You'd have to be, well, high not to have seen all the reporting around the New Year related to Colorado's and Washington's legalization of recreational marijuana sales.
Those states join 18 others (plus Washington, D.C.) where marijuana can be sold for "medicinal purposes." As
Until that conflict is resolved — and it seems inevitable given the number of states changing their stances on marijuana — it appears it will be a while before we start seeing any pot-themed check backgrounds (should make for a nice warning for merchants that the check may be coming back NSF) or debit card images (for those emergency Taco Bell runs).
It's A Given
Given that the marijuana market in the U.S. is estimated at $1.44 billion annually (that had to be some challenging research), if credit unions and banks don't step in with products, you can count on other providers doing so. So, while we don't know when (wow, how these marijuana-related news items really lend themselves to hackneyed puns), credit unions will eventually have merchant accounts and even loans with stores and businesses "dispensing" pot. And at least some of those businesses are going to fail (insert joke about bad record-keeping, owner forgot where store is, etc.), which means some CUs are going to find themselves owning and managing these establishments until they can sell them. (I hope someone really is recording those collection calls — for quality assurance purposes, of course).
There's a skill set many CEOs (and regulatory agencies) probably never thought they would need.
Turning Toward Branches
Loan-to-share ratios, loan-loss reserves and net income, obviously, are the standard metrics for determining the economic trend lines in credit unions. One that gets less attention is branch remodels and groundbreakings, but it's literally and figuratively among the more obvious indicators of the health of CUs, and the word I get from the design/build firms I've spoken with over the past six months is they are seeing a rebound. It began with branch "refreshenings" and has since grown into more shovels turning dirt.
While the ceremonial silver shovels are being broken out once more, branching as a bellwether indicator could be headed back into the tool shed for good. That's because while some of the very largest credit unions such as Navy Federal continue to rapidly expand their branch networks, that often-debated "clicks over bricks" strategy seems to finally be past its tipping point. Why build a branch when, with apologies to Apple, "there's an app for that?"
While that evolution continues, one trend that's clear is how branches are changing, becoming less about transactions and more about consultation, problem resolution and sales. Interaction is bigger, footprints are smaller.
Constant Debate
The retail outlets of financial institutions are being swept up in the same trends affecting other companies. At one recent meeting, for instance, James Barker of American Airlines told financial institutions that how physical design of its facilities in airports aligns with technology is the constant subject of "big debate" within AA.
"We have an industrial engineering group that is looking at flows," he said. "We want to remove stanchions and have an open space format, especially in Chicago, that allow our customers to flow forward and then move out. In DFW, we shaped our self-service machines to be in a 'U', so as people come from different doorways they can immediately move forward to activate their bag tag...We are trying to keep that kind of design in airports as we implement new products. Space is always a constraint, but you have to keep in mind the flow of the customer."
One other note from Barker: Credit unions have built their model on lower fees, but fees have also been unavoidable over the past four years as CUs struggled to keep not-for-profit from becoming non-profit, while also expecting more owners in the co-op to carry their share. Few companies know more about fees than airlines, where the price of a ticket is just a starting point.
One Approach To Fees
"The fare has become to a point that it's almost non-moveable," Barker observed, a sentiment CUs will recognize as quite similar to loan pricing. "People will make a decision on a fare based on $10; we've seen that. As airlines have struggled with the raising of fare prices, the bag charges and the seat charges have come about. The majority of customers are looking at what is the lowest fare... It becomes more a la carte. I know a lot of customers have said, 'Yeah, that's still not right.' But it's the direction many airlines have chosen to follow, which is based on your preference. Now we're starting to see items being grouped together. We'll sell you the fare, and then sell the seat, for instance. These are being tested to see how they perform."
Frank J. Diekmann can be reached at
