MADISON, Wis. -
"Each team has prototyped what these ideas would look like," said Denise Gabel, chief innovation officer of the Filene Research Institute.
These seven innovations are: Auto Resource Center, Auto Savings, Community Impact, Lot$a Mot$a, Savings Revolution, VIRTUALFINANCE, and Women: A Strategy for Success.
Descriptions of each of these seven innovations are below.
AUTO RESOURCE CENTER
STRATEGY: A package of tools that credit unions can add to their websites to help members manage everything relevant to auto ownership.
The basis of this innovation is that members do not usually think of their credit union as the place to go when purchasing a vehicle, Gabel said. The goal of this innovation is for members to be able to rely on their credit unions for trusted financial advice about auto lending.
This web-based program will be accessed by the member through the credit union's website, and will have the following elements: *
Registration by VIN (this will allow the member to update mileage manually).
* Learn more about my car (this will allow owners to talk to other owners of the same make/model, connect to research on their car and learn how "green" their car is).
* Take care of my care (this will allow car-owners to search for local service centers capable of maintaining the car, provide coupons, provide reminders for services and chat with a technician).
* Time for a new car (this will allow members to find out current worth of their car, what type of car they should buy next, who they should buy their next car from, how much they should pay for their next car, and warrant information).
* Stuff I have to do (this will provide links to insurance providers and link to the local DMV offices).
* Using my car (this will provide a link to mapquest and roadside-assistance links).
* How to use my car less (this will offer local walking trails, and calorie counters for driving vs. walking). "There is not one collective place for this," Gabel said.
According to the drafted plan, benefits for credit unions offering an Auto Resource Center could be additional loan business, reduced indirect fees, and reduced loan charge-off expenses.
"This plan has a wide demographic," Gabel said, as people from all ages, income levels and geographic areas buy cars. However, the primary target market would be that of the CU members "looking to have easy, self-serve access to value-add information on autos," according to the draft.
Creating a united approach with several CUs is the future marketing objective for this plan. "Our challenge is implementation," Gabel said.
The goal: participation by multiple CUs can reduce costs.
LOT$A MOT$A
STRATEGY: A destination where young people can go to learn the basics about money (mot$a) through fun, interactive experiences.
According to Gabel, this innovation would consist of a physical destination, similar to a Chuck E. Cheese, where children ages 5 to 18 could learn about money and finances.
"People are willing to pay for karate, dance, dog-grooming, so they should be willing to pay for some financial education," Gabel said. "Parents can sit in, which would make it a secondary way for parents to learn through their children."
In this program, parents would pay for their children to attend.
Classes would stress the importance of becoming financially secure at an early age, and developing strong money skills that would be hoped to last throughout a lifetime. It will also stress the importance of developing a relationship with a credit union.
This program would be formed as a CUSO to give CUs that invest in the corporation the opportunity to share in the profits earned. Credit unions will also have the ability to create a Lot$a Mot$a window in their branch office to promote the concept.
This product would focus on CU members but would also target nonmember students. Schools would be contacted to offer scholarships to underprivileged children.
The business plan projects start-up expenses of approximately $200,000 for the program, mainly for rent on the facility, and capital expenses for the first six months of operation.
Lot$a Mot$a was pilot-tested in Louisville, Ky., with a group of 20 fourth- and fifth-graders. Children and parents expressed a high interest in participating in future classes.
The next steps in making this project a reality are: seeking CU investors for CUSO, complete financials, developing a curriculum, conducting more pilot tests and determining the feasibility of launching a multi-user website where students could go to continue learning.
AUTO SAVINGS
STRATEGY: A product that promotes forced savings by giving members the option of signing a contract to add a specific amount from each auto-loan payment to be credited to a savings account.
"The team's thought was that by the time the member has paid off their car, they'll have created a nice savings at the same time," Gabel said.
The basis for the program is recognition that many people live paycheck-to-paycheck and are one small step away from financial disaster. The plan promotes forced savings implemented as a contractual add-on to an auto loan. Members borrow from the CU to purchase an automobile and sign a contract to add a specific amount to each loan payment in order to accumulate savings. Substantial penalties are applied to members who break the contract. The member determines the amount to save and electronically transfer the savings amount with their regular loan payment. Then each month, the "new" loan payment is made and the extra funds to be saved are automatically transferred to a special certificate. A $25 minimum is recommended.
"It's a simple forced savings," Gabel said. "Everybody knows they need to save. They just don't know how."
The product is targeted toward younger members, specifically ages 18 to 25. The program's business plan states that this target market can be easily accessed via a newsletter, website or in-branch advertising.
Once credit union staff members are trained on the program, the operational investment is limited to the resources required to close the loan and set up the automatic-payment transfer.
According to the draft business plan, automation is the key to the economic success of the program.
The term on the savings portion of the program will be set at the full length of the loan. If vehicle refinancing occurs, it will do so two months past the point of profit equality.
The auto/savings program has been piloted at two credit unions: Day Air CU and American Airlines FCU. At Day Air, 37 of the accounts were opened during the first two months, equating a take-up rate of almost 17%. At American Airlines FCU, 28 accounts were opened in that same period of time. The average additional payment was $34.
"This may be a way for credit unions to differentiate themselves from a regular auto loan," Gabel said. "Also, credit unions can go directly to our website, take the idea and get it implemented. It's ready to go."
COMM. IMPACT
STRATEGY: A shared resource business model to help credit unions partner with public and private enterprises to engage in community development projects in the spirit of "people helping people."
This model is based on some already engaged in similar programs, such as Arizona Federal and the Valley of the Sun YMCA, both located in Phoenix. According to the draft business plan, the right type of community development opportunity would be one that creates value for the community as it creates value for the credit union, to ensure a win-win situation.
This innovation is not a product, but instead is the evolution of a business model-The Community Impact Center.
The Community Impact Center is designed to help credit unions by: providing assistance in helping the credit union form a viable structure to partner with an enterprise, identifying funding sources available and helping write grant proposals.
"It's going to need some credit unions to come together to create a central resource," Gabel said. "This will be need to stay very focused to get off the ground. Monies always come with strings attached. You really need to know what you're doing to enter into this Community Impact."
Targeted projects for this plan would be places such as hospitals and housing, with would bring benefits to consumers while encouraging further investment in the community.
WOMEN: STRATEGY FOR SUCCESS
STRATEGY: A comprehensive look at helping reduce the headaches of bill paying and budgeting, and creating a greater sense of financial independence.
"This team did a tremendous job," Gabel said. "They piloted an online registration process." Unfortunately, she added, "It wasn't that much of a success."
During the summer of 2007, SAFE Credit Union in North Highlands, Calif. piloted Strategy for Success. SAFE offered all three elements of the innovation, alerting members to bill payment training, budgeting classes, and the opportunity for retirement counseling.
SAFE constructed a "women's site" as a sub-page off its main homepage. This site (accessible at https://www.safecu.org/online-services/women-finance/index.aspx) highlighted training opportunities, resources for financial education, and text and images focused on the message of financial independence. Members were "pushed" to the page via banner advertisements on the main homepage and via placements in SAFE's regular newsletter. In addition, about 300 female members received a targeted email message.
Female members were given the opportunity to enroll in bill-payment training. These classes were offered online via live chat for several hours each week with interested members scheduling an appointment beforehand. The website also allowed members to register for an in-person budgeting class.
SAFE appears to have had greater success with the budgeting class than with the online bill payment training. Only 10% of available spaces were taken for the online bill payment trainings. While take-up was higher for the budgeting course, only eight women signed up and none of them purchased additional credit union products, leading to a fairly high per-person cost for the class. It seems likely that the bill-payment trainings were not provided in the correct venue, according to the evaluation in the business plan. Many of the women who have trouble with bill payment may also not feel entirely comfortable online and so take-up might be enhanced by offering in-person classes.
The pilot implementation also produced an idea for a more far-reaching reinterpretation of this innovation, Gabel said. Rather than simply bundling existing financial management tools with training and new marketing, credit unions interested in helping women with their financial tasks could offer a complete financial concierge service. This service would be higher cost to members, but would offer them the chance to completely outsource bill payment and financial management including document management, bill review, payment, disputes, expense reporting, and even analysis of household spending trends.
SAVINGS REVOLUTION
STRATEGY: This two-pronged promotion encourages members to get out of debt and build wealth through a "Savings Challenge" contest between selected members publicized in the community, along with online resources where all members share tips and suggestions for meeting financial goals.
This plan is based in part on data from the Consumer Federation of America and the Financial Planning Association indicating that 40% of low-income earners think its more practical to accumulate significant savings by winning the lottery than by actually following a systematic plan for savings.
The Savings Revolution has two main components: Savings Challenge and Savings Revolution.
Savings Challenge is an event in which selected members of the CU compete toward achieving defined savings and debt-reduction goals. The participant most closely reaching or exceeding their financial goals wins the competition and receives a prize. The business plan suggests that monitoring of the participants' progress via some sort of media interaction stimulates other members and consumers to check on the families' progress. It is hoped that it would also prompt them to think about taking the next step toward their own financial goals.
Savings Revolution is a nationwide mass implementation of setting financial goals and working toward them with their neighbors and fellow CU members. It would require some sort of networking of members and the ability for those members to easily set their goals and monitor their own progress. They would also need to able to share notes with others.
The target market is CU members who know they need to focus more on their finances and are in need of incentive. Another target would be CUs themselves and/or groups of CUs. The objective would be to encourage CUs or CU groups to adopt the program locally, to build credit-union brand recognition.
"This team considers this to be a form Weight Watchers for your wallet, or reality TV," Gabel said. "The vision is this has great potential to pull us together as a national credit union brand.
This was piloted in GECU in El Paso, Texas, where six families were chosen: three Spanish-speaking, and three English-speaking, competed for a $10,000 prize. Two local television stations are monitoring the families' progress via televised monthly 90-second vignettes.
VIRTUAL FINANCE
STRATEGY: The use of virtual worlds to attract and educate Generation Y members about financial literacy.
This innovation is based on the fact attracting new members to CUs has been difficult, and that numerous industry publications have pointed out the need for organizations to attract the 76-million people who were born between 1977 and 1995, known as Generation Y. Studies show that 71% of this age group research financial decisions online.
Though yet to be introduced in the market, Virtual Finance is well into the development process. Stage One of development is to include the creation of a website to facilitate registration in the virtual world at Teen Second Life and a web portal to Virtual Finance. It will also include the development of a prototype credit union "island" within Teen Second Life, including orientation area, credit union branch, stock market display, and other financial tools. Finally, Stage One will also produce a prototype financial management game where teens can make financial decisions and see the consequences play out in the virtual world.
Stage Two of development calls for integration of the Stage One prototype with credit union websites and the completion of a full financial game. This stage will also include the development of a virtual ATM system within Teen Second Life that players can use to create virtual accounts with a participating credit union, withdraw or deposit virtual dollars, and even interface with real world accounts. "This is entertaining and fun," Gabel said. "The prototype has been developed, but not implemented yet."
