The CU2.0 Podcast

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 Most credit unions continue to wrestle with too many deposits and too few places to park that money profitably.  Call this Part 3 of the CU2.0 deep dive into lending in the pandemic era and that is because Barclay Keith, CEO of Artis Technologies, has developed tools that will enable a credit union to empower business members - think home improvement retailers, contractors, jewelers, etc. - to initiate personal loans to consumers, typically in the range of $3000 to $65,000.

For the credit union, this just may be a high yield lending arena that also may well bring in new members.

For the business, a fast, convenient way for a shopper to borrow may bring in bigger and more sales.

For the consumer, this may be a quick and easy way to borrow at competitive rates.

Win-win-win.

For the consumer it typically takes minutes to complete a loan app, a process that can be initiated and completed at the retailer.  The underwriting is AI powered, there's instant KYC verification, and the lending institution - the credit union - gets to set its own policies. Some may not want to lend to subprime borrowers, others may.  Some may want to lend only to super-prime borrowers, many will have a broader standard. Artis Technologies lets the lending institution set the policies it is comfortable with.

The conversation with Keith in this podcast is a broad look at how the Artis tools work and the benefits that may come to credit unions that deploy them.

Part 1 of the new lending tactics series is #113 with Sherif Hassan on small business lending.  Part 2 is #114 with Nicholas Hinrichsen on opportunities in refinancing car loans and also lending to subprime car buyers.   

You know you have money on hand you want to put to work.  Listen to the CU2.0 trilogy for ideas you can use today.

Barking alert:  There is some barking and growling in this podcast, noises that defied filtering software used in editing the podcast.  The podcast is clearly audible.  And no animals were injured in recording the podcast.

Listen up.

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Find out more about CU2.0 and the digital transformation of credit unions here. It's a journey every credit union needs to take. Pronto

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Call this the best of times for digital member service company Glia and that is because, in the pandemic era, credit unions' traditional member service tools have fallen out of favor and so just about all of us have become significantly more digital, said Dan Michaeli, Glia CEO and co-founder.

Just a couple years ago, many credit unions looked at digital customer service tools as a "nice to have." That's changed for many and, suddenly, these tools are must haves.

Especially at credit unions, says Michaeli and that's because credit unions have always had a member centric attitude. And digital tools just may be the best tools around.

Here is what Glia says it does: "Glia creates digital-first moments that simplify and transform conversations between institutions and their customers using Messaging, Video, Voice, CoBrowsing, and Artificial Intelligence." 

Even better, as service switches from channel to channel - as often happens - the context and history are retained. No more maddening moments for a member who just spent 10 minutes explaining a problem to a rep and now is asked by a new rep to  tell about the problem. From scratch.  How frustrating is that?

Right now, we are in a shift from telephone based member service into a variety of digital channels, including oldfashioned voice, but with text, AI and more claiming ever larger roles.

An upshot is that members may find themselves experiencing better service and now they will be able to pick their own channel.

Are these tools that mainly will abound at only the biggest financial institutions? Michaeli believes otherwise. He in fact believes that this technology levels the playing field and a $100 million credit union just may have member service tools that rivals that of a big five money center bank.

How cool is that?

You want to know - indeed, in the Covid era you need to know - about digital member service and that's why this half-hour is a must listen.

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Call this Part 2 of our smarter lending for credit unions. The recent episode, #113, explored small business lending with Capiform's Sherif Hassan. Listen here. This week it's time for something entirely different.

Happy with your car loan portfolio?

Many credit unions are anything but and this has become a crucial issue as most are awash in deposits and now are hunting for profitable places to put that cash to work.

Car loans could be it. But indirect lending...not so much.

Enter Nicholas Hinrichsen, an online car sales veteran who co-founded an online used car marketplace in 2015 when he raised $10 million in venture capital. They sold that business in 2017 to Carvana, which by now has grown into one of the nation's biggest used car retailers.

After logging three years at Carvana he is again starting up a new company, with $5 million in venture funding, where the aim is to help credit unions better sell car loans to their members.

Hinrichsen knows car loans and he also knows about credit union dissatisfaction with indirect loans.  He has a better idea: helping members refinance existing car loans issued by third parties, converting them into credit union owned loans.

Credit unions can win that fight, said Hinichsen, because usually their loans are better, at lower interest rates.

Most credit unions, he admits, do "spray and pray" marketing, sending out mailers to all pre-qualified members. In this podcast he tells a smarter, more cost effective way to contact the right members, ones who just might be prospects for car refinance.

Keep listening because he has an idea for tools that will essentially pre-populate a loan app for a member, using data the credit union already has. So filling out a loan application literally takes seconds.

And another - intriguing - idea he has is about how to profitably make sub-prime loans to existing members and, in the process, to create a path for them to get lower interest rates going forward. Just that may be a core credit union mission, especially as more members deal with economic pains of the pandemic.

You know you want to issue more and more profitable auto loans. This is a podcast you have to hear.

Contact Hinrichsen here.  The company is named Clutch

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Call this Part 1 of our smarter lending duet.  Part 2, posting tomorrow in podcast 114, is on smarter car loans with Nicholas Hinrichsen. You don't want to miss that one. 


PPP loans just may have awakened credit unions to the immense opportunity there is in small business lending.  That's what Sherif Hassan, CEO of fintech Capiform, believes.  The opportunity is there.

But to win that business credit unions need to speed up their lending process, said Hassan, and they also need to create a more efficient process that cuts costs.

Automation - smart technology - is the key.  At many credit unions, the typical cost for funding a small business loan is around $3600, said Hassan.  Capiform's tools  get that cost down to maybe $360.

At that cost, suddenly making smaller loans - maybe $50,000 or $75,000, loans that often are what small businesses want - is realistic.

Community banks have long had a lead in small business lending, but CU2.0 Podcast listeners recently heard Steve Bruyn of Foresight Research say that his data shows a huge drop in customer satisfaction at community banks. That's an opportunity for credit unions.

Add in the comfort many credit unions gained in the PPP program - where they learned they could successfully deal with small businesses and also with the federal government - and the path to more loans for credit unions is clear.

It comes at an ideal time. Many credit unions are drowning in deposits. Small business loans are a profitable path to safety.

Don't many fintech lenders want that same market? They do. But credit unions - with their community focus - have a fast track to succeeding in that battle. Listen up as Hassan tells why.

You may have heard Hassan's earlier podcast. Here's a link.

Listen up to this new podcast here.

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 Now just may be the worst of times but it also is an opportunity for credit unions to reinvent themselves, by reimagining their roles and taking an active part in helping to limit what many experts see as a coming eviction crisis, as renters who have suffered enormous economic hardships in the Covid-19 pandemic are put out on the streets. 

What if credit unions made available emergency loan funds to help renters avoid that outcome?

That's the question Jake Schlachter, executive director of We Own It, an organization devoted to reinvigorating the cooperative movement, asks.

A starting point is that many credit unions have more set aside than the 7 to 8% excess capital required by the regulator. What if those institutions used some of that money to help renters avoid eviction. What if....

Credit unions just might be seen as community heroes.

Suddenly, many would know exactly the difference between banks and credit unions.

Schlacter has sent out a letter to the CEOs of 1430 credit unions with assets above $100 million and significant excess capital. Here's a link to the letter.

Now what happens? Listen to the podcast. You will hear Schlachter's hopes and dreams.

This is a challenge to just about every credit union.  But the need is real and the possible payoffs are also real.

Want to hear more Schlachter? Here's a podcast I did with him for a different series a year ago.  This one focuses on cooperatives in general with minimal direct references to credit unions.

Like what you are hearing? Find out how you can help sponsor this podcast here. Very affordable sponsorship packages are available. Email [email protected]

And like this podcast on whatever service you use to stream it. That matters.

Find out more about CU2.0 and the digital transformation of credit unions here. It's a journey every credit union needs to take. Pronto

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Bank Transfer Day 2020, Bigger and Better?

By Robert McGarvey

You remember Bank Transfer day, that 2011 movement that brought in perhaps one million new credit union members, possibly more.

Something a lot bigger may be about to happen.

That’s the opinion of Steve Bruyn, CEO of Foresight Research who, writing in The Financial Brand, said that its extensive polling had found nearly a doubling of the number of consumers who say they intend to change financial institutions. Now 22% say they are heading to the exit of their present financial institution, per Foresight Research.  

Foresight Research elaborated: “We have surveyed almost 11,000 banking customers and credit union members in 44 markets to find out what is really going on in the world of banking from the customer/member’s point of view.  Then we added another survey of almost 700 customers and members to find out what the pandemic had changed in the banking industry.  We found a hot spot of churn.  Churn increased from 12% (over two years) to 22% expected churn in the next year or two.”

Hear the Bruyn podcast here.

The news gets sweeter still: “Of the people who intend to leave their financial institution almost 3 out of 4 are Gen Z or Millennials - the very block of business that drives the future of your financial institution,” said Foresight Research.

Foresight Research added: “So, what drove the high churn?  Even though satisfaction declined greatly (except at credit unions) that was not the culprit.  Customers and members were generally empathetic, likely thinking ‘we are all in this together’. It was all about financial issues like interest rates and fees.  The switchers while forgiving also are looking to reduce cost or increase interest on items like money market accounts, CDs, etc.”

This makes sense. The economy is the worst it has been since the Great Depression. Millions of us are unemployed and millions more are underemployed (working fewer hours).  It’s tough to balance the household budget when less money is coming in so a shrewd step is to slash unnecessary outgo.

Bank fees are prime to be trimmed. And that is a potential bonanza for credit unions.

Ask yourself this: where can credit unions beat banks, consistently?  The answer is and has long been on pricing of everything, from account fees to NSF fees and loan interest rates.  Credit unions are member owned, they have no shareholders who demand dividends.  Most have unpaid boards of directors.  Most pay their employees fairly but rarely lavishly - and here’s a CNN round up of bank c-suite compensation and note that the CEO of Bank of America had total compensation of $24.8 million but he was by no means the highest paid in the group.

Big salaries, big dividends to shareholders, and bloated, inefficient branch networks add up to huge expenses on the books and that means customers have to pay through the nose for the privilege of having a bank account.

Ac

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No more cookie cutter solutions.  And put a branch in the member's hands with mobile tools that allow the member to do pretty much anything he/she could do in a branch.

When Wildfire, a $900 million credit union in Saginaw Michigan, set out on its omnichannel journey four or five years ago it dreamed big, says Mark Schuiling, VP of technology.  

A lot of the process was doing hard thinking about what the institution wanted to be and what it wanted to provide members. From the start, however, Wildfire knew its future would be digital and it also wanted to provide members with a unified consumer experience, not the fragmented experience many credit unions offer because they have pasted together solutions provided by third party vendors.

At $900 million, however, and with only three programmers, Wildfire also knew it had to carefully pick a vendor and a tool that would suit its budget and its internal skills.

About a year ago, the process turned serious and Wildfire went all in on its digital transformation, working with Backbase as its technology partner.

Listen up to the Backbase podcast, number 110 in this series. 

This Wildfire podcast tells the story from the institution's perspective and Wildfire candidly tells about its hopes, its challenge, and also why it now is going slow in the roll out of its omnichannel solutions to members (because it wants members to want the solution and to know they want it).

Listen up here.

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 For how many years have you heard about omnichannel banking - and you also know not many institution have done this more than pay lip service to an idea of the digital first financial institution.

About 90% of financial institutions in the US in fact fall very short of really getting omnichannel, says Vince Bezemer, head of strategy at Backbase, a digital platform provider with the tagline "Become the Bank that People Love."

That means about 10% of US FIs are in fact digital first and of course that includes many of the biggest.

But it does not mean that credit unions can't succeed in embracing a digital first strategy.

In fact now, in the Covid-19 era, many are going forward at high speed to become digital first.

As for Backbase's pedigree, know that its clients include Navy Federal, State Employees Credit Union of North Carolina, and Schools First.

But Bezemer in this podcast stresses that Backbase has tools and services for smaller institutions too. 

This podcast is Part 1 of a two part series on digital first.  In this podcast Bezemer talks at length about what digital first means, why it is important, what institutions need to really do it, and why you don't want to define your credit union with cookie cutter tools and apps that literally hundreds of other credit unions use.

In Part 2, you will hear from Wildfire Credit Union, a Backbase client that is deep into its transformation into a digital first institution. It's a rare, candid look at what the process really is.

You know digital first matters.  

Listen up.

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 Paul Ablack knows big data and fintechs.  He served as CEO at OnApproach, a big data company aimed at credit unions that was acquired by Trellance.

Ablack left OnApproach after the acquisition and is now noodling new opportunities in fintechs and especially in commercial lending for deposit rich credit unions.  In that latter regard he is bullish on what he sees as major opportunities in lending for new senior care facilities and, yes, that industry has taken a beating in the Covid-19 era but that, too, may well fuel the need for new, more smartly designed senior care facilities.

The need for senior care will only grow for some years to come as Baby Boomers age (and the oldest Boomers are now 74, the youngest 56).  

Throughout, Ablack sees unique opportunities for credit unions, in part because of their cooperative character. If enough credit unions share data, a powerful big data lake would be an industry asset that will help credit unions compete with the biggest banks.

If credit unions come together into what Ablack sees as a Venture Capital CUSO that manages many fintech investments, big successes could come to the movement, he said, where today's piecemeal, every credit union for itself fintech investing produces scattershot successes.  

Bold thinking? You bet. That's why Ablack is a fun podcast guest. He throws out a number of good ideas you may not have heard before.

Covid-19 is triggering huge changes in financial services. Tomorrow's services won't be today's.  Think new, think fresh - and this Ablack podcast will nudge you in that direction.

From our archives, here's a podcast with Lou Grilli of Trellance.  It predates the OnApproach acquisition. But there's good info on payments.

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 Before he was 40, Ralph Swoboda was named CEO of CUNA in Washington, DC.  That was in 1986 and he held the job until 1994.  That was when CUNA was a big association, with a head count upwards of 1400 because it provided a lot of assistance for credit unions with back office operations.

His next job after leaving CUNA was chairman of the management committee of the Association of British Credit Unions, based in Manchester, England.

Later, he moved to CUNA Mutual where he was head of international operations, directing operations in some 30 countries, from China to the Caribbean.

Now Swoboda is managing director of CUFA Ltd., a fintech based in Dublin, Ireland which creates lending analytics software running on big data for credit unions in Ireland but expansion into the United Kingdom and the United States is afoot.

Buckle your seatbelt for this wide ranging conversation that covers upwards of 35 years of high level involvement with credit unions, literally in dozens of countries. You will hear about differences between Irish credit unions and American credit unions, about the importance of community banks to US credit unions, and how the US payments system is something of a Third World embarrassment.

We wind up discussing the lending analytics tools Swoboda now is involved in and the timing could not be more ideal as many credit union executives awaken to the reality that lots of once solid loans on their books may be turning bad as Covid-19 takes its toll on many national economies.

Probably no podcast in this series covers so diverse a range of topics, countries, technologies.

You may not always agree with Swoboda. But you will definitely have fun listening in on this conversation.

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