Virtual Finance: Pushing us out of our Comfort Zones

Posted by Christopher Stevenson

Rumor has it that when an idea is greeted with raised eyebrows or furrowed brows, you may have stumbled upon a truly innovative concept. Well, when Filene i3's Lesley Carrell (Fibre Federal Credit Union, Longview, Wash.), Dave Brooke (Point Loma Credit Union, San Diego), Steve Koenen (Altra Federal Credit Union, La Crosse, Wis.), Linda Armyn (Bethpage Federal Credit Union, Bethpage, N.Y.), and Scott Moriarty (Virginia Credit Union, Richmond, Va.) presented their idea for virtual finance at last week's i3 meeting, the room was filled with furrowed brows and raised eyebrows. And the folks in that room are some of the most innovative, forward-thinking credit union professionals in the U.S. and Canada.   

Here's the general idea. Create a credit union island in Second Life, an online virtual world created by its "residents," that would function as a central online location for the industry. Participating credit unions can set up a portal to the island through their Web sites. Check out the video below.   

The island itself will include financial management games, virtual stock market tickers (yes, there really are virtual stock markets in SL), and a simulated currency-exchange-rate display. Even cooler is that credit union members will be able to use a virtual ATM to convert their Linden dollars (the virtual currency of SL) to U.S. dollars and deposit them directly in their CU accounts. No one else does that, not even Wells Fargo, which was an early adopter of virtual worlds.

Teenagers and young adults are already entrenched in virtual worlds. There are over 7 million subscribers to Second Life worldwide, many of whom participate actively in its virtual economy, buying and selling products and services, and earning Linden dollars. More than 80 universities across the globe are offering virtual classes through online worlds. The i3 team has done their homework. They understand their target market's drivers and are building a service that is tailored to them. (See my previous post for more about that.)

It's an amazing concept. This project may be an important step in attracting younger members and showing them that CUs aren't just for the middle-aged and elderly. Nevertheless, I'm old (relative to the average user of SL) and tend to be out of the pop-culture loop (What, you mean kids aren't listening to the Spice Girls and Hanson anymore!?!), so this project is tough for me to get my head around. I imagine that it will be equally tough for CEOs, many of whom are pushing retirement age, and boards, some of which are well beyond retirement age, to grasp.

What do you think are the most important questions of CEOs and boards that will need to be addressed in order for Credit Union Island to get traction? How would you address them?    

Comments

[Robbie Wright]

Looks pretty interesting!

[Jeffry Pilcher]

The concept is intriguing and certainly worth investigating. Any dismissal of the idea at this point is premature, and probably coming from someone who doesn't understand Second Life.

I would think offering loans in Second Life has a lot of potential. Does Second Life have any kind of credit market today? Do people make peer-to-peer loans in SL? Is there a central exchange (e.g., a bank or service like Prosper or Zopa) that lists rates or people looking for loans?

Quite frankly, "commercial lending" in SL would probably be the biggest hit -- offer loans to people with promising ideas for their own SL islands. Kind of like venture capital.

One of the hurdles to overcome would be credit ratings. How do you evaluate the credit worthiness of an avatar?

Virtual lending would be the ultimate educational experience for young people. It would teach them the value of having good credit history, monitoring their credit score, balancing debt vs. over-extending, making timely payments, etc.

The experiment would definitely build the overall credit union brand, but it's a little vague how this experiment would be an immediate benefit to any specific credit union, since the Second Life community is distributed around the world. Teaching kids in the Philippines and South Africa about responsible finance is great, but how does this help a $100 million CU in Philladelphia?

Also, I suggest replacing the announcer in the video. It was a good script, but the announcer slurred his lines. Nothing personal... it was just distracting.

[Ginny Brady]

This concept is certainly in keeping with Filene i3's goals of innovation and meeting the needs of specific member groups. I agree with the comment made by Jeffry - as a Board member, it would be hard to sell the immediate benefit of investing time and money in a concept like this. Would we be paying a credit union employee to spend their work day in a virtual world of avatars and linden dollars? I'm certainly not ruling it out completely. Personally, even though I don't understand it, I find the technology and its potential fascinating.

[Dan Veasey]

I think it's amazing! Perhaps it would be a good project for a high school or college intern at a credit union? Maybe, let them create the virtual CU of their dreams in second life and we can get some ideas for our physical CU's? I have not ever visited second life for more than 2 minutes but this idea has peaked my interest.

I do think the only way it would fly is if it is started off as a collaborative effort by several CU's. I know my budget doesn't have any lindens in it!

[Scott Moriarty]

I think all of the comments are great, and as we understand the difficulties of “bleeding edge” technology, your comments all seem to focus in on areas where there may be some resistance. Let me know if any of this (unfortunately long) post is helpful at addressing some of those obstacles. There are quite a few things to consider.

First of all, this arena is evolving every day. It is a leveraging the aspects of social networking, individual ingenuity, and large corporations who shape the rules and ethics continuously. It is important to understand, the main focus of the project is to make CU’s more aware of the 3D internet, and how Avatars may be used in the future, and not specifically Second Life.

Second Life is one of the largest virtual worlds, and from a Board Member’s and management’s perspective, the focus needs to be about awareness and understanding of the possibilities. Second Life may not even exist in a couple of years, however the 3D internet will, and a virtual world with avatars certainly looks like the future of the internet. Keep in mind, the internet in and of its self was a difficult concept in the early and mid 1990’s; can you imagine any credit union without some sort of web presence today?

Let me address some of your specific comments:

In Jeffry Pilcher's comments:

1) Lending and Credit: You are right on, the future will allow for tremendous opportunity in these markets. The financial markets in SL are expanding every day. They are becoming more complex, and the need for more regulation and transparency is becoming very evident. In fact, there are multiple initiatives centered on virtual laws and ethics, and much of this is focused on economic viability. Check out this site as an example of virtual democracy:

http://www.metaverserepublic.org/

Basically, these efforts will enhance the credit monitoring aspects you spoke about. The avatar is a unique communication portal that does allow you to be individually identified and tracked. Linden (the founder of SL) has the ability to track the actions of the avatar, but has resisted a “big brother” approach because it really tries to allow the users to develop the future of the virtual world.

Currently, the economy is driven by the purchase of virtual goods and mortgages for land developers. Check out this article to give you a recent perspective on the consumer side of the virtual world:

http://www.nytimes.com/2007/09/09/business/yourmoney/09second.html?_r=2&ref=yourmoney&oref=slogin&oref=slogin

The possibilities are evolving every day, and as I said above, awareness is the key, and early adoption is invaluable from a knowledge perspective.

2) Comments related to immediate benefits to individual Credit Union’s:
Again, Jeffry’s concerns were also considered by our team. It certainly does not seem to have any benefit to the individual credit union at first, but alas, I think our business plan helps address that. (Let me know your thoughts.)

The focus of the prototype island was to demonstrate the possibilities and functionality. You are correct in that the world is far too disburse to expect people just to show up on the island, but what if we were able to tie the island directly to your homepage and coordinate the log in process right to the island. We are designing two possible scenarios for individual credit unions, both relatively inexpensive:
1) Option one is to allow your members to log in directly from your current website. If you have financial literacy initiatives focused on youth, you can coordinate classes on line, and maximize your member’s presence by coordinating classes directly with your member’s prior to entry. This will cost nothing and will be available to all CU’s
2) Option 2 allows for a branded orientation island that connects directly to the CU Island. This will allow you to manage your own island, (which we will be able to build for you) and initiate events of your own as you feel appropriate. This will cost approximately 10K and we believe give all CU’s some options.

Let me know your thoughts on the structure, because we hope it can address a very viable concern that you highlighted!

As far as the announcer on the video, it will be improved. Keep in mind the video is a prototype as well, and we are working with the Ohio University to coordinate the initiative. The voice you hear is of a student, and the recording tools we used at first can and will be enhanced, so thank you for the feedback, and we will address it shortly.

Some other comments:

From Ginny Brady, your comments and concerns about the benefits are extremely legitimate as well. As I outlined above, I think the cost to introduce your Credit Union to the medium is reasonable, and posting a staff member in SL will probably not be necessary at first (Though I love your forward thinking.) If your credit union does become an early adopter, then I think Dan’s suggestion of a college or high school intern is spot on! That certainly is a great way to break in at a reasonable cost and learn a lot in the mean time.

Dan's comments about market research and development of ideas to validate branch design is also extremely viable. More and more initiatives are focused on the engineering and architectural capabilities of SL. Here is a great article from a recent CNN post specifically geared towards your comment:

http://edition.cnn.com/2007/BUSINESS/09/16/second.life/

I think a quote from an MIT professor encapsulates the real world possibilities fairly well:

"Second Life's real potential may be that of an experimentation platform," says Eric Klopfer, a professor at MIT. He notes the ability within Second Life to rapidly construct objects and experiences "without having to build the world from scratch."

Again, building a branch and validating it can be very valuable, epsecially if you are trying to develop something more cutting edge. Again, some great forward thinking on the possible applications.

Additionally, the need for collaboration is also something we are trying to formulate. Ultimately we are trying to design the functionality of the program to be easily deployed at CU’s. Three of the five team member’s credit unions will probably be early adopter’s of the program. If anyone is interested in being a part of a pilot, let me know (the more the merrier.) If you need some supporting documentation, please let me know as well, I would be happy to assist in the persuasion process.

I really appreciate the dialogue, and help anticipating possible roadblocks to getting buy in for a fairly radical idea. If anyone would like to contact me, please do not hesitate:
Scott.moriarty@vacu.org
(804)253-6123

Again, I appreciate all of your comments and look forward to continued conversation.

[Scott Moriarty]

Sorry I miss-applied each individuals thoughts, I read the name on the top and not the bottom. Dan, your comments are attributed to Ginny, and Ginny, your comments are attributed to Jeffrey and so on. I am sorry for not aligning the names correctly. Thanks again for the comments

[Jeffry Pilcher]

Yeah, the way they attribute authorship on the comments here is very, very confusing.

Why do they put a dividing line in between a poster's comments and the attribution line???

Down there...

\/

[Ginny Brady]

Scott, I think I might be able to understand this better if I saw it in action. I liked the video explanation. You mentioned that this is a prototype. Is the CU Island actually on Second Life now and can I visit it?

[Chuck Van Court]

Kudos to all involved! Although the concept is clearly still in development, you seem to have a solid foundation to evolve from. I applaud you for sticking your necks out to explore new channels for raising awareness with younger consumers about financial literacy and credit unions.

Are you going to have much information extended that describes in common terms the real differences consumers can expect to see between credit unions and banks? The credit union "brand" is not well known across all demographics and certainly not known well at all with younger consumers.

It would be great if your efforts could begin to create a credit union brand so that individual credit unions are able to focus on branding their unique differences rather than answering the "why a credit union" question.

Good luck and let me know if Fuze can be of any help...pro bono, of course.

[Christopher Stevenson]

Sorry about the confusion regarding the writers of the comments. I've updated Scott's comments to attribute the ideas to the correct people.

Scott and Jeffry--Thanks for the notes. We'll look for a possible solution.

CJS

[Denise wymore]

This post, the i3 groups, CUES Nexus, blogging, Second Life, Twitter, Flickr, Facebook - I'm giddy for it all. You know why? Because credit unions are doing it.

I got a call earlier this week from a CU Times reporter. He wanted to know what this whole "blogging" thing was about (apparently he saw the OpenSourceCU post regarding the Belco marketing "project").....

A TON of credit unions still get their information from sources like the Times. And they wait for it to come across their desk. (to be fair, the Times does have a daily online version for breaking news).

Major KUDOS to Filene Research Institute (if you're not a member you need to be right now) and to CUES Nexus for giving us this real time, inspiring, fresh, new, INNOVATIVE ways to think.

Whew - that felt good. LOVE IT!

[Christopher Stevenson]

Denise--Thanks for the kind words. We love working on this stuff and are excited to share it.

Undoubtedly, CUs in the virtual world is intriguing. The conversation has also spread to opensourcecu.com; check it out.

Thanks to Trey for the link love.

[Chuck Van Court]

Are you going to have much information extended that describes in common terms the real differences consumers can expect to see between credit unions and banks?

[Scott Moriarty]

In response to Ginny's comments, we are looking to create an access point; however, unless you have an avatar, you will not be able to see it (a current limitation that we are working with Linden Labs on.) If you would like to go through the steps of creating an Avatar, let me know, and I will post a comment on how to do it.

We are currently testing the orientation platform we created to access the CU island. This will allow an individual without a current avatar to develop one and orient to our island. Again, we are still developing the more comprehensive, and scalable solution for individuals and credit unions alike, however we feel it should make entrance more seamless, especially for the new user. (the last thing we want is to discourage new users.)

As far as the Game and seeing it in action, I agree. The next 3-6 months will be about perfecting some financial interactive games and getting teen input and testing for validation. Once we create that, what will need to do is create what is called a sandbox (a place where developers can design and test prototypes before they introduce it to the public,) on the main grid (where adults can go without having to complete a background check,) that will allow you to test the game.

I will keep interested parties apprised of developments through the Blog, and other publications.

In response to Chuck's comments, you’re definitely crystallizing the focus of the main CU Island. Trying to have a uniform message and approach will be the key to buy in for the CU industry. I like the idea of providing the differences between banks and CU's. As we get closer to making the island more public, I would love to hear more thoughts on what we should emphasize, and how we could maximize the effort.

Scott M

[Scott Moriarty]

BTW, I am going to post some responses on opensourcecu tomorrow. That conversation seems to be taking on a different tone. I am going to focus on how the educational efforts with middle and high school students has been utilized succesfully in Ohio's educational system, and continues to be used as an effective tool.

In addition, we will focus on how individual credit unions can use this as a tool to create communities of their own members, so there is not a reliance on members just showing up arbitrarily.

Check it out tomorrow.