/by

Key Considerations for Financial Institutions Regarding ODP/NSF in Light of New Regulations

, , , ,

4 minute read – Pressure on non-interest income continues to grow, particularly on Overdraft Protection (ODP) and Non-Sufficient Funds (NSF).  In 2022, many financial institutions revamped their ODP and NSF programs.  Some did this to get out in front of potential regulatory pressure and take advantage of a market opportunity.  Many others followed suit because of competitive pressure. 

Fast forward to today and the Consumer Financial Protection Bureau has been actively looking to tackle “junk fees”.  What has created additional pressure is that, for the first time, NCUA has required federally insured credit unions with assets over $1 billion to report their ODP and NSF income on the call report.   

While banks over $1 billion have also had to report, the addition of credit union data creates more awareness in general around ODP/NSF.  As a result, there are several considerations all financial institutions should think through: 

Understand the information that is available in the call report.  Think through the different ways the data can be collated and visualized.  For example, the average ODP/NSF per member/customer can be calculated as can the percentage of net income that comes from ODP/NSF.  On the former example, the pace of indirect lending can impact that number and tell different stories because indirect customers are less likely to have checking accounts. 

Crucially, financial institutions should identify what data is not available in the call report.  Examples here are checking penetration and transaction volume, two items that can influence ODP/NSF usage as can the demographic makeup of the membership/customership.  Additionally, call report information does not show how often or how active institutions are at closing accounts.  This can influence the ODP/NSF per account and per member/customer. 

Next, understand your data.  The data on the call report is a start.  Financial institutions should dig into their data to understand usage at a more detailed level. 

Doing this analysis has a twofold benefit.  First, it can help financial institutions continue to evaluate their programs and make decisions about how they want to move forward.   

Many have already lowered fees and changed the structure of when ODP is applied.  At the same time, they have also made efforts to significantly reduce NSF, viewing this fee as not really providing a service whereas ODP does.   

Many financial institutions have also been proactive in reaching out to customers to help them reduce their fees.  The response is often “thanks, but no thanks” as that is how the customer wants to manage their money.   

Regardless, financial institutions will likely need to continue thinking through ODP/NSF and making more changes.  With that comes the pressure to also think through how to make up for that revenue.  

The second benefit of doing this analysis is to help prepare messaging.  With ODP/NSF information being public, there will come a time when consumers and the media will ask questions.  As an example, Politico published a sharply worded article about California state-chartered credit unions after they were required to begin reporting this information starting in 2022.  Regardless of whether ODP/NSF information is public, financial institutions should get ahead of the curve on their thinking and messaging as consumer awareness is likely to be higher.  Financial institutions should also think about how they want to disseminate their messaging throughout the organization so employees are prepared with the right points and go-to people when questions are asked. 

/by

180-Second Exercise: Generational Shifts

, ,

Every generation is different, and businesses must constantly evolve to meet changing customer preferences.  Millennials and older Gen Zs have been using financial services for a while.  For this 180-second thinking exercise, consider Gen Alpha.  Born between 2010 and the present, they will be the next big generational topic. 

As a reminder, 180-second exercises are a great way to brainstorm and help prepare for an uncertain future.  The idea is to be fast and creative – make sure analysis of your ideas doesn’t stifle your imagination.   

Set a timer for 180 seconds and have your team imagine as many unique aspects of Gen Alpha as possible.  What behaviors and preferences will this generation exhibit? 

During the debrief, identify trends in the answers.  What path will your organization need to be on to win the business of your imagined Gen Alpha? 

/by

c. myers live – Elevate Your Team’s Financial Foundation for Enhanced Decision-Making

, ,

Many leaders in financial institutions are discovering gaps in their team’s thinking and decision-making processes when it comes to ALM, especially those who don’t come from a financial background.  In this episode of c. myers live, we highlight the importance of intentional ALM education and building a solid financial foundation within leadership teams.  Listen to learn how leadership can bridge these knowledge gaps and enhance their team’s effectiveness in managing financial assets and liabilities. 

This podcast references different interactive tools and resources that can be used in training for enhancing ALM understanding.  Click here to use these free tools on our website.

About the Hosts:

Brian McHenry

brian mchenry headshotBrian, one of c. myers’ owners, has worked closely with financial institution Boards and managements of all sizes in a variety of capacities. As a strategic planning facilitator, CEOs regularly praise Brian’s industry knowledge, calming communication skills, ability to authentically engage anyone with whom he interacts, and ability to keep discussions focused on linking strategy with desired measures of success.

Learn more about Brian

Charlene Leland

Charlene LelandSince joining c. myers in 2004, Charlene has become one of the most diverse facilitators within the industry, especially with regard to helping financial institutions of all sizes address three necessary business objectives: relevancy, differentiation, and sustainability. Over the years, she has honed her skills for facilitating various types of sessions, including Strategic Planning, Strategic Implementation, Member Journey and Experience Improvement, and Strategic Financial Planning.

Learn more about Charlene

Other ways to listen to c. myers live:

listen on apple podcastslisten on spotify

/by

10 THINGS THAT STIFLE CRITICAL THINKING + 5 WAYS TO HELP IT FLOURISH

, ,

5 minute read – The following blog post was written by c. myers and originally published by CUES on May 15, 2024.

Dictionary.com defines critical thinking as disciplined thinking that is clear, rational, open-minded, and informed by evidence.  It is foundational for good decision-making.  What organization couldn’t use plenty of critical thinkers?  But there are some common stumbling blocks and some key practices to avoid them. 

10 Things that Stifle Critical Thinking: 

  1. Unclear objectives – lack of clarity around the purpose of the discussion, desired outcomes, or the decision being made 
  2. Hidden biases, assumptions, decision filters – being unaware of these (which we all have) and therefore, not considering their validity 
  3. Not questioning others – deference to authority, taking things at face value, groupthink  
  4. Not looking for unstated challenges and opportunities – assuming that everything will work out fine and that the necessary thinking has already been done 
  5. Defensiveness – needing to be right 
  6. Seeking input from those who won’t disagree – avoiding alternate opinions  
  7. Lack of the tendency to embrace change – not having an open mind, avoiding the discomfort of change 
  8. Lack of information or misinformation – assuming all needed data/information has been supplied and that the data/information is right, not doing a reasonableness check  
  9. Waiting until the last minute to make a decision – working with limited options due to time constraints 
  10. Not assessing whether past decisions were good or not and why – no feedback loop to improve critical thinking in the future 

5 Practices to Help Critical Thinking Flourish: 

  1. Seeking clarity on the objective of the discussion or decision at hand.  Ensure that the participants are clear on what you’re thinking critically about and why.  Ask them to state their understanding of the desired outcomes of the discussion.  This sounds incredibly simple yet is often misaligned.  Clarity on the objective must occur before productive conversations can occur. 
  2. Cultivate genuine curiosity.  Participants need to believe that they have a responsibility and a right to fully understand, ask questions, and question each other.  Encourage creativity and practice “Why to the power of 5,” asking “Why?” at least 5 times to get to the root of the problem.  This also applies to data and other types of information that have been supplied.  Ensure it is fully understood by applying common sense and asking questions.  Try approaching data and information as though there is a mistake that must be found. 
  3. Surface biases, assumptions, and decision filters.  Human brains are made to rely on shortcuts based on past experiences when full information isn’t available.  The challenge is becoming aware of them so they can be examined.  There are many books and articles written on this, but a simple way to start is to ask people to intentionally consider what assumptions, biases, and decision filters are at work that have not been stated. 
  4. Authentically consider other options.  There are usually multiple solutions available and being open to those options and understanding the tradeoffs leads to better decisions.  Debate is an excellent tool for creating an atmosphere that embraces challenges to ideas as a thought exercise rather than a personal attack.  Have people debate in favor of an idea that is not their own.  Being open to change and assuming there are better ways to achieve the objective are helpful mindsets. 
  5. Blend data with instinct.  Colin Powell’s famous 40/70 rule says that leaders need at least 40% of the available information to make a decision, but not more than 70% because the opportunity may pass you by.  Where data is lacking, we must blend data with instinct.   

Building critical thinking skills takes practice.  Some of the behaviors and mindsets that help critical thinking may not be typical within your organization.  One way to approach that challenge is to start by creating working agreements that pertain only to the meeting or discussion at hand and ensuring everyone is on board at the start of the meeting.  Example working agreements could include, We must identify at least 4 solutions to our problem or Everyone must ask “Why?” at least once.  A leader can also help others think critically by ensuring objectives are clear and asking specific questions related to the above.  Help your team start building critical thinking skills and reap the rewards with better decision making. 

/by

Vendor Relationships: Signs You Should Be More Strategic

, , ,

Vendor and partner relationships are essential to financial institutions, therefore we are reposting this blog in light of recent conversations with our clients.  Taking a strategic approach to these important relationships can better position the organization for future moves, boost performance, save resources, and maybe even lessen the total number of relationships required.  Optimizing these relationships helps add value for your customers and employees, yet the complexity and sheer volume of relationships can be overwhelming.  As the industry continues to evolve, institutions will have to rely even more on third parties, which means this challenge is growing.  Taking action, sooner rather than later, will help.

Most have an objective of leveraging vendor and partner relationships to their fullest advantage for the benefit of the customers employees, and other key stakeholders.  Many have systems in place for contract management, due diligence, and managing/monitoring third party risk.  While those foundational functions are critical, there is far more opportunity to leverage relationships for higher performance and efficiency.

Here are a few signs that opportunities are being missed:

  • Contracts are renewed even though the partner has no plans to offer key capabilities that you will soon need to support your strategy
  • Multiple pieces of software or service providers are performing the same function in different areas of the organization. Downstream effects are compounded when you’re left managing extra relationships and updating more software than is needed
  • Features and capabilities that are planned for implementation are never made available because they were postponed during a complicated rollout with the best intentions to go back and activate them later
  • Desired features and capabilities are added by the vendor but not implemented. It’s possible no one knows they’re available, and it’s not uncommon for software to be branded “no good” or “out of date” because it was not updated regularly or features were not implemented
  • Products or services are contracted, but training is minimized. This is often due to time constraints, making the new products or services far less effective and beneficial

It’s important to understand your partners clearly, just like you would your employees.  Are they bringing the minimum requirements to the table or are they true extensions of your staff?  How forward-thinking are they?  How quickly do they adapt?  How does their strategy support your strategy?

As vendor and partner relationships grow in number and importance, determining how you will approach them going forward will provide clarity.

Here are a few questions we’re asking our clients as they shift to a strategic approach:

  • What is your strategic position on vendor and partner relationships?
  • Who owns the overall vendor and partner relationship process?
  • If the process is broken down into categories, such as software and non-software, who owns the different categories?
  • Who owns the individual relationships? If a vendor provides multiple products or services, is there a single owner or multiple owners?
    • The owner of the relationship is the person responsible for paying attention to what’s happening with the company, their software or service, their plans for the future, their representatives, etc. This includes understanding and choosing whether to implement updates and new features
    • Relationship ownership is a strategic decision. Why are the owners chosen?  How well do they understand the business and organizational priorities?  How well do they build relationships and drive results?
  • What should the relationship owner know about each vendor in order to understand how well their strategic positioning aligns with your strategy? For example:
    • If you are interested in artificial intelligence abilities/integration in the future, is the vendor planning to support those capabilities?
    • If you’re utilizing the cloud for some services, is it important for this partner’s services to be cloud-based?
    • What does this vendor’s development roadmap include, and how can you assess their ability to deliver on that roadmap?
    • What other products and services do they offer that may help you move forward strategically?
  • Is your organization using the products or services at the desired level (include upgrades, features, training)?
  • What type of customer do you want to be to your vendors, and what level of service do you expect in return? How difficult or easy are you to work with?  How difficult or easy are they to work with?
  • How should specific vendor/partner relationships be prioritized for the organization?
  • How much resource should you dedicate to ensuring that these integral relationships are optimized?

Strengthen your approach to vendor and partner relationships to meet today’s and tomorrow’s needs.  These relationships will only become more necessary, complex, and further ingrained in the fabric of your business.  Investing intentional effort in this area brings organization and efficiency, and a strategic approach helps leverage the institution’s relationships for optimal performance.