LAS VEGAS–In what he said will be among his last remarks to credit unions, retiring SECU CEO Jim Blaine stressed the basics he believes every credit union needs to return to.
Speaking to the Directors and CEOs Leadership Convention here, Blaine strongly urged credit unions to not fall victim to complacency or forget where they came from, lest they suffer their own “Kodak moment.”
In this case, Blaine’s reference wasn’t to that company’s once famous tagline, but instead to that company’s eventual fate.
“If this is my last lecture, my funeral, then what is it I should tell you about?” he said, before answering his own question and saying he would speak to basics that are “very, very fundamental.
“And you might think they are too fundamental. But at points in life we get confused over what’s up and what’s down, and at some point we forget what our lives are all about,” Blaine said. “I think the same thing is happening in credit unions, and we need to step back from regulation and compliance and mobile and MIllennials and take a look at the core ideas, and see if we are in trouble and, if we are, how we might rectify that situation.”
Blaine reminded his audience that the Kodak logo once “owned the world of photography in ancient times. It was as popular in China as it was in Indiana…Around 1990, somebody came up with the idea of the digital camera and Kodak did not change to meet that technology. What you may not know is Kodak owned most of the patents on digital cameras. The question has always been why did Kodak go down? Is it that management did not see it coming or did they see it coming and do nothing about it? I’m not sure that’s ever been fully resolved. But the results are clear.”
CU 'Kodak Moment'
The issue that concerns him, said Blaine, is whether it’s credit unions that are now coming to face their own Kodak moment.
“Whether or not we are, we’re getting ready to find out that the game has changed,” he said. “Ten years ago at this conference I held up three things that you can run a really good credit union with, and that would allow you to compete with a Bank of America: a checkbook, a credit card, and a telephone. Now we have arrived at the time when this little instrument, the mobile phone, is here. Apple, Walmart, Android—they are all trying to get in between you and your members’ transactions. You can see what’s coming with a lot of players trying to get into the finance business.”
Regardless of the technology, Blaine said when consumers are polled on what they want most from a provider, the answers are nearly always the same: convenience (45%), price (15%), service (15%), and the fourth, which Blaine said is often overlooked: consistency (25%).
Blaine, who has been CEO of what is now the second-largest credit union in the world, asked his audience what it is they believe credit unions do.
“My answer is we buy and sell money on behalf of our members. The cooperative model was created to be an alternative to the loan shark. People got together and said we need to unite in order to go to the financial markets. The modern credit union model is the same as when we started,” he said. “The risk we’ve started to take on as the credit union is becoming something separate and distinct from its membership. The credit union is becoming an entity that is independent from its members. In some cases, it’s seen even as an adversary, and often we’re seen as an intermediary. What’s happening to intermediaries? The intermediary always adds cost, so we are always looking to get rid of the intermediary. We could be taken out. It’s happened in every other segment.”
Blaine said there are three simple rules of survival every CU must remember: Control the point of sale, control the point of sale, and control the point of sale.
“Don’t let anybody get in between you and your members. That’s pretty hard to do,” he said. “Many of you are indirect auto lenders: who is making the loan to the member? You might think you are, but the auto dealer is controlling the deal and you’re just bidding on the deal. They aren’t obligated to give it to you just because you have the lowest price. And this is happening in mortgages and online with Ally Bank and LendingTree and others. If you can’t control the point of sale, you’ve got to figure something else out.”
Blaine, whose credit union does not do indirect lending or risk-based pricing, told credit unions that if they are not “quicker, better or cheaper, you are wasting your time. You don’t need 18 checking accounts; your tellers can’t keep up. They may be able to keep up with three. But if you have just one, they’ll understand that.”
Same Advantage
Whether a credit union is as large as SECU, at nearly $34 billion, or below $1 million in assets, all share the same, single, sustainable competitive advantage, said Blaine.
“Trust. That’s all you got. What doesn’t Walmart have? They’re not attached to their neighborhoods anymore,” Blaine said. “But trust is a slippery slope. Distrust is the other side. You’re either have one or the other with your members. Trust was the original model. We got together with our peers, whom we trusted, in the labor union or post office or factory, and decided to loan money to one another. We need to return to that model.”
In keeping with his theme of simplicity, Blaine pointed to the five guiding principles outlined by Herb Kelleher, the founder of Southwest Airlines:
- Keep costs down
- Focus on the customer
- Keep employees happy
- Keep it simple
- Screw conventional wisdom
“The difference in credit unions is real,” said Blaine, “but it is a problem being different. Simplify what you do and get your costs down even further.”
Blaine urged all credit unions to be socially responsible, to be reliable, and to prove they are worthy of members’ trust.
“Your mission going forward is to do the right thing,” he said.