MEMPHIS, Tenn.-Daryl Tanner, CEO of the CUSO Share One, is retiring, but will remain on board as a director and product research consultant. During his career Tanner served as CEO of four different CUs for a combined 27 years, and as president of Share One, which provides data processing services, for 15 CUs. During that career he has seen the introduction of share drafts, the first credit union-owned ATM, as well as growth at Share One to 84 clients from 20.
Below Mr. Tanner shares observations and recollections from his career.
CU Journal: How did you come to be involved in credit unions?
Tanner: I worked at a community bank for two years after leaving high school and again in college. I was having a lot of frustration at the second bank due to their unwillingness to take steps to improve customer service and I vented some of my frustration to a friendly customer one day. He invited me to lunch the next day to discuss working for him at a "credit union," which I knew nothing about. I accepted the offer and showed up for work after school the next week to find, to my horror, a line of "customers" snaking out the door of the office and into the parking lot.
As I walked past them into the office I noticed no one was complaining about the line, but instead were discussing work at the schools in the school district or district policy or whatever, but unlike at the bank, they were not complaining. Inside the office I noticed Difference No. 2: everyone at the CU was helping "customers," not hiding in the back. My kind of place. The man who hired me, Mel Erickson, was my first and the most important mentor of my career.
CUJ: What management lessons did you take away from those various positions?
Tanner: A) Service to the member comes above all else. B) Starting a high school credit union was one of my first assignments after graduating from college in 1970. It provided me rich opportunities to innovate and to provide financial counseling to young people. C) Credit unions were "simple" organizations compared to the services I was used to delivering at the bank. Creating some of those same "banking" services in the CU environment was exhilarating. C) After I graduated from college my job description included chief loan officer, keeper of the books, the only loan collector, youth program administrator, general office manager, and sometimes teller. This broad experience was a godsend when I became a CEO of a larger credit union in 1973.
CUJ: During your career you've been involved with a number of firsts, including one of the first share draft programs and the first CU-owned ATM. Can you take us back to those times and share some of your memories of those experiences?
Tanner: Checking accounts were the first project I wanted to accomplish. After much research about negotiable instrument law, in 1971 I approached a good friend at my old bank about providing "payable through" services for the credit union. He was intrigued and took it to his bosses and got a tentative OK. We then traveled to Salt Lake City and met with officers for Continental Bank and Trust who did the nightly check processing for the bank. The head of IT at the bank was a member of Cyprus Credit Union in Salt Lake City and jumped right in to help us set up the processing side while we put the correspondent agreement together. A few weeks later we processed our first checks that had been written by credit union staffers. We had all of the programming and reporting capabilities of a commercial bank at our disposal so the program was well-grounded. We even had automatic overdraft loans by charging 1% monthly interest on overdrafts.
I moved on to a larger credit union in Idaho in 1973 and in order to offer checking accounts there, we had to convince the banking commissioner, Thomas MacEldowney, that it was legal to do so. We presented three plans to the commissioner and his legal counsel: A) There was nothing in the law that said we couldn't offer demand deposits so we would. B) We could offer the members "loan drafts" that would be posted to a loan each day and then the loan balance would immediately be paid off from a share or deposit account set up for that purpose (this was similar to what a few credit unions in other states were experimenting with). C) We would give the members checkbooks identified on the face as "Member Money Orders." The negotiable instrument statutes were vague as to what constituted a "Money Order," except that it was a negotiable instrument purchased individually. In our proposal, the actual "Sale" and settlement for each "Money Order" would occur when it was posted against a special account set up for that purpose.
The legal counsel for the department, a bright young attorney named Mike Brassey (his father was then the president of the Idaho Bankers Association), agreed there was nothing in the law preventing our offering of checking accounts but stated that if we went with that plan they would sue us and let the courts decide. The method was "messy" and would certainly confuse the members but, he really thought that program was "creative" and could find no reason to deny it.
A couple of years later the Fed ruled these to be NOW accounts and we were given permission to clear directly through the Fed without using a "Payable Through" bank. The legal documentation for this plan was shared with friends at the NCR Credit Union in Dayton Ohio and was approved by their state regulator also.
Even before checking accounts were established, we wanted to offer ATM services. Niles Latta, a senior vice president with the Bank of Idaho, which at the time had the largest network in the state, approached me about sharing machines on their network for withdrawals at $.25 per transaction. I agreed, but wanted our own machine so we weren't sending our members "to the bank" for this great service. Niles and I had to meet with the Bank Chairman, Robert Bianco, for overall approval of our plan. After much deliberation, he gave us his blessing and we proceeded. They had a new machine that had just been delivered by Docutel and they offered it to us at cost. I bought it and we put it through the wall of our office facing a very busy parking lot. We put play money in the machine and interspersed it with real $20 bills. We had two employees who demonstrated the machine to our members for two weeks. During this time, the bank commissioner and his examiners who were in town for the Idaho league annual meeting came by our office to see what we had been doing. One of the examiners got a $20 dollar bill during a demo of the machine and the commissioner made him give it back.
We later negotiated sharing their machines for member deposits, as well, which the bank branches would separate out and deliver to us by courier each day.
When VISA opened services to credit unions a couple of years later I negotiated with Rocky Mountain Bankcard Company of Denver to interface with the VISA network for us. We programmed our computer to handle in-house credit and debit cards. By 1981 we had 4,900 debit card and 8,000 credit cards out and that year processed 124,215 debit annual transactions and 180,022 credit transactions for a total combined $5-million-plus annually. The CU grew more than 900% between '74 and '82.
CUJ: How does a data processing CUSO effectively compete with the larger DP/tech providers?
Tanner: We successfully compete primarily on service, product, structure and price. Service, because we are smaller and most of us have credit union backgrounds, we understand the needs and cultures of our clients better. Product, because our product is newer and developed with more modern tools than most of the legacy products out there, we can develop faster and the Microsoft-based architecture is more compatible with Internet services. Our product line is at least as broad as that of our major competitors and broader than most with the added advantage of most of the ancillary products they have to rely on third parties to supply, we have written ourselves and integrated them natively into our system (imaging, for example).
Structure, because as a CUSO our corporate and business decisions are made by credit union professionals, not banking or IT professionals, and thus there is a better mutual cultural understanding. Price, because we are always competitive on price and in many cases we see that the credit unions that have been on legacy systems for a number of years are being overcharged. We have seen cases recently where our prices are one-quarter to one-third less than what credit unions are being charged by the large vendors.
CUJ: Looking forward, where should a credit union be budgeting technology dollars?
Tanner: That depends a lot on their membership demographics. Certainly for the younger and more professional members, mobile delivery is becoming a necessity. For those serving more of a working class membership, price and physical convenience are more important and mobile services somewhat less so. For example, one of our clients, $970-million Self Help FCU, serves the underserved in North Carolina and California. McKesson FCU in San Francisco is much smaller but serves the lucrative drug industry. McKesson was an early mobile adaptor and Self Help, with much deeper pockets, is not planning to offer mobile services anytime soon.
The successful core processing system for the future needs to have certain characteristics to be viable for the most likely future service delivery models:
* Relational database for efficiency-supporting member data marketing analysis.
* Safe and sound networks, as the bad guys are getting smarter.
* Reliable business continuity plan, as the weather risk is going to get worse.
* It must be inexpensive and yet powerful. This means Intel-based servers as a general rule and not mini-computers.
* Tight web-integration capabilities.
* A universal interface such as CUFX.