Start-up, Smart-up!

Old business logic for many bankers and credit union senior officers says, We avoid risk, that's our business. That perspective has served the financial services industry well for years, and some will try to keep it in vogue for many years to come. Today, however, more new companies are forming than ever before in the financial services industry- and some have unique business plans that will be successful.

 

By Stan Wade

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Old business logic for many bankers and credit union senior officers says, ''We avoid risk, that's our business.'' That perspective has served the financial services industry well for years, and some will try to keep it in vogue for many years to come. Today, however, more new companies are forming than ever before in the financial services industry- and some have unique business plans that will be successful.

The next millennium has begun and, as such, many of the rules on which businesses have historically been based have changed. For years, we have heard that the rate of change impacting our personal and professional lives has never been greater, and when we take a few minutes and think back on what has happened in the last few years, we see that this is indeed true. Remember the story of the MBA professor telling his grad student that his plan for a next-day delivery service was not likely to work? Fred Smith grew the FedEx Corporation out of that grad school project - giving birth to the biggest air/ground express business in the world. FedEx was merely a fledgling start-up company in 1971, and last year it recorded revenue of over $18 billion. Customers utilizing FedEx's services in the beginning pledged a ''leap of faith'', of sorts, to this new company. The goods that needed to be delivered in those early trips were no doubt very important to those shipping the packages. The successful arrival of those packages was also critical to FedEx as well. The leap of faith clearly worked for all parties involved.

Why do many potential customers run and hide from the idea of trying new companies with new ideas? The obvious answer is this: the fear of trying something new and untested is greater than the potential reward for making that choice. Is that a rational position? Based upon press reports about dot-com failures in the last few months, some caution is warranted. The typical concerns are well documented: Will there be enough money to keep the company going while they build up their revenue stream? Will all the key personnel stay with the organization? The answers to these and other questions will depend on the company and their particular products and niche in the marketplace. With some companies, these concerns may form a very rational perspective. On the other hand, who's to say that a new company could not be the next FedEx? How can you tell which company will make it and which one will not? The odds of being as successful as FedEx are long-but being successful enough to stay in business and to support the promises made to customers is not as impossible a task as one may think, especially given a sound business model and a viable product.

Lets also ask if there is risk for a credit union in limiting the options for products and services to only the established companies? We think there is some risk. In the Online Banking industry, the stability of established companies can also be questioned. Many of the so called ''leaders'' are now having to explain to analysts why they are not performing to expectations, thus creating great volatility within their organizations. Will there be others? It is difficult to judge, but the due diligence needed to evaluate new suppliers should also be applied to those already in the market.

Let's try to make a case for becoming an adopter of what may seem to be an ''unproven concept'' with a start-up company. An assumption can be made that a new company will provide an adopting organization with personalized attention. Newer companies are usually smaller and quicker to adapt to marketplace changes. It stands to reason that adjusting to marketplace changes comes easier to organizations with less history of how it used to be done in the ''good old days''. Established companies may have policies and procedures that have not quite caught up to the leading edge of the marketplace, and as such may be less nimble, or willing, to modify and adapt to meet the needs of an ever-changing environment.

It also stands to reason that an early adopter may have more leverage with a new company, due to the fact that they need you at least as much as you need them (remember the FedEx example). Their stake in leading your organization to the highest levels of customer satisfaction is vital to their ongoing success, and they are more likely to do whatever it takes to insure that their promises are being met.

If it can be agreed upon that adopting a new product, process, or technology available through a start-up company may be beneficial, how can that company be evaluated to insure that a wise decision is being made from a business perspective?

First, the company's solution should be superior to anything else available. The value of the new product/service to your organization is an equation that involves the features, benefits, and price of the products selected. If the solution involves new technology, make sure you understand it and that you can equate this new technology with the improvements you are seeking.

Secondly, the stability of the organization should be evaluated. If the company is privately held, this may be more difficult than investigating data on a public company. Nonetheless, an effort should be made to obtain a comfort level that the company will be around to fulfill the promises they are making. If the data is available, it may be enlightening to know who the major investors are. This information can indicate the trust that others place in the company and their management. A careful look at the management team is also beneficial- who are the people who are making the promises, and what will they do to fulfill them?

Thirdly, make sure that you are forming a partnership with the new company. You both are investing in this venture. As such, working together as partners- instead of just supplier and customer- will give you a greater sense of security. Most companies today say that they stress customer service, but not everyone is truly committed to that goal. One way that new companies can help new customers feel more comfortable is to set-up and manage a users conference for their customers. These conferences will allow the users to voice their challenges and successes with the new company as a group, which can be very powerful. Become aware of what the new company is doing to prove their commitment to you and your organization.

Today, financial institutions have more choices than ever before in regards to services they are able to provide to their customer base, mostly technology-based, driven by small companies with innovative ideas. A credit unions primary goal, ultimately, is to provide value to their members. To look at a start-up company as a ''risk'' is, quite simply, looking at the glass as ''half-empty''. These companies are creating solutions for you in order to leverage the value perceived by your members and you, the credit union.

eCommLink, Inc. is an innovator and striving leader in the credit union market using our technology to the fullest. We were founded on visionary ideas and remain to this day committed to achieving one goal which can be answered only by asking the following question: How can we make you a better credit union?

Please visit us at our website www.ecommlink.com or contact me directly. Our Technology Partners program allows a select group of our clients to lead the innovation they want to see in the marketplace. We are anxious to share the details with you.

Stan Wade,
Manager, Credit Union Sales
stan.wade@ecommlink.com

 

Feb. 19, 2001


Comments

 
 
 
  • A goof focus on an business opportunity that CU's are mostly missing
    Anonymous
     
     
     
  • Need to hear more about member business lending success stories.
    Anonymous
     
     
     
  • I used to work at Citizensfirst!!!
    Anonymous
     
     
     
  • hearing technological applications to meet efficiency and service are always at the top of our list- very helpful to have knowledge of innovators in our industry.
    Anonymous
     
     
     
  • Very relevant for today.
    Anonymous
     
     
     
  • The reason for the decline in retained loans is the lowest mortgage rates in 40 years-- and CU's have bout 30% of their portfolios in real estate-- Home improvement loans and 1st mortgages
    Anonymous
     
     
     
  • The comparison of figures of 2001 with 2001 figures doesn't do much for me!
    Anonymous
     
     
     
  • I have created a similar analysis using Peer to Peer for local credit unions. I think part of the problem is that credit unions are not active in getting the next loan when a member pays off and are not active in pre-empting members who want to refinace the mortgage held with the credit union. Henry Wirz SAFE CU
    Anonymous
     
     
     
  • Great Data. Headings need correcting.
    Anonymous
     
     
     
  • Check your table at the end of the article - are the dates correct???
    Anonymous
     
     
     
  • Check your table at the end of the article - are the dates correct???
    Anonymous
     
     
     
  • upon closer inspection, your dates on the chart are wrong
    Anonymous
     
     
     
  • Duh!!!!!!!!
    Anonymous
     
     
     
  • Your left hand column should read: September 30, 2000. Correction needs to be made.
    Anonymous
     
     
     
  • The article is very interesting - however, it looks like the right hand column should read Sept. 30, 2000
    Anonymous
     
     
     
  • Very timely
    Anonymous
     
     
     
  • Second Column heading should be 2000, not 2001
    Anonymous
     
     
     
  • Great Article
    Anonymous
     
     
     
  • very helpful since we are planning to offer on-line banking this year
    Anonymous
     
     
     
 
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