An amazing talk with Dr.Florian Moser from the German Bank FIDOR

On Feb 8th , 2016 I traveled to Munich Germany to meet with Dr.Florian Moser of FIDOR. Recently I reconnected with Florian during my work on my upcoming book. I thought it would be good to share the transcript of the show. Find the original podcast of the show here 

BIGcast w/ Florian Moser Fidor. :

John Best:  Hello everyone, and greetings from Munich, Germany. I am at the headquarters of Fidor bank in Munich and I have the great pleasure of speaking with Dr. Florian Moser, the Head of Products and Markets here at Fidor Bank. Welcome, Florian.

Florian Moser: It is great to have you here. Thank you for coming the long way out.

John Best: It was a small vacation and a great time. I’ve been fascinated by Fidor’s rise and what I want my listeners to understand is that we think a lot about America from a credit union perspective, and I have a lot of folks who are European and listen to this from a credit union space, as well, is that there are other people doing really exciting things out there. I discovered Fidor when I speaking to a big bank in Kansas City. One of the folks there brought up Fidor. Then I was speaking somewhere else and your name came up again. After that I dug in and I was just fascinated by what I found. So, before I get into my fascination, why don’t you give us a little background on yourself and Fidor?

 

Florian Moser: I am personally a customer at Fidor for five years now. I joined Fidor as an employee in 2014, so almost two years ago. I am responsible for product development and all of our business relationships and partnerships. We have a very open approach. We definitely have our own products and we open up our account to various parties. We have a lot of partnerships, too.

Fidor Bank is a fully regulated 100% digital bank in Germany. We have currently about 300,000 people in the community and about 110,000 bank customers. We were founded as a financial community in 2008, meaning at this time the founders started a financial community which is a place for people to talk about money in a transparent way due to the financial crisis and to speak about how a bank should look in the future. The community was able to speak transparently about the financial issues. Just imagine going into a banking branch and asking the person in front of you, ‘Are you new here? What products are you buying? How do you like the branch? How do you like the bank?’

John Best:That doesn't happen, yeah.

Florian Moser: That is exactly what we want to do. So, building a bank around the customers, we ourselves understand that it is 100% customer centric. 100% customer centric means living the way the customer lives. That means being 100% digital. So, everything that we need or want to do needs to be 100% straight through processes. What we offer customers is current account with a credit card, with savings or loans, anything you need. The nice thing is that we open our technology in order to integrate a lot of third parties, as well. We don’t always have the best product out on our own but we include, for example, partners that enable fixed trading or global money transfer. We have partners that enable crowd finance, P2P lending. We have our own P2P lending function but we also partner with another company. It’s a 100% digital bank account and most of the functionalities are processable within 60 seconds. So, within 60 seconds you do the configuration, you select the product that you want to have and it is instantly processed in house. 

John Best: It’s right there. You have it?

Florian Moser: Yes, there is no paperwork and nothing to do afterwards. 100% digital. That is what we think makes us unique because there is a lot of direct banks that have branches but still have a lot of paperwork. Usually the only paperwork that our customer sees is their credit card.

 

John Best: So, a couple points. Really good points. One, you mentioned before that you’re the head of products and development and that you guys have this open system. So, myself as a developer, if I wanted to, I could connect to the Fidor system and not call you, you and I have never spoken before other than over the phone, and I showed up with my Echo already talking to Fidor. That is insane in America. I would usually have to call 62 people and give blood and some other things in order to get that kind of connectivity, but yet you’re saying, hey, we want people to connect to us. When you do connect that becomes a product and if I wanted to turn something like this into a product I would go through the techs group and just turn it one. It becomes sort of an app store connected to the Fidor engine. That’s one of the fascinating things.

The other fascinating thing to me was that you mentioned you had 300,000 community members and 110,000 bank members. Are all 110,000 also part of the community?

Florian Moser: Yes.

John Best: So this is just a constant on boarding process out of this community.

Florian Moser: Definitely. Due to the fact that the community was first we definitely have more community users, but that is definitely one of our strategies to acquire customers. It is easier to acquire through the community. We have a goal to have a 100% digital customer journey from on boarding to how they get connected to the banks from first contact to the bank in the community, chatting with other customers, marking product suggestions, product rating. Then, if you see the value of the bank then you become bank customers.

John Best: Right. So in the community itself, is it a whole bunch of Fidor guys in there solving things, or is the community together…

Florian Moser: It is self regulated, we call it, so definitely it’s another kind of customer service. The idea is really to have P2P. Of course there’s our P2P customer service. Our P2P is very active. We have four to five moderators that are more or less…

John Best: Yeah, to make sure bad things aren’t going on

Florian Moser: But in the end the customers really make peer to peer regulations. If somebody, for example, raises a question usually within five or six minutes he has the first answer. The average question gets seven answers. You can really see within the community that there is a static flow. So it’s really alive. It’s not a dead end.

John Best: Yeah, I described it as Reddit plus a bank. 

Florian Moser:Yeah, people are really connected with us. For example, decreased interest rates for the current account we discussed in advance with our customers. For example, our COO would go to the community or one of us in the community says, ‘due to the market we have to decrease the interest rates from .05% to .03%. Then people make suggestions and ask is this okay. What is your expectation. For example, at the end of last year we were announcing a change from .05% to .01% and we really had over the year an intensive discussion with the community. In the end we decreased it just to .025%.

John Best:So, the community actually affected how you run the business.

Florian Moser: Partly, yes.

John Best: And they have the opportunity to speak to that. And, you know, I’m sure at this point people are figuring out why I’m here. It’s a lot like credit union behavior. It feels like coop.

Florian Moster: Definitely, cooperation. Cooperation is the key to Fidor bank. So, our founder is always saying you have to treat the customers like a co-manager. Not like a child and say this is how we should do it. You need to treat them on eye level. It’s a very important part.

John Best: Yeah, that was just fascinating to me that you guys wanted to open up your API in that fashion. Also, that you have this community that is dedicated to financial literacy. That was another real theme that I saw as I moved through this. As a matter of fact, this was a quote from one of your folks. I’m assuming you know Stefan Weiß?

Florian Moser: Our Head of API?

John Best: Yeah, head of API at Fidor Tech which is part of Fidor Bank here in the campus. And we’re at this cool campus. There’s this awesome board outside that is showing what looks to me to be all of the statistics of Fidor

Florian Moser: Our dashboard

John Best: Just constantly, wherever you can see it. But, this quote from Steven is, “Another way is that we white label and license our technology that will be used by other banks to set up their own brand. This is how we will come through and rule the world someday.”

So, even the idea that you guys are okay with sharing you tech outside of these four walls. I know that you have plans to move to the US and you already implemented on the UK.

Florian Moser: Yeah, in the middle of last year we launched a debit card in the UK. Customer acquisition is good. Compared to the price we invested in the UK it is famously low compared to other banks that recently started in the UK.

John Best: I have a researcher who I asked to research Fidor and she came back at the end of her research and told me that she joined. She bought into it immediately. So, I think the value proposition is there. When I look at what you’re doing compared to other digital banks that have tried this, you know, I think of ING. That’s the one that comes to mind. I don’t feel like they connected the concept of community in their space. I don’t think they knew how to engage in a digital world. So, I think maybe that’s kind of the secret sauce for you guys.

Florian Moser: The one thing is that you can digitalize processes and you can leave the customer on its own. And the other thing is really to include the customer to make them a co-manager and to bring them into our processes. In product development, for example, we regularly include customers for beta tests.

John Best: Right in the community?

Florian Moser:Yeah. For example, when we launch a new card product, we picked those customers from the community that were active in the card groups and have a high Karma (Fidor Communiy activity measure) where we see these customers are really loyal, these customers know what they talk about. Together with the customers we found out things that even our processor didn’t know.

John Best:Right. Because there’s behaviors and things that can only be discovered en masse and just sort of crowd-funding it.

Florian Moser: Yeah. And it’s maximal effective. I don’t think 150 customers sent them test cards, send them out into the world, let them test any consolation for the card, then the feedback comes back immediately.

John Best:Wow! Yeah, that’s just amazing to me, in the sense of when you guys are looking out there to decide on products, you have a built-in community. So many folks just put things out there blind and hope it’s going to work, you know?

Florian Moser:Yeah. It’s very much a cultural issue, so one thing is to put a community in place but you really have to lift this community approach. So the community is really at the heart of any of our activities, or should be. And so anything that is not really related to the community, it doesn’t make sense in the community, it needs to be crushed.

John Best:Well, it’s a great point because I think that if you weren’t doing the community right, and I would say it’s cultural but I would call it a digital culture, in the sense that they would see through that. They would know right away you’re being disingenuine.

Florian Moser:Yeah. Or if you just use the community for pushing products.

John Best:Yeah, if that’s all it was, nobody would be interested.

Florian Moser:No.

John Best:And I think the fact that you let them talk you out of your rate change, and maybe that’s not a good word to use, you let them advise you on your rate change.

Florian Moser:Yeah, we include them.

John Best:You included them.

Florian Moser: And we explained the customer why we would change the rate. We don’t just change them. We explain them, okay, we have to change the interest rates because the market situation is different.” On the other side, for example, we also decrease the interest rates on the overdraft so that the customers really see, okay, it’s not all about maximizing revenues, but that they also get something back from this to grow.

John Best: Surely, yeah. And that might have been somebody said, I would’ve been fine if you decrease the rate, but maybe if you give us a benefit here, that would be okay with us.

Florian Moser:Yeah. And that’s what feedback is, so of course people are not happy, we decrease the interest rates, but a lot of people in this community talked and said, okay, I’m not Fidor customers because of the price because I’m a Fidor customer because of the full package.

John Best:The service, yeah.

Florian Moser:Yeah. And that’s the feedback that you never ever get from customers. No customer calls you on the hotline and says you’re a good bank. But people are used to have this kind of conversation connecting bad feedback.

John Best:Online.

Florian Moser:Yeah, online.

John Best: Yeah. And, you know, when I think about it, I feel like in America more and more people are moving that way because, unfortunately, in America, and I don’t know about Germany, but we’ve not focused on financial literacy. And as a result, people are looking for help, you know. I came in here and I speak a little German, enough to read that in the center of your board there was a big circle that before you erased it that said “Gemeinsam mehr Geld” which was “Together more money”. And at first I thought, was that more money for Fidor? But then I looked at the design role and it looked like the giant thing to figure out how to get more money for the member or for the consumer.

Florian Moser: So this is also a good example for combining technology with cultural thing. So in the future we will more and more share the data that we collect on behalf of the customer or through the customer, share this data with the customer to give him more money at the end of month, so to make him really aware of what is happening, how other people behave, so we could use this data on our own and make analysis and enhance our product, what we do. But on the other side, we also share, for example, usually the typical customer has this and this amount of gold, for example the Fidor customer has 20 gram gold in his portfolio, how much do you have, why do people anyhow buy gold. So for example, Fidor customers get €2 bonus per month if they don’t use their credit card at the ATM. So we say, okay, you get this money. We don’t have that much fees. On average, people go this and this, off to the ATM how much, how often do you go, so the goal is really to have more money at the end of the month.

John Best: So it’s interesting, you’re using analytics to really discover who’s being successful in space. I can think of something, for example, it’d be interesting to take a merchant and to say, okay, based on a merchant – I don’t know, call a pizza down the way, Gee, I see that Florian consistently spends 20% less but it looks to me like he’s getting the same product. What does Florian know that I don’t? Oh, it turns out there’s a promo code. Or there’s something that you could share that across community to everybody, or if you bought it this way through this company. You know, it’s that co-op mentality.

Florian Moser: And that’s, for example, we don’t just cooperate with our customers but also wanted to enable cooperation between customers. We have about 8000 SB customers, a small corporate. And whenever these corporates have a unique offer for other Fidor customers, we are happy to share this offer with our original customers, to have a community between retail clients and SB clients, for example.

John Best: Yeah. You now, one of the reasons I’m here is that just so much fits in with the philosophy of BIG and what we’re trying to do with our organization, so very cool stuff. And for those of you who are listening, I encourage you to Google Fidor and, you know, Florian’s been very open, letting me just kind of ask a lot of questions, and one of the main questions that I know folks are going to want to know is, the U.S. And it is that you’re looking at coming, I believe, across the ocean to visit us. And I know you can’t talk about everything, but tell us what you can about…

Florian Moser: We have a partner bank in the U.S. we are working together with, where we put our technology in place. And hopefully very soon, we can announce something either with the Fidor brand, another brand, another business model. So we will be in the U.S.

John Best: Something similar to Simple? Are you aware of Simple?

Florian Moser: Yeah, maybe not the Simple way.

John Best: Yeah, but something where on top of this particular partner...

Florian Moser: Yeah, but the Fidor will be more in backend for the technology part of…

John Best: Got you. Yeah, it’ll be more transparent.

Florian Moser: Yeah.

John Best: Okay, so we’ll close it with this. You’ve been very generous with your time, and I’m so thankful for that. What excites you? You know, I feel like this place is like been really exciting just to come and talk to people who seem to understand, you know, where everything is, fintech-wise, and can speak that language. What excites you that’s out in the financial world right now? What are you guys gearing up for? What’s exciting to you?

Florian Moser: On the one side it’s all about mobile, so I know everybody’s talking mobile, but what we really want to achieve and what I’m excited also from a process side of view, to make really a full mobile bank account, not only – what is it? – channel, but mobile-only with all the stuff that comes with it and not just have a transaction list and have a credit card but everything.

John Best: Yeah, because everybody’s got that.

Florian Moser: Credits, insurance, all the stuff.

John Best: A bank in your pocket.

Florian Moser: Bank in your pocket. Onboarding. Everything. 100% digital, and based on our technology, maybe with partners, and maybe it’s other partners that come into play, but that’s really the challenge also of our first, to make really everything 100% digital mobile, combined with everything that you can use with the mobile. Be it payment. Be it loyalty. Be it artificial intelligence. So we’re ready to make the mobile account not only mobile but intelligent.

John Best: Document imaging.

Florian Moser: Everything, yeah.

John Best: GPS. Beaconing. All the things.

Florian Moser: Bringing everything together, and sooner or later also combining it with the community.

John Best: And will the community guide some of that? Will they guide what that looks like and how that product kind of comes together?

Florian Moser: No. Partly yes. But on the other side, the typical user is not that much into this technology developments.

John Best: So, speaking of typical users and technology developments, one of the things I found interesting, and we’ll close with this, is you’re one of the very few banks actually doing the blockchain and Bitcoin with your partnership with Ripple.

Florian Moser: So we don’t do blockchain, so we enabled our customers.

John Best: You enabled blockchain, correct.

Florian Moser: We enabled blockchain-related clients to realize that this is more like Bitcoin.de, which is one of Europe’s biggest Bitcoin P2P platforms, or Kraken, or also Ripple which is enabled in the current account.

John Best: Kraken. K-R-A-K-E-N. I know of these guys, yeah.

Florian Moser: Yeah, we’re always happy to be the banking partner. On the other side, we are always keen to make things happen. And on the other side, from a tech department, we think about and we’re looking in the direction of using blockchain for a call banking system.

John Best: And we think that faster payments in America, that’s going to be probably something that we see as a matter of fact I think in the podcast that we just did. We talked a lot about that. We talked about the impact of faster payments and how the blockchain will probably be, from a distributed ledger standpoint, the de facto standard at some point, and it seems like you guys are engaging that as well. So I have a question for you. If I applied for a loan with Fidor and I stated my income as Bitcoin, would they freak out or would they just be okay? How would the underwriter react?

Florian Moser: There’s no product yet, but maybe that could be part of storing with them. We are open to everything. Open up to everything.

John Best: You’re open to everything. You know, that’s something we talk about a lot in America. You know, we already have people showing up and saying, I get paid in Bitcoin.

Florian Moser: Yeah, I have no money but I have a lot of Bitcoins.

John Best: Well, and what’s funny about that is everyone assumes if they have Bitcoins, alt-coins, light coins, all of these things, then immediately they’re some sort of criminal. In America anyways, that’s what we think. I don’t know why. I guess it’s the movies, you know. But that’s the sense that we get. And so the idea that, at least, if nothing else, they can be on deposit with you and have value through the Fidor interface I think is a step in the right direction.

Florian Moser: Well, you could think about a simple bank loan on Bitcoin basis.

John Best: Well, absolutely, why not? When you say asset, I assume you mean secure line, secure loan gold. You know, that’s interesting, when you said everybody has this amount of gold, you know?

Florian Moser: Yeah, and people can buy gold, precious metal, and they can gold, platinum, palladium, server, ethics in the account and definitely mix that and put as…

John Best: See, I’m a comic book guy, I want to buy the stuff that Wolverine has running through me, I don’t know if that sell that here. I’ll look around later. Like I said, I really thank you for your time and I’m sure hopefully we’ll hear from you again in the future.

Florian Moser: I hope so too.

John Best: Particularly as you move towards the U.S., I’d love to have you back on the show.

Florian Moser: Thanks for being here.

 

 

AXFI 2017

Thanks to everyone for another amazing year at AXFI. We exceeded the number of people from last year, and the reviews from the groups were great. AXFI 2018 is on the way and we just signed up our first speaker . The amazing Kevin J Anderson will be joining us as our a Keynote to discuss Culture, Business, Creativity, and the Future. Kevin J. Anderson is the author of more than 140 books, 56 of which have appeared on national or international bestseller lists; he has over 23 million copies in print in thirty languages. He has won or been nominated for many awards, including the Nebula, Hugo, Shamus, Scribe, Bram Stoker, Lifeboat to the Stars, SFX Reader’s Choice, Colorado Book Award, and New York Times Notable Book. 

Many thanks to the all of the amazing presenters this year. Manuel Stagars was amazing, Neff Hudson from USAA , and Ted Speaker and noted Data ecologist.

Next years registration is open! Get your early bird rate here

Many thanks to everyone who attended! 

 

 

Walmart Pay- Not an Atomic Bomb, but a Trojan Horse (or a Forceful Nudge)

The brands Walmart and Apple are rarely mentioned in the same breath, although that’s probably a result of typecasting more than consumer behavior. It may also change- at least among payments geeks- now that Walmart has unveiled its own entrant in the mobile wallet wars. Thanks to its sheer scale and reach, any move made by Walmart deserves attention. Still, dubbing this “an atomic bomb dropped on Apple Pay” (as this Forbes article did) seems a pretty big overstatement.

Walmart has wisely focused on an integrated consumer experience, converging in-store and online checkout processes, enabling coupon and gift card redemption and split tenders, and building the payment functionality into its existing widely distributed mobile app. Other details remain in short supply- like the recent Chase Pay announcement, Walmart Pay won’t be widely available until mid-2016- but on first blush Walmart’s approach has far more in common with Starbucks’ app than with Apple Pay.

Like Starbucks, Walmart’s entrant is intended for use solely at the company’s own retail outlets. Again this could prove quite savvy, as it confers far more control over the user experience- it may also be the “secret sauce” that explains why Starbucks is the only player to have achieved scale in mobile payments. But it’s a quite different business opportunity than the one Apple, Samsung et. al. are pursuing.

The Starbuck analogy only carries so far, however. Walmart likes to tout that it comprises nearly 10 percent of all US retail sales, and that 140 million consumers visit its stores each week.  These are very impressive numbers, to be sure, but they represent a vastly different shopping experience than at Starbucks- many of whose patrons visit daily (if not more often), have a standard/repeatable order, and place a premium on the fast in-and-out aspect of their interaction.

Another widely reported aspect of the Walmart announcement is the implication that it reflects a repudiation of the MCX/CurrentC strategy. Representatives of Walmart and the MCX retail consortium have already issued follow-up quotes in an effort to squelch this impression. You’d expect these types of statements regardless of true intent but I have a hard time with the “Walmart undercutting MCX” storyline regardless, for several reasons:

First, in its still ongoing exploration of what it wants to be, MCX has at various times publicly stated that its model could involve consortium members each issuing their own wallet apps leveraging a common backbone. It’s possible that’s precisely what Walmart Pay has done. Technical details haven’t been shared, but it’s clear that Walmart Pay functionality is triggered by QR codes, the same path CurrentC chose (it’s also similar to Starbucks’ approach- although they’ll take pains to point out their app actually uses “enhanced bar codes”).

And if Walmart’s move does prove to be a knockout blow for MCX, I’d hardly call it a sucker punch. The consortium has already incurred more than its share of self-inflicted damage- don’t forget it launched long before Apple Pay, yet has not managed to proceed beyond the pilot stage amid numerous management changes and strategy shifts. With its announced Chase Pay partnership, MCX already seemedto have painted itself into a corner in terms of a standalone market solution but could declare partial victory for the reach the alliance brought its members. If anything, Walmart’s could become more the final push off the cliff for MCX.

Finally, bear in mind the initial impetus for Walmart’s championing of MCX (it came from the Treasury group, after all) was a fervent desire to reduce acceptance cost. In fact, some believed the consortium was largely a “stalking horse” built to gain leverage with the card networks in interchange negotiations.  MCX hasn’t delivered measurable results on that front, and one could argue it’s where Walmart lost patience and decided to forge this new path. Maybe its shopping experience doesn’t map perfectly to Starbucks’, but with a reported 22 million users of its mobile app, Walmart can build usage of its payment feature with an accept-all-tenders approach (CurrentC has spent most of its existence back-burnering card acceptance in hopes of jumping straight to the ACH endgame), then gradually offering incentives to steer consumers to low-cost-routing (see PayPal for a best practice on this front).

None of this is going to shift the payments world overnight, but it sure is fun to watch the chess pieces move and to strategize on how credit unions can best capitalize on these changing dynamics and allegiances. 

 

The brands Walmart and Apple are rarely mentioned in the same breath, although that’s probably a result of typecasting more than consumer behavior. It may also change- at least among payments geeks- now that Walmart has unveiled its own entrant in the mobile wallet wars. Thanks to its sheer scale and reach, any move made by Walmart deserves attention. Still, dubbing this “an atomic bomb dropped on Apple Pay” (as this Forbes article did) seems a pretty big overstatement.

Walmart has wisely focused on an integrated consumer experience, converging in-store and online checkout processes, enabling coupon and gift card redemption and split tenders, and building the payment functionality into its existing widely distributed mobile app. Other details remain in short supply- like the recent Chase Pay announcement, Walmart Pay won’t be widely available until mid-2016- but on first blush Walmart’s approach has far more in common with Starbucks’ app than with Apple Pay.

Like Starbucks, Walmart’s entrant is intended for use solely at the company’s own retail outlets. Again this could prove quite savvy, as it confers far more control over the user experience- it may also be the “secret sauce” that explains why Starbucks is the only player to have achieved scale in mobile payments. But it’s a quite different business opportunity than the one Apple, Samsung et. al. are pursuing.

The Starbuck analogy only carries so far, however. Walmart likes to tout that it comprises nearly 10 percent of all US retail sales, and that 140 million consumers visit its stores each week.  These are very impressive numbers, to be sure, but they represent a vastly different shopping experience than at Starbucks- many of whose patrons visit daily (if not more often), have a standard/repeatable order, and place a premium on the fast in-and-out aspect of their interaction.

Another widely reported aspect of the Walmart announcement is the implication that it reflects a repudiation of the MCX/CurrentC strategy. Representatives of Walmart and the MCX retail consortium have already issued follow-up quotes in an effort to squelch this impression. You’d expect these types of statements regardless of true intent but I have a hard time with the “Walmart undercutting MCX” storyline regardless, for several reasons:

First, in its still ongoing exploration of what it wants to be, MCX has at various times publicly stated that its model could involve consortium members each issuing their own wallet apps leveraging a common backbone. It’s possible that’s precisely what Walmart Pay has done. Technical details haven’t been shared, but it’s clear that Walmart Pay functionality is triggered by QR codes, the same path CurrentC chose (it’s also similar to Starbucks’ approach- although they’ll take pains to point out their app actually uses “enhanced bar codes”).

And if Walmart’s move does prove to be a knockout blow for MCX, I’d hardly call it a sucker punch. The consortium has already incurred more than its share of self-inflicted damage- don’t forget it launched long before Apple Pay, yet has not managed to proceed beyond the pilot stage amid numerous management changes and strategy shifts. With its announced Chase Pay partnership, MCX already seemedto have painted itself into a corner in terms of a standalone market solution but could declare partial victory for the reach the alliance brought its members. If anything, Walmart’s could become more the final push off the cliff for MCX.

Finally, bear in mind the initial impetus for Walmart’s championing of MCX (it came from the Treasury group, after all) was a fervent desire to reduce acceptance cost. In fact, some believed the consortium was largely a “stalking horse” built to gain leverage with the card networks in interchange negotiations.  MCX hasn’t delivered measurable results on that front, and one could argue it’s where Walmart lost patience and decided to forge this new path. Maybe its shopping experience doesn’t map perfectly to Starbucks’, but with a reported 22 million users of its mobile app, Walmart can build usage of its payment feature with an accept-all-tenders approach (CurrentC has spent most of its existence back-burnering card acceptance in hopes of jumping straight to the ACH endgame), then gradually offering incentives to steer consumers to low-cost-routing (see PayPal for a best practice on this front).

None of this is going to shift the payments world overnight, but it sure is fun to watch the chess pieces move and to strategize on how credit unions can best capitalize on these changing dynamics and allegiances. 

Does your Financial Institution have Phase II syndrome?

For a long time I worked in Credit Unions and I couldn’t understand a simple problem. It seemed like we were really good a cranking out the ‘big bang’ project. You know, converting a bill pay or converting to a new credit card provider. But afterwards? We would struggle. We would struggle to do updates to those products. It seemed to me that when we got the product together we were really good at reaching parity, meaning that the product we were changing to was 80% the same as the product that we had, and it was 20% different. That 20% difference was usually in features. Sometimes it would be cost. But most of the time it was features. Somewhere along the way, while we were implementing the product, we would learn that we could get the product out on the timeline that we had and get to parity, meaning that it did all of things that the old product did. That was sort of the bar. Then, later on, we would make a promise and we would say, ‘We will come back and do the rest.’ And we would usually call that Phase Two, which would lead us to ‘Phase Two Syndrome’. Here’s how to tell if you have Phase Two Syndrome:

Symptom #1 - There is a general distrust between the departments in your organization and Information Technology.

Symptom #2 - You are frustrated with most of your digital vendors because you need new features or have paid for new features and they are not out yet. Then, when you go to find out what the problem is, every single person points to the other person.

Symptom #3 - People from other departments are sneaking around Information Technology with cookies and free food in order to coax programmers and implementation people to do their bidding.

If any of this sounds like you then you likely have Phase Two Syndrome.

How do you fix Phase Two Syndrome? Well first, you have to understand the root of the problem, and if you’re Executive leadership at your Credit Union, I hate to say this… you’re part of the problem. The challenge is this: when you have a new product and you implement it, there’s a big difference between what I’ll call Phase One; implementation, and then Phase Two; which is continuous improvement. We’re all really good at Phase One, but it’s really hard to handle Phase Two. That’s what creates distrust.

Let me give you an example. Here’s a scene from a conference room somewhere in your Credit Union. Two people are sitting around the table. It’s likely a manager from credit cards or another processing area, and an IT manager.

IT Manger: So I see we have a new project on the books.

Department Manager: Yes, yes we do. I’m very excited.

IT Manager: Okay, well let’s get moving with it. I was looking at the timelines, and we can only get A, B and C done. We’re going to have to push off E, F and G.

Department Manager: Yeah, that’s what you said last time when we were implementing project X, but we never got back to that.

IT Manager: Oh come on, you know that we had those regulatory issues come down and the NCUA was in and we just didn’t have time to do it.

Department Manager: Yes I know, but when are we going to get to it?

IT Manager: Oh, I have plans for that.

Now, here is the interesting thing: the IT manager sincerely has plans for this. He is not in the wrong. He is doing what he can to get this done. The department manager isn’t in the wrong here, either. It’s fair of her to expect these features and to expect a timeline for Phase Two. The challenge is that Phase One implementations require a different mind set than Phase Two implementations. Phase Two implementations run along a practice we call ‘continuous improvement’.

Now, let’s just talk about that for a minute. Continuous delivery and continuous improvement. There are companies like Facebook, Twitter and Apple that continually put out releases to their products. Have you ever had an app on your phone automatically update? Keep an eye on it. You’ll see the big players that I mentioned above all deliver continuous updates. This is important because this instills a trust into their consumers and members. If you have one of these products and there’s a bug or an issue with it, you learn to trust that there will probably be a new release within the next few days, so before you complain you’ll sit back and wait to see if it gets fixed. You can then install the new update as soon as it’s available.

However, what I’ve determined in the Credit Union world is that these releases are few and far between. If you have a mobile banking product or home banking product, it’s not likely that you will even push out yearly fixes. If fact, bi-annually would be good. So, how do you resolve this?

Well, continuous improvement and continuous delivery requires a separate project management track. It’s a different mind set. It uses agile, and because it does that it means that you’re going to continuously be pushing to put out new things.

Now, many of you are going to say, “Yes, but we are at the mercy of our vendors for these improvements.” I would argue that most vendors have improvements waiting in the wings for you right now. The challenge they have is getting on your schedule to get it out the door. However, if you knew that you were going to do a release every quarter, and you knew that you had a capacity within IT of X amount of hours, you could plan for that and you could always be continuously improving your world.

This would also help to restore trust. The distrust between the departments and IT that sometimes occurs is really synthetic. It’s not real because the reality of the situation is that IT wants to perform and deliver, and the department also wants to deliver. They’re put at odds because you’re trying to fit a round peg in a square hole. The continuous improvement process allows the group that is iterating on the platforms you have to focus on those iterations. It also allows the groups that are instantiating new product, which by the way is much more far reaching, to focus there. It changes whole processes within your organization. It can change your call center and it can touch all areas, which is why these projects are so difficult. Think of a core conversion. Think of a home banking change.

But, something little like fixing a bug or adding a small new feature? You can learn to master the art of the little and do small releases. I would even recommend for most Credit Unions, if you can just work towards a bi-annual release as your first step you would see a tremendous improvement both in the relationships of your departments and your relationship with your members. Once your membership learns to trust that you’re going to do regular releases, continuously deliver updates, you won’t see the types of reviews that we typically see in iTunes. And, once the staff begins to trust that there absolutely will be a Phase Two they will calm down as well, and IT will be happy.

What does this cost you? Well, it’s going to cost you some resources. It’s going to cost you some implementation time and some training time. That’s why here at BIG we have our digital strategy offering that includes guidance on continuous improvement and delivery. These are the kinds of things that we like to help Credit Unions with.