Critical to this overarching strategy – and contributing to its mandate – was the decision we made to pursue a payments strategy that is innovative, quick to market, and focused on the needs of our clients.
In order to reimagine how to support our members and clients in their success, and to accelerate impact and delivery of key strategic initiatives, Central 1 created a Transformation Office, which, over 90 days, led cross-functional collaboration internally, and consultation with members and clients.
Through 2018, the Transformation Office will continue as Central 1 launches its new strategic plan, allowing us to shift initiatives into the Transformation Office for intensive focus and then out for implementation, as other priority strategic initiatives take their place.
Canadian Western Bank (CWB) takes pride in serving small business customers, and they hold substantial market share of the small business market in western Canada.
CWB’s interests align nicely with Central 1’s small business banking vision to design based on delivering what business owners have said they need. They complement the work that CWB is doing with its business customers and the growing small business customer base.
“CWB has a strong and growing client base, and the various online solutions we use from Central 1 really help us deepen our relationships,” says Greg Noga, Senior Assistant Vice-President, Sales & Marketing at CWB. “Through Member Direct Small Business, we can provide clients with integrated invoicing and the ability to view personal banking and business banking accounts on the same platform, and soon we’ll be able to offer payroll options. These features add significant value to small- and medium-sized business owners, which enhances their overall client experience with us.”
With competitive pressure on financial institutions (FIs) and digital transformation impacting every aspect of business, maintaining and building customer base is imperative. Customers are attracted to ever-easier access to financial services and information.
Origination Solutions from Central 1 is a suite of products that fill the need for customer acquisition strategies to grow customer base and cross-sell lending opportunities to help deepen share of wallet for participating FIs. The products include Open Anywhere for customer acquisition and Borrow AnywhereTM for lending. Both products are offered via multiple channels: in-branch, digital, or an integrated omni-channel user experience.
Automating processes creates efficiencies for credit unions and other financial institutions, allowing their staff to focus on customers and count on the data where it needs to be.
Open Anywhere works with most major banking systems and can be connected to MemberDirect®. It’s built with data integrity designed to work with future technologies. And as Central 1 develops partnerships with leading origination service providers, opportunities for real-time integration and preferred pricing extend to Origination Solutions clients.
Three separate teams – Treasury Services and Solutions, Securitization and Capital Markets – worked together to help the credit union hedge the mortgages it originated, locking in the cost of funding those mortgages before they were securitized.
Andrew Shannon, Chief Operating Officer of the Orillia, ON-based credit union, says he was impressed by the personal service his credit union received and the understanding of the information it needed. “Brian Raine came up for a one-on-one presentation, reviewed the last hedge we had done and taught us how that worked. So, we were dealing with our own, not just looking at a theoretical example.”
Since then the credit union has continued the strategy and hedges all its new mortgages.
says Brian Raine, Managing Director, Capital Markets at Central 1.
Raine says larger credit unions often phone him each Friday to hedge the mortgages they have originated that week to protect themselves.
“As soon as they hedge, it stops their pain,” Raine says.
To power the digital transformation of financial institutions it serves, Central 1 is investing in a new omni-channel digital banking platform, conversational user interfaces and origination solutions. These solutions and technologies help clients stay ahead of the curve, differentiate from the competition and meet the increasing demands of consumers.
Central 1’s new User Experience (UX) Platform for digital banking will put the control in the hands of credit unions and clients to create unique digital customer experiences and to accelerate speed to market with innovation.
“The UX Platform built on Backbase is the right technology platform for our future. It offers unparalleled opportunity compared to what we’ve ever had previously and puts us ahead of most other Canadian financial institutions,” says Darrell Jaggers, Chief Information & Digital Transformation Officer at First West Credit Union. “At First West, we’ve seen Central 1 partner differently and more effectively this past year, with an engaged focus on facilitating this ‘once in a generation’ technological change for credit unions. As a system of credit unions, assisted by Central 1, we have selected a technology platform that will be a key to our success.”
“By improving and increasing the services offered digitally, credit unions can make banking more convenient for their members and that presents an opportunity for growth,” says Mark Cauchi, Senior Vice President & Chief Information Officer, Alterna Savings. “The UX Platform offers Alterna more autonomy, which allows us to innovate more quickly and efficiently with greater control over our own digital roadmap. As a result, the flexibility of this system makes it possible for Alterna to stay at the forefront of Digital Bank innovation.”
In the fall, together with technical leaders of product champions, Central 1 established a refined set of priorities for the program and began developing plans for the path forward.
The new UX Platform is based on technology from Backbase, a global leader in omni-channel digital banking platforms. Central 1’s clients will benefit from a menu of possible widgets to customize their site, but they can also choose to upgrade to other options. It’s possible to customize further by working to create custom widgets, or credit unions can work directly with Backbase for a fully-individualized site leveraging Central 1’s preferred pricing.
Central 1 is committed to developing a dynamic solution through transparent communication and engagement with clients to build future success for digital banking for all users.
In February 2014, FICOM identified Central 1 as a Domestic Systemically Important Financial Institution (D-SIFI) and set out tight rules on how much capital credit unions must hold with Central 1 to ensure resilience an adequate liquidity capability in the system. But after three years under those rules, FICOM decided it could loosen the controls a bit because of Central 1’s and credit unions’ efforts to improve risk management.
“Significant improvements have been made to the liquidity management within Central 1 and the broader credit union system,” FICOM said in a letter to Central 1.
The changes allowed Central 1 to return $50 million in capital to credit unions by redeeming Class A shares, redeeming Class E shares and issuing a dividend on its Class A shares.
“We’re focussed on serving the needs of our members while prudently managing risk,” says Brent Clode, Chief Investment Officer at Central 1. “These regulatory changes reflect Central 1’s capital and risk management capabilities and good relationship with our regulator.” FICOM said it will revisit its prescriptive requirements on an annual basis as it transitions to broader principle-based standards.
Commercial Loan Syndications are predominantly real estate projects; they are a collaborative and creative way for our credit union members to participate in commercial real estate loans that exceed their individual limits. They can help credit unions to retain business by funding a large loan together with Central 1 and other partners to leverage the capacity of the combined balance sheets. It’s a true partnership that goes both ways: organizations can bring loans to Central 1 for syndication, or Central 1 offers participation in syndication opportunities led by Central 1.
“Central 1 was very professional and made the loan process simple and easy,” says Wang. “Once we provided Central 1 with the requested documents, they got the job done without any hitches. We look forward to working with them on future projects.”
Mainstreet Credit Union in Sarnia, Ontario was one of nine credit unions who participated in the syndication.
“Being part of the Central1’s Syndication program is a real benefit for our credit union,” says Kevin Boersma, Senior Vice President Risk and Innovation, Mainstreet Credit Union.
As the credit union system’s liaison between Interac® and credit unions, Central 1 uses its position as a hub for collaboration and cooperation to detect fraud attempts and stop them before they happen. The service promptly alerts credit unions to potentially compromised cards and Interac e-Transfers®.
This allows credit unions to leverage the monitoring tools to manage fraud and stop it.
When Mongrain gets an alert about a member’s account, she alerts the person’s home branch, which then contacts the member to determine whether the activity is truly suspicious.
“It has been very helpful,” Mongrain says. The system improves when more detailed information is input. In a few cases the system flagged some members who were making purchases in the U.S., but it quickly learned when it became clear that the members lived close to the border and often made shopping visits there. Once the members’ profiles were updated the false positive alerts ended, Mongrain says.
To offer innovative payments products at market-competitive rates, in fall 2017, Central 1 sought to secure a large-volume client for electronic bill payments that would supplement its existing credit union business and support it through client changes.
In December 2017, Central 1’s members voted 98 per cent in favour of a move to tiered pricing. The model offers price reduction for 100 per cent of members relative to what they were paying previously, immediately upon finalizing the contract with the large, non-credit union client.
Building for future success in payments is good for all members – small, medium and large – who seek to remain competitive. The future success of the credit union system demands client-centred, competitive options for all members and clients, and in the spirit of its cooperative values, Central 1 is serving members with innovative changes like this.
Get Your Share is an online, incentive-based membership acquisition program designed to support the cooperative movement and attract new members to the BC credit union system. Each credit union can customize the new member experience to reflect their individual brands.
Get Your Share is managed by Central 1 on behalf of the BC Marketing Committee. Starting out as a Facebook campaign in the spring of 2013, the program’s growth accelerated in 2015 with the launch of the Get Your Share website and hasn’t slowed down since.
During this hiatus period, the BC Marketing Committee plans to implement a more sustainable model to continue to deliver on the previous program’s success. Its relaunch will include a more customizable and scalable web platform that delivers an improved, frictionless user experience for both new and existing members, and credit union staff.
Get Your Share is scheduled to relaunch during the second quarter of 2018.
For the past two years, Central 1 has supported the B.C. Young Leaders program, which now has members in most of the province’s credit unions. Alex Kostenko, corporate secretary at Sunshine Coast Credit Union, says she was attracted to the program because it offers the potential to build collaboration throughout the system at a less senior level.
Kostenko says the young leaders program has highlighted the competencies that managers will require to become CEOs. “We have been able to leverage this system initiative at a Young Leader level to build more succession capacity within the system. We want to have that knowledge base within the system to lead us into the future.”
Central 1’s People Solutions team works with credit unions to help them prepare for leadership transition. Its research shows dozens of CEOs will retire over the next few years and in 2017 it helped several credit unions search for and recruit new leaders from inside the system and out.
Two of Williams Lake & District Credit Union’s (WLDCU) three branches, including its head office, were forced to close and many employees were evacuated from their homes. Central 1 teams from across the organization – including those supporting liquidity and lending, payments operations and technical support – stepped up to provide much needed resources, advice and hands-on assistance to WLDCU and other credit unions, amidst the uncertainty. At one point, Central 1’s delivery and infrastructure teams worked into the night to help another credit union – Integris Credit Union – move its data centre from its facility in fire-ridden Williams Lake to Prince George.
“During the evacuation, our top priority was to keep all electronic channels open, so members could access their accounts from anywhere, at any time. It was amazing to see the dedication and determination of our staff and managers as they worked remotely from their campers, vehicles, and other people’s homes to monitor our systems and make sure that members continued to have someone to support them when they encountered difficulties. That support would not have been possible without our systems partners, Central 1, Celero and Credential, as well as the Credit Unions of B.C.,” says Jim Zimmerman, CEO of WLDCU.
Central 1 also engaged the Red Cross to organize a credit union fundraising campaign. With the support of over 40 member credit unions and their employees, the effort raised more than $149,000 for affected communities. Money raised allowed the Red Cross to provide financial support, temporary housing, supplies, and counselling services to evacuees.
While the affected communities continue to need support as they rebuild, the immediate response to the wildfires was nothing short of inspiring. Credit unions in B.C. and Ontario rallied together to put our cooperative values and community-oriented approach into meaningful action.
Employees in Ontario kicked off the New Year by volunteering their time to the Toronto Area Habitat for Humanity. On January 11, ten employees helped build a townhouse in Brampton, Ontario. It was a fun and fulfilling day of learning new skills and working together helping to provide a family with a new home.
One of the Central 1 organizers of this initiative, Christy Saunby, commented, “I am so proud to work for an organization that helps support this and for all of the volunteers that help each year. I couldn’t do it without them!”
Not folks to sit on their laurels, 2018 has already seen Central 1 employees raising money for the B.C. SPCA, participating in the Scotiabank Bowl for Big Brothers and holding a 50/50 draw, mini-donut sale and book sale. Proceeds help children in the Greater Vancouver area. Here’s to many more years of working together to serve local communities in B.C. and Ontario!
In 2017, credit unions won eight awards – including a shared win for Mobile Banking Excellence and Online Banking Excellence. In the case of the online and mobile banking excellence, it is the Central 1 product that is powering progress for these credit unions!
Even more impressive, credit unions achieve these results with substantially fewer resources than most other financial institutions invest in some of these areas.
2017 Financial Highlights
Central 1 enjoyed overall strong results for the year. Total assets were $18.1 billion, up $0.8 billion from 2016. Central 1’s total equity increased $34.2 million during 2017 to $1,119.1 million. The increase in share capital in the Mandatory Liquidity Pool (MLP) and the earnings retained by Central 1’s other business lines account for most of the increase in equity year-over-year. Return on average equity (ROE) decreased in 2017. Net financial income was $73.4 million, compared to $67.5 million. Interest margin increased $5.6 million to $53.2 million, compared to the prior year. As a wholesale provider of services to its members and clients, Central 1 prices many of its services on a cost-recovery basis, rather than at levels that would enhance profit and improve ROE. Profit was $48.6 million, down $8.4 million compared to the prior year.