On January 1, 2017, the world changed for credit unions. At least for credit unions serious about Business Banking. In place of a fixed percentage of assets, a cap based on net worth (in other words, tied to the credit union’s ability to absorb lending risk) was implemented. Prior to January 1, NCUA waiver delays resulted in the loss of many good loan deals (and sometimes business clients). In place of the waivers, credit unions now must have sound lending policies, and are judged on how well they follow their policies.
The new NCUA rules create tremendous growth opportunities for credit unions. The best small business clients can contribute 5-10 times the profitability of an individual consumer, and business clients expect to pay extra for time savings and banking advice. However, their decision criteria for selecting a banking partner is different, and requires a radical change in how credit unions think about their service and pricing models. As regulations started to loosen in the late 1990s, credit unions with excess lending capacity saw business loans as a vehicle to produce better returns than they were getting with traditional investments. However, because of the lengthy delays in approvals, and lack of competitive deposit products and merchant services, some credit unions became the “lender of last resort” and many sizeable portfolios were written down or written off altogether when these less desirable, single product borrowers defaulted.
Traditionally, credit union business banking programs have focused primarily on the lending side, but deposits and merchant services account for nearly 80% of small business banking profits, vs only 22% for loans (see chart, Oliver Wyman, 2011). Rates and fee pricing are lower priorities for businesses than having tools to accept payments, access to working capital, ease of making ACH and wire payments, and sound banking advice.
To build a solid, profitable, and sustainable business banking offering, credit unions need to employ people, process, and technology along with competitive products.
Experienced Business Bankers- Forbes describes a small business as “one that does not have a CFO”. This role often belongs to the business owner. A key part of the value of the banking relationship is the ability to get solid financial advice. That takes experienced business bankers. Not just lenders, but staff with experience in deposits, payments, and operations.
Commercial Deposits- Business customers have used community banks or larger banks in the past, and expect a broad variety of deposit offerings. Along with traditional checking, savings, and IRA accounts, they expect their banking partner to offer limits and controls on who can transact business with the CU on behalf of the business client, based on their role with the firm. Banks have offered automated sweeping of excess balances from operating accounts to high-yield accounts for over 20 years. Positive pay (a feature that allows the business to view and approve their checks before they are paid) can help them avoid check fraud losses. And analysis accounts that reward the business client for the overall relationship help attract and retain the most profitable business clients.
Business Services- The most important banking function for many businesses is enabling them to take payments for their products and services. Roughly 30% of small business banking profits are from payments-merchant card payment processing and remote capture and transmission of check images.
Business Online Banking/Mobile/Cash Management- The most valuable commodity for a business owner is time. The right set of capabilities can save your business clients valuable time transacting their banking business, and neutralize the huge brick and mortar advantages of the big banks. Most banks now put the ability to send wires and ACH originations and payments, pay bills and control card limits in their business client’s home office or even in the palm of their hand.
Commercial Lending- Along with more traditional forms of business credit such as term loans, business credit cards and vehicle loans, many businesses need more sophisticated lending products. SBA loans create great value for both clients and the lender, allowing businesses the capital they need to grow and expand, with government guarantees protecting the lender if they default. Loans with variable payment schedules tied to seasonal cash flows, flexible collateral arrangements and commercial construction loans allow the credit union to serve as a “one stop shop” for most of their business clients.
Security- Small businesses are frequently the target of fraud, sometime from their own employees. They expect a banking partner that has the expertise and technology to protect them from cyberattacks, check and payments fraud, and embezzlement.
And finally, speed. Efficient processes and tools for application processing, credit review and funding will help you offer business clients the same amazing service experience credit unions are known for with their consumer members.
Even after credit unions hire experienced business bankers and set up policies and processes, technology often becomes the primary barrier to success. Most credit unions run on core processing systems designed in the 1980s, long before credit unions were allowed to offer business banking. Many offer online banking platforms that serve the needs of consumers well, but lack essential cash management and business functionality.
Credit union IT teams and traditional credit union technology vendors often lack familiarity with business banking, banking regulations and the third-party systems that help serve business banking operations, and their business clients. Choosing the right solutions that will integrate with your current environment and fit your budget can be difficult and risky. A detailed strategy with clear requirements, budgets and timelines will go a long way toward mitigating the risks involved in complex technology decisions.
Enlisting outside advisors with experience in helping credit unions develop and execute the right technology strategy to enable their business services program can go a long way towards minimizing the risk and disruption of a complex technology selection and deployment.
At Arriba Advisors, our partners have over 25 years combined experience in assessing the business banking technology needs of credit unions, and helping them evaluate, select and contract for the right technologies at the right cost of ownership. Feel free to contact us for a free business banking technology market overview.
George McGourty- Originally from Boston and based in Tampa, George has spent his entire 30-year career helping financial institutions evaluate, select, and implement enterprise technologies. He has held senior sales and executive leadership positions with Fiserv, FIS, CSI, Deluxe and Open Solutions as well as co-founding an IT services firm that was later acquired by a Fortune 1000 technology company.
George co-founded Arriba Advisors to help community financial institutions understand and evaluate their technology options, and gain the most value from their technology investments. He is an accomplished negotiator, having personally negotiated over 1,000 technology and services contracts while sitting on the vendor side of the table.
Tom Russell- A native of Miami, Florida, Tom has spent the past twenty years helping financial institutions navigate complex technology and professional services decisions to create efficiencies and gain competitive advantage. Tom has held senior sales roles at TWS Systems, Open Solutions, and Fiserv, managing complex enterprise sales valued up to $25M.
In his role as co-founder and partner at Arriba Advisors, Tom helps our clients understand the technology options available in the market, and how to match their needs and budget to secure the right solution at the right cost of ownership, while identifying and managing the risks inherent in a complex technology purchase.
Back by popular demand…
Integra Client Conference & Training Seminar 2016
Full Conference: $249 per Institution
Events Only (Perfect For Guest): $99
More to follow as the dates approach...
We couldn't do it without you! We're celebrating the Holidays with Santa, as another successful year, 2014 comes to a close. We are reminded once again, our greatest achievement is the relationships we have developed over the years with you, our customers, our partners, our employees and our friends, of which most are synonymous. Thank you!
Please enjoy a relaxing, peaceful and safe holiday season and don't forget to celebrate like Santa!
Seasons Greetings from Integra Business Systems, Inc.
Integra Business Systems, Inc. Professional Services Group (PSG) teamed up with the Support Group (SG) to challenge a team made up of the Development Group (DG) and last but not least, a team made up of the Implementation Group (IG) to participate in a canned/boxed good sculpture challenge.
The challenge was created by Christie Russell, Manager of the Professional Services Group to help support an upcoming event by the Feed the Bay Charitable Foundation, of which she is actively involved.
The Feed the Bay 2014 Event is coming on 3/23. This event is used to stock up on food for many homeless and food pantry organizations around the Tampa Bay area.
The challenge to Integra employees to bring some canned goods and then each team prepared a sculpture with the canned goods received. The sculptures were built in the offices of the various teams and are pictured here.
Sculptures needed to be completed by 1 PM on March 21st and were to be delivered to Feed the Bay on March 23rd.
Dolly has escaped her captor(s)? and has been seen partying with known revelers in MA recently. It remains uncertain how Dolly managed to escape. With some degree of certainty we can report Dolly has been receiving daily massages and Botox injections which has produced some amazing results best described as artificial inflation. Dolly was last reported to be seen heading south...
Recently, we asked Dolly's kidnappers for the terms of her release and return safely to Integra. It turns out Dolly has some terms of her own. It seems though her kidnappers, too, are concerned about her getting plenty of attention and exposure to world travels. Our designated world traveler, Abby would probably be willing to take Dolly with her on her travels. Abby's been to Cancun, Costa Rica, Puerto Rico, Ireland, Scotland, France, Australia and New Zealand. She is planning trips to South America and St. Lucia. Dolly could certainly enjoy some spectacular sites. The only problem would be whether Abby had room for Dolly among all her other stuff including dancing shoes, rubber duckie, People magazines, unopened workout videos, hotel property to include towels, lotions, cue tips, mouthwash, pens, and stationary...
I think I really just want to return to FL. At least for awhile. I am not demanding anything much just some time with you all, my adopted family. I am not sure if you heard about the death of my grandmother' and namesake's father recently. It made me very sad. (see below). So I was named after Dolly Parton too!
If I can find a way back to Integra, will someone there be able to take me with them when they go on trips? I really do enjoy that, and have been doing that with the people I stay with. Yes, the actual travel is awkward, folded and sometimes pulled at when in a suitcase by what is called a TSA agent. But I did find my real sister in New Orleans during one of those trips, and met a very nice companion, Ziggy. Did you get my other photos?
I have heard of something called C.O.D., maybe I can use that to return, would that be OK? Us sheep are not good with initials after BaaBaa.
Yours truly, Dolly
LONDON -- Keith Campbell, a prominent biologist who worked on cloning Dolly the sheep, has died at 58, the University of Nottingham said Thursday. Campbell, who had worked on animal improvement and cloning since 1999, died Oct. 5, university spokesman Tim Utton said. He did not specify the cause, only saying that Campbell had worked at the university until his death. Campbell began researching animal cloning at the Roslin Institute near Edinburgh in 1991. The experiments led to the birth in 1996 of Dolly the sheep, the first mammal to be cloned from an adult cell. The sheep was named after singer Dolly Parton. Researchers at the time said that the sheep was created from a mammary gland cell, and that Parton offered an excellent example.
I just walked into the office, albeit reluctantly, on a gorgeous made to order day in the middle of December, here in the Tampa Bay area. I looked wistfully over at my new wheels, (cycling is my hobby), then down at my feet. I happened to be wearing flip-flops and shorts. You see, I’m the chief cook and bottle washer for a software factory. I like to think we make stuff and we do, Made in America, no off-shoring. No need for a safety hat, goggles or for that matter shoes. In the world of brainiacs and geekdom, extremely causal beats clothing optional, so t-shirts, shorts and sandals serve us well.
I don’t know about you, but doesn’t feel like every year the holiday season and Christmas comes earlier; like Santa and his reindeer are out trick-or-treating? Maybe it is because of technology. We’re on Internet time. I think my time-slipping is lack of concentration. All these distractions like 12 smart phones a ring-a-ding-dinging, 11 tablets a play-play-playing, both are tweet-tweet-tweeting… and what’s with these Angry Birds? It’s hard to focus on one thing for too long when you’re running in so many directions. Time flies!
I suppose I’m just the Grinch. Each year it gets harder for me to get all excited about the holiday season. Maybe it’s because it doesn’t snow in the Tampa Bay area. Christmases in Wisconsin was certainly different. I used to live there. No regrets. Now it’s a nice place to visit.
I need to remind myself. Tis’ the season! Time we are afforded to share with loved ones. So I’m going to take the time. I hope you can too.