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02/18/2008

Virgin is looking to make Canadian banking cool!

By Tim McAlpine

According to the Financial Post, Virgin is planning to bring its beloved mega brand to the Canadian banking space in the not-too-distant future. Virgin has been operating in the cellphone business in Canada for a few years now. Richard Branson, the billionaire founder and chairman of Virgin Group Ltd., says:

"All the problems and frustrations that people find in the mobile phone industry, they find in the banking industry here. The banking industry is ripe for a strong competitor here."

What does this mean?

Virgin is one of the world's most popular brands and has an uncanny ability to transcend categories.
Virgin offer a range of banking services including peer-to-peer loans in the U.S. and personal banking services including credit cards and mortgages in the U.K., South Africa and Australia. They will bring these services to Canada.
Virgin will employ its amazing marketing machine to disrupt the conservative Canadian retail banking space.

What can your credit union do?

Every new player in the space is going to dilute market share, but honestly, I think Virgin will mostly hurt the big banks by drawing attention to their weaknesses. This may actually create additional opportunities for credit unions to differentiate themselves in the wake of this increased attention.

For credit unions, now is the time to:

Stop acting like just another bank.
Live and breathe a highly differentiated brand.
Create game-changing products and services.
Deepen member relationships.

This is the same stuff that I've been preaching for the past decade. Now might be a good time to get started.

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02/13/2008

P2P lending in Canada, eh? IOU Central launches.

By Tim McAlpine

Much like William Azaroff, I have been looking longingly South of the border at all of the new peer-to-peer lending services that Canadians can't utilize. Well, I can now personally test the Canadian P2P waters with a new service that launched in Canada this week—IOU Central.

I immediately setup an account, linked it to my credit union account and I am in the lending business. The setup process was dead easy, while still offering a number of security layers including e-mail verification and bank account verification.

It felt a little odd to offer up my social security number and my bank account number to a brand new entity that I only learned about hours ago. This will be the hardest thing for most people to get over.

I have only looked at the lending side of things so far. There are about a dozen people looking for loans—everything from debt consolidation to new appliances to funding a short film. The interface is clean and simple and you can easily finance a portion of someone's loan. I am looking forward to experimenting.

It's too bad that this didn't launch with a credit union affiliation like ZOPA did in the US. If it did have a credit union affiliation, I would feel more like I just setup "Tim's Credit Union" rather than the "Bank of Tim."

I was amazed at how fast I was able to setup my account and the fact that I did not need to leave my chair to do so. Credit union leaders need to take note and take action while the bankers stick to denial.

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02/05/2008

This P2P song sounds so familiar.

By Tim McAlpine

My credit union and banking RSS feeds are full of peer-to-peer lending articles. It is early days and everyone is sussing out where P2P lending fits into the financial services landscape. If this topic is new to you, here's a Wikipedia definition:

Person-to-person lending or peer-to-peer lending is lending done between individuals circumventing the bank's traditional role in this process.

Community lending had the advantage that people's interpersonal relationships fostered increased fiscal responsibility. The risk was that without the benefit of diversification, when something went awry the entire community could suffer.

Lending through banks has benefited from scale and diversity. By pooling the available money supply and lending it out again, the impact of any one default would be trivial in light of the timely payment of the vast majority of the notes. The downside to this model is that it has introduced greater transaction overhead and removed community loyalty from the equation.

New ventures are seeking to blend traditional practices with new scale economies via online marketplaces. The marketplace serves many functions. Most notably it facilitates bringing borrowers and lenders together. Furthermore, it simplifies what might otherwise be a cumbersome process to properly document and service the resulting loans.

It is hoped not only that these new markets will be more efficient by removing the bank as middleman, but that factors leading to default can be mitigated by reintroducing a social component to the mix.

I have been following a number of P2P discussions with great interest. Between the arrival of Zopa in six US credit unions, the growing number of P2P players entering the North American lending space and the disingenous marketing tactics of some of these players, there is a forboding feeling that P2P lending is not a flash in the pan.

How does P2P lending affect your credit union? I believe it will have a huge impact in the not-too-distant future. You need to understand it and develop strategies to embrace it. It should not be ignored.

This feels like déjà vu. The emergence of P2P lending is eerily reminiscent of the early peer-to-peer music sharing days. Out of nowhere, a very young Shawn Fanning introduced Napster and the recording industry was changed forever.

Replace the young Shawn Fanning with the older, wiser and richer, Richard Branson, replace music with money and replace illegal with above board and you get the picture of the potential impact that P2P lending will have in the financial services world.

The music industry's answer was to use the law to take down Napster, use digital rights management to throttle the inevitable tidal wave of file sharing and litigate against the common man in hopes of striking fear into the general public.

This took the music industry's eye off the ball as legitimate players like Apple's iTunes, Rhapsody, eMusic and Amazon swept in to fill the void. The ultimate victor in this bloodbath is the consumer with ease of use and instantly available legitimate access to music. Mega record stores are soon to be a thing of the past.

What can we learn from this parallel musical universe? Where will your credit union be after the P2P lending music gets cranked up to 10?

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10/22/2007

The dinosaurs didn't have broadband, what's your credit union's excuse?

By Tim McAlpine

Many of the credit union technocrats that follow the blog-o-sphere will find this post old news. However, many top-ranking credit union executives seem sadly unaware of the impending onslaught of Web 2.0 financial service offerings quickly making what credit unions offer seem almost prehistoric.

While credit unions are busy guarding their market-share and fiercely competing against other credit unions and banks, there is a new breed of financial service offerings out there that may well pass the credit union movement by.

From the online free Personal Financial Management (PFMs) services like Wesabe, Mint and Jwaala to alternative lending services like Prosper, Zopa, Lending Club and Bill Me Later, these start-ups are for real and heavily funded by venture capital. Unlike their dot-com predecessors that dot-bombed, these new ventures have timing on their side. The Internet has matured to a place where broadband is the norm and the general public is comfortable doing business online.

And, with legitimate, innovative (and free) services that make sense and actually work, this new crop of financial services represent a huge threat to credit unions or a huge opportunity. The choice is yours. Here are 12 just to get your feet wet.

They have great names and branding, great websites and many of these services are using the social web to build like-minded communities that out-community most credit unions. So what is a credit union to do?

First of all, be aware of what is happening in the world beyond your branch doors and your city limits. The best thing you can do is get educated on the myriad of new services popping up monthly. Here are three blogs to follow. All three follow this space very closely.
Stop trying to control your members online activities—they have Google and they are smarter than you give them credit for! The first reaction of your peers is to try to shield members from third-party services. The winners will be those credit unions that figure out how to work with these companies to provide the best value for their members. Make the calls and see how you can partner.
Think like a start-up. It's time to shed the best practices mentality and stop living in the past. Pull up your socks and start innovating and aligning your credit union with innovators.
Don't think this is just the realm of the young person. Did you know the average age of YouTube's participating members is over 45 years old? Everyone is getting more and more comfortable with technology.

These are exciting times. At the recent Partnership Symposium at FORUM Solutions, Robbie Wright asked an interesting question in a session on lending trends by Doug True. Robbie asked, "These start-ups seem so able to innovate compared to credit unions. What's stopping our credit unions from coming up with these ideas?"

Doug's response said it all, "Absolutely nothing."

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Virgin is looking to make Canadian banking cool!

P2P lending in Canada, eh? IOU Central launches.

This P2P song sounds so familiar.

The dinosaurs didn't have broadband, what's your credit union's excuse?

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