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By Stan Wade
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
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
Manager, Credit Union Sales
February 19, 2001
7/26/2012 04:04 PM
A goof focus on an business opportunity that CU's are mostly missing
Need to hear more about member business lending success stories.
I used to work at Citizensfirst!!!
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.
Very relevant for today.
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
The comparison of figures of 2001 with 2001 figures doesn't do much for me!
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
Great Data. Headings need correcting.
Check your table at the end of the article - are the dates correct???
upon closer inspection, your dates on the chart are wrong
Your left hand column should read: September 30, 2000. Correction needs to be made.
The article is very interesting - however, it looks like the right hand column should read Sept. 30, 2000
Second Column heading should be 2000, not 2001
very helpful since we are planning to offer on-line banking this year
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