Stan Hollen on an Industry that Does Business Like None Other
As President and CEO of CO-OP Financial Services, Stan Hollen does plenty of thinking about the industry – the challenges facing credit unions, what industry leaders are talking about, the value of working cooperatively and the innovation that will lead us into the future. THINK caught up with Hollen to find out what’s what as CO-OP Financial Services turns 30, the Durbin Amendment takes affect and we head into 2012.
You’ve been working in the credit union industry for quite a while now. Just when you thought you’d seen everything, the past few years have brought a few surprises. Has this been the most tumultuous time you’ve seen in the credit union industry?
I have been in the industry for a long time: I was elected to a credit union board of directors when I was 19, and I’ve worked in the industry for pretty much my entire career.
Yes, this probably is the most tumultuous time we’ve seen. There was a period in the 1980s when interest rates skyrocketed and lending rates were at 12 and 14 percent. That was a difficult period for credit unions as well. But other than that, I haven’t really seen a time that was as challenging for credit unions as the present.
We’ve had the financial crisis, and the impact of the recession has been tremendous. Real estate values – and real estate lending — have been hit hard, and that’s been compounded by unemployment, which of course feeds into the problem.
As an industry, we’ve been going through a period of intense expense reduction, and we’re coping with new regulations such as the ones being ushered in under the Durbin Amendment. We’re dealing with more regulation in general. Some of it is a reaction to the financial crisis, but with or without that impetus, regulation continues to grow. We’re seeing more consolidation and mergers. And consumer expectations are changing.
It seems like consumer expectations are changing radically. That has to be a challenge for credit unions, especially at a time when resources are tight.
It is a challenge. Our industry is made up of hundreds of small institutions. Without the ability to access new technology through cooperatives, it’s difficult for credit unions to stay current.
At the same time, it doesn’t seem like consumers will wait. What are consumers keen on right now?
We’re seeing a movement toward alternative payments: ACH, PayPal, prepaid cards and hybrid cards, which combine debit and credit by running PIN transactions as debits and signature debit transactions through a line of credit. I think another growth area in the future is going to be person-to-person, or P2P, payments. So, if you buy something from your neighbor, you’ll have a mechanism to pay for it that doesn’t involve cash or a check.
There’s also a lot of innovation in areas like mobile banking. CO-OP has had a mobile banking product for a while now; members can download an app or access their accounts on their phones. We also offer remote deposit capture, where you can deposit a check right at home or over your smartphone. We’re also seeing more interest in check imaging at the ATM level. Consumers love being able to process checks at the ATM without envelopes, but right now the industry is at about 20 percent when it comes to image-enabled ATM machines.
If credit unions need innovative products and services as well as advantageous pricing, that puts pressure on the organizations that serve them. How is CO-OP trying to meet the challenge?
There’s nothing like competition to make you better at your game. That’s true for CO-OP as well as the credit unions we serve.
Credit unions are our owners. When they grow, we grow. So we want to be not only sympathetic, but supportive. We’ve reached out proactively to our service providers for savings, which we have passed along to our members and clients. We know that it’s important for our clients to operate efficiently, and we’re doing everything we can to ensure that the value we provide reflects that understanding.
We want to help credit unions compete by offering the products and services they need, whether that’s 24/7 customer service through our member call center, e-commerce solutions, shared branching or our ATM network, which is still the best in the industry.
This is a challenging time, but it’s also a time of great opportunity. Even regulation can create an opening. As the financial services industry responds to Durbin, credit unions have the opportunity to gain customers and set themselves apart. Expenses and lost revenues that banks are having to bear are being passed along to consumers. If that doesn’t apply to credit unions, they need to leverage that into action.
CO-OP recently turned 30 years old. What’s changed since its inception? And what’s remained the same?
In 30 years, we’ve made many changes. We’ve grown nationwide through partnerships and acquisitions and now we’re arguably the nation’s largest CUSO, serving 3,300 credit unions.
But I think what’s constant is our commitment to our values. The original purpose of CO-OP was building and linking ATMs nationwide, and to aggregate those transactions in order to save money for the credit unions that participate. That principle is at the core of what we do, even today.
Moving forward, we’re seeing more of an openness to outsourcing. We’re now looking at providing a brand new service where we would manage ATMs for our clients. We would replenish the cash, service the machines and provide a range of services related to ATMs – and our goal would be to do it more efficiently than individual credit unions can do it themselves.
What keeps you energized about this industry and its future?
It’s always energizing to take on the challenge of growing an organization, but the cooperative nature of credit unions makes this industry unique.
If you think about banking, it’s completely different. Banks don’t want to share ATMs. They don’t want to help each other; they don’t trust each other. Everything is about competition. While there is more competition between credit unions today than there might have been in the past, this is still a cooperative industry, and that willingness to cooperate gives credit unions a unique spirit. We should be glad that we work in this industry. The people, the mission, the way we do business – it’s unlike any other.