacious.

And today I talked to amazingly passionate credit union CEOs from mid-sized credit unions in Texas. After conversations with these executives, I have never felt better about being a part of this industry. We discussed why it has never been a better time to be small, the mainstream media’s general distaste for all things big and profitable, and the subsequent public distrust of large firms. Small, not-for-profit financial institutions have what most large financial institutions do not: the genuine ability to craft solutions to their field of membership’s unique needs, a transparent and trustworthy “we are here to help our members, not to profit off of them” public persona, and the ability to honestly prove innocence from the recent meltdowns in the financial services sector.

Do small credit unions have a lot of work to do? Sure, some do. Mostly, though, I think it’s a great time to be a small or mid-sized credit union. It’s just a matter of communicating our unique stories, serving our members in powerful, personalized ways, and continuing to be what we have been: transparent, honest, and a cost-saving solution to regular Americans’ financial service needs.

Don't ask me to reach the top shelf in a cupboard. Don't make me the center on your basketball team. But please don't expect me to be ashamed of my credit union's size.

The Savings/Member Ratio

Forum Solutions' Doug True wrote an interesting post on OpenSourceCU today about some credit unions' palpable complacency and unwillingness to take risks in product/service offerings.

"Folks, we can’t offer “free’er” checking. In my opinion, there is too much cookie cutter product offerings that are copied and launched with very little thought on what your members want or how they will see the new offering as relevant. Too many times a credit union simply just buys a new product from a vendor and launches it – differentiation is almost non-existent from the beginning and if it does exist it quickly disappears." - Doug True

When the industry's idea of innovation and collaboration is a "best practices" mentality, it's no wonder many credit unions struggle finding a discernible, relevant role in the financial services marketplace. Fear, reasonable or not, is the major factor here. Fear of regulators. Fear of losing one's job. Fear of rocking the archaic boat that has been too cozy for too long.

As not-for-profit cooperatives, I believe our biggest issue has been our success metrics. If members, assets, net income, number of branches, deposits, loans, capital/assets ratio and number of transactions continue to be our primary measurements, I believe we're doing our charters a huge disservice. "Grow or go away"?!? Says who? Honestly, that bugs the hell out of me.

How's this for an idea? Why don't we define success by the amount of money we save the average member? The savings/member ratio. And by savings, I certainly don't mean deposits. Calculate real value that your credit union is delivering to members. Consider your deposit rates compared to the competition. Look at comparative loan rates. How about fee income? Isn't this what we're in business to do? Aren't we supposed to be saving members money?

Listen, I'll be the first to admit that being responsible stewards of members' assets is an irrevocable charge - and I'm not suggesting we fall anything short of that. What I'm suggesting is that growth for growth's sake is not beneficial to members. I'm suggesting that most of our current metrics are too easy to manipulate to the detriment of our memberships. I'm suggesting that big successes require big risks.

I'm suggesting we start being credit unions again, not bank wanna-be's.