Activate Your
THE
ISSUE
2020
FEATURING
SIERRA CENTRAL CU
on increasing lending volume by 30%
THINK 20 SPEAKERS
on pivotal activation moments
INSIDE: COVID-19 Presents Major Opportunity for CUs to Think Differently
The middle miles are more important, seldom discussed, and wildly misunderstood. – Scott Belsky, Chief Product Officer at Adobe
The Magazine for Credit Union Intrapreneurs
Next
Activate Your Next | CONTRIBUToRS
Adobe's Chief Product Officer and Executive VP of the Creative Cloud, entrepreneur and author
Scott Belsky
Chief Operating Officer for CO-OP Financial Services
Nick Calcanes
Award-winning financial editor of NBC Today and founder of HerMoney Media and HerMoney.com
Jean Chatzky
Senior Vice President, Pay Products for CO-OP Financial Services
Tom Church-Adams
President and CEO for CO-OP Financial Services
Todd Clark
Chief Product Officer for CO-OP Financial Services
Bruce Dragt
CEO of Partners Federal Credit Union
John Janclaes
CEO of Town & Country Federal Credit Union
David Libby
Chief People Officer for CO-OP Financial Services
Cheryl Middleton Jones
Chief Strategy Officer for CO-OP Financial Services
Dean Michaels
Founder and CEO of The Brainy Business and columnist for Inc.com
Melina Palmer
Editor-in-Chief of THINK Review, THINK founder and Chief Experience Officer for CO-OP Financial Services
Samantha Paxson
Business and personal finance journalist
Gayle Sato
SUBSCRIBE TO THINK REVIEW FOR FREE:
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Pivotal Moments That Propelled World-Class Activators towards Their Next
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Accelerating Your Next: Introducing The CU Strategic Investment Assessment Powered by CO-OP and backed by EY NextWaveTM
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Becoming the Primary Financial Relationship Requires Activating a Shift in Focus from Life Stage to Lifestyle
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Developing the Energy to Endure
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How Behavioral Economics Can Help You Activate a Better Member Experience
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Activate Your Culture: Meet Evolving Business Models in a Socially Distanced World
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Wisdom from THINK Virtual: Crisis Presents Major Opportunity for CUs to Think Differently
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THINKing Out Loud: Leading and Activating with a Growth Mindset
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What a Moment! How Financial Services Has Changed (and Where It’s Going)
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Activation Spotlight: How After-Hours Lending Generated $5-$8 Million/Month for Sierra Central Credit Union
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THINK Review: Summer Reading
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Living Your Mission: Activating Your Members through Financial Wellness
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Activate Your Next…With Us
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THINKing Out Loud: Just How Hard Should It Be to Activate Your Next?
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Activate Your Next | TABLE OF CONTENTS
Letter from the Editor
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FEATURED THEME
innovation
conversations
credit union spotlight
education
closing thoughts
Activate Your Next | LETTER FROM THE EDITOR
THINK REVIEW 2020
How We Activate Will Set Us Apart
Go Back to Table of contents
The “new normal” is in full swing – and THINK 20’s theme, “Activate Your Next,” feels apropos. For some credit unions, your “next” may be activating behavioral science to optimize all the little things that heighten member engagement (page 16). For others, it might be placing a big bet on activating a dynamic, digital culture in your organization (page 18). No matter what strategies your credit union pursues as the economy stabilizes and recovers, I know that how we activate will set us apart. Credit unions aren’t just another business-as-usual institution; we’re a relational partner during some of the most intimate moments in a member’s life. From planning for kids’ college to needing to skip a card payment, credit unions have opportunities during major and minor life events to demonstrate that we are the compassionate banking alternative and to secure the Primary Financial Relationship (PFR) with your members. To secure PFR with modern members, we must focus on lifestyle, not life stage (page 13)... which allows us to transcend being just an institution and instead crystalize a relationship that is responsive to shifting trends. A relationship is about thoughtful touches during the moments that matter, exemplified by card controls like CO-OP’s CardNav, which gives members personal control over card fraud and spending limits. A relationship is built with the trust that a member’s call will never go unanswered. That’s why CO-OP doubled down on investments in our 24/7 Contact Center, ensuring your credit union will be there every single time a member needs assistance after business hours. A relationship is characterized by people helping people – not just dollar signs. If every credit union activates their “next” with helping people in mind, I know that our collective efforts will succeed in helping members weather this storm. Credit unions are the only providers poised to secure the role of PFR for this new normal and for generations of members to come. Let’s get to it. ! Samantha Paxson Chief Experience Officer editor@coop.org
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Wisdom from THINK Virtual
Crisis Presents Major Opportunity for CUs to Think Differently
The unprecedented COVID-19 crisis is in the process of transforming the financial services environment at a pace we’ve not seen. Many clients have told us that they’ve been able to activate more change in the last quarter than they have in the last ten years. Due to necessity, digitally nomadic consumer behavior and engagement trends that have been steadily evolving over the course of years and decades, have taken hold practically overnight. We have seen firsthand the data cited by the recent RTI study, that 33% of consumers have ordered groceries online and had them delivered for the first time. And 54% of these consumers plan to continue shopping this way after COVID-191. This is not a new script. Some of the most innovative business ideas are borne out of crisis. The 2003 SARS epidemic in China set the ecommerce giant Alibaba on its path to market dominance because they grabbed hold of the market opportunity and were set up to do so2. The pandemic has sped up many of our credit unions’ plans – plans that may have been “nice-to-haves” prior to this time. Our industry has had to figure out how to activate and operationalize new strategies at a pace many of us have never before experienced. All this being said, we believe this is your moment. Trust is the currency you’re growing right now. And not only do credit unions already have it in spades, you’re building it through your actions in response to this crisis. Bold strategic bets require a bedrock foundation of infrastructure, operational dexterity and routines that make swift action and agile delivery possible. Over the past three years, my team has been integrating the technology and infrastructure to support CO-OP’s multi-year strategy to transform into a platform business. Doing the hard work to modernize has enabled us the flexibility to quickly pivot to respond to the crisis on behalf of our clients and employees. We are living proof that investing in your foundation will pay off not only in the day-to-day, but at unexpected times when meeting your members where they are matters most. Following are a few of the primary credit union opportunities that surfaced during THINK Virtual sessions, filled with information for responding to COVID-19 now and next. [CEROS OBJECT] During THINK 20 Virtual, CO-OP polled online attendees about which consumer payment trends they thought would continue after COVID-19. Nearly 70% of responders selected the increased use of digital payments; 42% selected high adoption of contactless cards; and 34% selected a continued decline in the use of cash. These results are no surprise. According to a 2019 Federal Reserve payment study, non-cash payments reached $174.2 billion annually, and the total value of payments totaled $97 trillion in 2018 . “It’s time to accelerate your roadmap for contactless cards,” said Nick Calcanes, Chief Operating Officer of CO-OP. “Traffic may move away from car loans to credit card flow. Understand that volume.”
Activate Your Next | WISDOM FROM THINK VIRTUAL
By Nick Calcanes
THINK Virtual, held on May 7, 2020, guided our clients with near- and long-term strategies to serve and even delight members through rapidly changing times. It is clear that COVID-19 will leave this industry with some permanent changes and has opened up ways of working that have made some credit unions more efficient, not less.
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The unprecedented COVID-19 crisis is in the process of transforming the financial services environment at a pace we’ve not seen. Many clients have told us that they’ve been able to activate more change in thet last quarter than they have in the last ten years. Due to necessity, digitally nomadic consumer behavior and engagement trends that have been steadily evolving over the course of years and decades, have taken hold practically overnight. We have seen firsthand the data cited by the recent RTI study, that 33% of consumers have ordered groceries online and had them delivered for the first time. And 54% of these consumers plan to continue shopping this way after COVID-19 . This is not a new script. Some of the most innovative business ideas are borne out of crisis. The 2003 SARS epidemic in China set the ecommerce giant Alibaba on its path to market dominance because they grabbed hold of the market opportunity and were set up to do so . The pandemic has sped up many of our credit unions’ plans – plans that may have been “nice-to-haves” prior to this time. Our industry has had to figure out how to activate and operationalize new strategies at a pace many of us have never before experienced. All this being said, we believe this is your moment. Trust is the currency you’re growing right now. And not only do credit unions already have it in spades, you’re building it through your actions in response to this crisis. Bold strategic bets require a bedrock foundation of infrastructure, operational dexterity and routines that make swift action and agile delivery possible. Over the past three years, my team has been integrating the technology and infrastructure to support CO-OP’s multi-year strategy to transform into a platform business. Doing the hard work to modernize has enabled us the flexibility to quickly pivot to respond to the crisis on behalf of our clients and employees. We are living proof that investing in your foundation will pay off not only in the day-to-day, but at unexpected times when meeting your members where they are matters most. Following are a few of the primary credit union opportunities that surfaced during THINK Virtual sessions, filled with information for responding to COVID-19 now and next. Opportunity: Leverage Payments as the Center of the Consumer Financial Ecosystem Building member relationships requires engagement based on their current behavior and their needs at this moment – most of which are remote and digital. This empowered consumer environment points to payments as a service and driver for interacting with members in their daily lives. Financial services as a whole is rapidly moving toward a remote banking, digital self-service paradigm. Credit unions have long wondered, “How can I get my members to adopt this new technology?” Now, members don’t have a choice. They are adapting quickly and so are we. We know lending is the traditional fuel for our movement’s economic engine; however, the transformation of member behavior has created a connectivity between use cases. Payments are the daily lifestyle driver of life stage lending. It’s time to leverage both to attain the entire lifecycle of the member.
Like its credit union clients, CO-OP Financial Services has had to make significant adjustments during the COVID-19 crisis. According to Todd Clark, CO-OP’s CEO, the digital transformation already underway left it well-positioned to pivot to the new normal. “We started our digital transformation three years ago,” Clark says. “Another six to seven months, and this would have been a non-event. The first thing we did was protect our people. We have roughly 1,800 folks and they’re the first priority in everything we do.” CO-OP runs three Contact Center locations and they were split up into a total of six “pods.” Everyone at risk was immediately sent home and within a week and a half 80% of Contact Center employees were working remotely. “This was due to an incredible response not just from our Contact Center folks but from our Enterprise Technology staff, staying up 20 hours a day, trying to get laptops distributed to hundreds of Contact Center employees.” The hard work paid off. On April 15, roughly a month after rolling stay-at-home directives began to take effect, the first of the U.S. Treasury stimulus checks were distributed to families. On that day, CO-OP experienced a 100% jump in Contact Center volume and a 20% increase in shared branch network volume, year over year. And the team didn’t skip a beat in ensuring members were taken care of during what was a stressful time for many. Fortunately, CO-OP had a strong business continuity plan in place well before the crisis hit and Clark sees no adverse effect on the company’s product roadmap. “In addition to keeping business continuity and being there for our clients, this crisis has brought out the very best in our people,” said Clark. “We have grown as a company through this event and it has made us stronger, more cohesive as a team and more determined than ever to deliver for our clients and their members.”
payments reached $174.2 billion annually and the total value of payments totaled $97 trillion in 2018 . Our suggestion? Accelerate your roadmap for contactless cards and new innovations within the card environment. Traffic may move away from car loans and toward credit card flow, so understand that volume and revise your service model based on member usage across your portfolio of services.
According to Ryan Battles, Principal, Americas Financial Services Banking and Capital Markets at EY, we are witnessing a “revolutionary shift in behavior” that is rapidly accelerating the digitization of the payments landscape. The primary obstacle to this revolution is on the merchant side, as many retailers lack the capabilities to support the shift to digital commerce from brick-and-mortar interactions. But in the first few months of the pandemic, innovative stores adjusted quickly due to necessity. Credit unions being there to support a more convenient, frictionless purchasing experience demonstrates that we are showing up where and when our members need us. “Digital First is the new normal strategy for BOTH growth and risk avoidance,” as Todd Clark, CEO of CO-OP likes to say. And according to Battles, organizations that were early adopters of the cloud, remote technology and digital technology are much better positioned to withstand the current crisis. We have seen how digital self-service, along with other services like drive-thru tellers and contactless payments, has proven to be a vital tool for maintaining efficiency, while ensuring the physical safety of credit union members and staff. Digital service tools have facilitated and simplified the processes for allowance of late payments, loan deferrals, fee waivers, and Payment Protection Program (PPP) loan applications. The challenge many of our clients are struggling with is how to better integrate their operations to actively connect solutions across the enterprise to deliver this expected and continued capability. This is the time for swift backend operations to facilitate the proactive, front-end member experience. The CO-OP ecosystem is designed to help our clients do exactly that – our suite of integrated solutions ties together backend and front-end systems to enable a seamless experience for credit unions and their members that is both expected and essential today. Opportunity: Accelerate the Future and Rethink Credit Union Operations for a Revitalized Workstyle and Workforce COVID-19 has also hastened credit unions’ transformation in how they structure their staffing and operations. The crisis has forced credit unions to put innovation on the front burner and figure out how to transition their staff to a largely remote working environment. [See Sidebar: How CO-OP is Transitioning During COVID-19] According to Battles, it is prudent to plan to keep back-office and middle-office positions working remotely until a COVID-19 vaccine is found. Credit unions have not traditionally been at the forefront of the “gig economy,” but Battles suggests thinking creatively to address credit unions’ current challenges by outsourcing certain key tasks that require specialized expertise not available in-house. For instance, since the IRS tax deadline was extended by three months this year, contracting with independent CPAs and tax preparers to help credit unions process the massive volume of PPP loan applications represents “an almost perfect use case.”
How CO-OP is Transitioning During COVID-19
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During THINK Virtual, CO-OP polled online attendees about which consumer payment trends they thought would continue after COVID-19. Nearly 70% of responders selected the increased use of digital payments; 42% selected high adoption of contactless cards; and 34% selected a continued decline in the use of cash. These results are no surprise. According to a 2019 Federal Reserve payments study, non-cash payments reached $174.2 billion annually and the total value of payments totaled $97 trillion in 2018 . Our suggestion? Accelerate your roadmap for contactless cards and new innovations within the card environment. Traffic may move away from car loans and toward credit card flow, so understand that volume and revise your service model based on member usage across your portfolio of services.
Above all, Battles suggests credit unions start to reimagine what the physical return to work will look like. “One of the upsides of this experience is that many organizations have seen how effectively you can work virtually, so the need to be physically present will go down and the need to travel will go down,” Battles says. “Telecommuting – having Zoom meetings versus flying people to meetings – is now the new norm for a few reasons: primarily the need for safety and the pure reduction in business expense. How we design this way of working to optimize the way we deliver service is on every leader’s mind.” Rapid investment in technical infrastructure, infosec, talent and modernizing all the processes that run through the backbone of your organization creates flexibility, speed and security. It enables both the modern platform and a way of working that makes it possible to serve members from anywhere. Many of us were caught off guard when this happened. We don’t have to put off the investment in transforming our operations because it’s critical to our member service, engagement and usage regardless of how our members want to do business with us. Opportunity: Demonstrate Financial Wellness is Core to Who You Are for Employees and Members as the “Compassionate Banking Alternative” Credit unions have been here before. This time we can do things differently. “The roaring 20s of this century might turn out to be more like the 1930s of last century,” says Jean Chatzky, financial journalist and the host of CO-OP’s THINK Virtual conference. “While this is a challenging time for credit unions, it can also be a moment of clarity — people need you,” says Chatzky. “Anything that builds a friendlier, more trusted relationship with members is essential.” A recent Gallup study reinforces the point that members’ trust in their FI is strengthened by taking a personal approach, providing thoughtful products and now more than ever offering member-centric services that help with financial management and wellness. Credit unions have an edge as they’ve consistently outperformed big banks across the board on these fronts. After the 2008 financial crisis hit, the long and painful recession with high job losses, plummeting home values and consumer dissatisfaction with big banks created a movement to find a better banking alternative. This culminated in 2011 with Bank Transfer Day, helping credit unions gain 2.2 million net-new members . But the digitization of our environment a decade later has shifted expectations. It’s easy to shift services to other providers and consumers have slim patience with a less-than-desirable experience. They now need experiences that help them in their financial lives. According to Battles, consumers will give us a pass on the experience we delivered in March and April, but now, their expectations on digital delivery will be higher than before COVID-19. The well-executed support of government relief programs like the PPP was one of the most important actions credit unions took in the onset of the pandemic. We have seen how credit unions and other community financial institutions offered the best response to small businesses applying for PPP loans, while big banks turned many eligible applicants away, preferring to focus on their mid- to large-size corporate clients. At CO-OP, we supported our frontline teams with “CO-OP Cares” pay to thank them for their service – for showing up for our clients when they needed it most and to manage the many challenges families are facing during this pandemic. Many of these teams were experiencing the same hardship as members and our empathy across both populations counted. We understood the need to support our employees in order for us to support our credit union clients and members. CO-OP acted quickly to transition many employees to work remotely and to implement safety procedures and physical distancing for onsite employees across all offices. Ensuring we did not overlook the impact of such quick and drastic work and personal lifestyle shifts these changes caused, we’ve encouraged and supported everyone at CO-OP to also take the time needed to focus on their mental, physical and emotional well-being. Many credit union members are struggling – even well before this current crisis. Take this opportunity to focus on your members’ long-term financial wellness and integrate it into your delivery and engagement methodology to develop a deep, emotional connection with them. Giving members transparency and control in their daily engagement is another way of delivering financial wellness education by helping them understand an aggregated view of how they are performing. This is the essential foundation for establishing a Primary Financial Relationship and for being seen as the “compassionate banking alternative.” This is Your Time From the Great Depression to the Great Recession, credit unions have maintained the best interests of their members at heart during a crisis. Crisis is a time of opportunity. It’s a time to get things done. It’s a key reason why consumers have traditionally gravitated toward the cooperative movement during our nation’s most challenging periods. The focus of this year’s CO-OP THINK Virtual event centered on how credit unions must respond to the current crisis to support their members and the opportunities this challenge presents for the future of the movement.
According to Battles, it is prudent to plan to keep back office and middle office positions working remotely until a COVID-19 vaccine is found.
Sources 1 www.rtiresearch.com/the-covid19-consumer 2 www.cnbc.com/2020/03/26/ chinas-2002-2003-sars-outbreak-helped-alibaba-become-e-commerce-giant.html 3 www.federalreserve.gov/ newsevents/pressreleases/files/2019-payments-study-20191219.pdf 4 www.huffpost.com/entry/bank-transfer-day_b_2056292
Watch the event on-demand at insights.co-opfs.org/think-virtual.
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Pivotal Moments
That Propelled World-Class Activators towards Their Next
You might think – after looking at the long list of name-brand projects Scott Belsky has had a hand in – that Belsky is a startup artist, whose first love is the creative spark. He’s been an investor or early advisor for Pinterest, Uber, sweetgreen, Carta, Cheddar, Flexport, Airtable and Periscope. But in fact, Belsky has a different fascination: the messy middle. You’ve been there. It’s the part of the story that never gets told, the part even you might downplay in the re-telling. At one point, Belsky was so disconnected from these parts of his entrepreneurial projects, he had to refer to the photos on his phone to remind himself what it was like. There, he saw screenshots of problems that needed fixing. Happy customer comments. Pictures of team members collaborating. Celebration. Despair. Endurance. And, ultimately, success . The questions around what treasures lay to be found if we mine the messy middle led Scott to write a whole book. “While difficult to withstand and tempting to rush, the middle contains all the discoveries that build your capacity,” Belsky writes in his book “The Messy Middle” (2018). “The middle is messy, but it yields the unexpected bounty that makes all the difference.” Read an excerpt from Belsky’s book on page 22.
Activate Your Next | PIVOTAL MOMENTS
By gayle sato
Every story has a moment of truth. We examine the parallels in pivotal moments from the stories of THINK 20 contributing speakers and of our fellow credit unions, when they encountered the key questions that propelled them to find their next success.
Activator: Scott Belsky Adobe Chief Product Officer (Speaker @THINK Future of Workplace Forum: Serving Members in the Transformed Workplace on October 14, 2020) Catalyst: Phone photos from the past Catalyzing Question: How do we celebrate the middle of our journey?
Activator: Launch Federal Credit Union Catalyst: Competing with megabanks Catalyzing Question: What if we didn’t rush through?
We owed our members the same level of attention as the megabanks and other card issuers, arguably more. That’s ultimately what we gave them, and the results have far exceeded our expectations.
Kristen Mecca, Vice President, E-Services at Launch FCU
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Working through their messy middle, Launch FCU needed a better view into how credit cardholders were transacting, what triggered their behavior and how their product could evolve to stimulate new accounts and richer relationships. Using three distinct CO-OP SmartGrowth consulting program campaigns – balance transfer, credit line increase and spend-and-get – Launch FCU saw a 13% year over year increase in purchases, 16% rise in interchange revenue and outstanding balance growth from $14.6 million to $24.7 million over two years. “We owed our members the same level of attention as the megabanks and other card issuers, arguably more,” said Kristen Mecca, Vice President, E-Services. “That’s ultimately what we gave them, and the results have far exceeded our expectations.”
To taste a Kogi short rib taco for the first time is to taste Los Angeles: It’s spicy and unexpected and familiar and crazy delicious. Everything you’ve eaten in L.A. up to that point – indeed, everything you’ve seen and done and covered up in hopes of it never being discovered – is contained in that bite. For Chef Roy Choi, everything is cumulative. He grew up in Orange County, California, where his parents owned a series of businesses, including a Korean restaurant. While studying at the Culinary Institute of America, he interned at Le Bernadin in Manhattan and later became chef de cuisine at the Beverly Hilton. One night, after being fired, he accepted an impromptu invitation from a friend and former coworker to do some cooking on a taco truck serving after-hours club-goers. That was the when the questions that would ultimately form Kogi came together. Kogi was the first to combine Korean-American flavors with Mexican tacos, burritos and quesadillas. It pioneered the food truck revolution and was the first to Tweet out its daily locations to an eager, wide-ranging audience. Later, Choi opened free-standing restaurants Chego, A-Frame and Best Friends to critical acclaim and co-founded LocoL, which promised to deliver healthier, better fast food to the Watts neighborhood in Los Angeles and which was named the Los Angeles Times’ first Restaurant of the Year. Although some of these ideas have been iterative, Choi’s mission never changed: cooking from the heart and feeding a hungry America. “Sometimes things don't last forever, but that doesn't mean that those moments that happened are worth nothing,” Choi told GQ in 2019. “Go back and excavate all the things that happened, and then make a 2.0 version from that—or even use little elements of it to contribute to your next project .” In 2017, the leadership at Water and Power Community Credit Union (WPCCU) faced a common challenge: legacy systems and rising technology debt. “We had a very strong family culture with a can-do attitude but we needed to do something differently very quickly,” said Celeste Zibelli, VP of Marketing. At the last minute (and serendipitously), Zibelli was asked to attend the THINK 17 conference in New York which was focused on theme of digital transformation. “It spoke exactly to what my credit union needed to accomplish,” said Zibelli. “THINK opened the possibility for our credit union to pay off our technology debt by changing systems, structure, and culture in order to let in a 21st century way of working. And thanks to David Rogers (one of the keynote speakers at THINK 17), we even had ‘Digital Transformation Playbook’ to use.” Inspired by what we she learned at THINK, Zibelli came back and recommended to her CEO that they start introducing these concepts to WPCCU’s staff and board members and also reassess their contract with their core provider. In less than two years, WPCCU switched to CO-OP for debit, full-service credit, ATM processing and Contact Center services, as well as leveraged CO-OP’s SmartGrowth Consultation services. As a result, Zibelli says, “WPCCU is having tremendous financial success, with gross and net income at 20-year highs and placing it in the top 2% of Southern California’s credit unions.” !
Activator: Water and Power Community Credit Union Catalyst: THINK 17 Conference Catalyzing Question: How can we reset for rapid growth?
Sources 1 Scott Belsky. YouTube.com, July 18, 2018. “Scott Belsky: Lessons from the Messy Middle of a Startup’s Journey.” 2 Roy Choi. GQ.com, January 17, 2019. “Why Failure Isn’t Real, According to Chief Roy Choi.”
Activator: Roy Choi Chef, Entrepreneur, Community Activist (Contributing Speaker @ THINK Virtual on May 7, 2020) Catalyzing Question: Can I iterate?
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Accelerating your NEXT
Introducing The CU Strategic Investment Assessment Powered by CO-OP and backed by EY NextWave
What is keeping you up at night? In an era of COVID-19 response, mergers and acquisitions, stiff competition from Big Banks, Fintechs and Big Tech, credit union leaders are now facing some of the most stressful strategic choices they will ever have to make. What’s needed is smart, informed and credit union-specific consultation to help leaders place the right strategic bets for future growth – not only for their members, but for the movement. Now, more than ever, credit unions need to adjust long-term strategy in swift and meaningful ways to serve our members in a post-COVID-19 world. That’s why CO-OP has partnered with EY to create The Credit Union Strategic Investment Assessment Powered by CO-OP and backed by EY NextWave™, a proprietary, credit union-centric tool, designed to provide CU leaders with insightful, strategic guidance unique to their enterprise. The Assessment interprets data inputs provided by the credit union and informed by EY’s breakthrough NextWave™ Consumer Financial research to create a strategic blueprint of the enterprise’s business opportunities with recommendations for how each individual credit union can reach their maximum potential.
Activate Your Next | accelerating your next
By SAMANTHA PAXSON
“Build, buy or partner? Invest in new technology or update legacy systems? Prioritize payments or lending? Grow membership by casting a wider net or targeting specific audiences?”
TM
The EY NextWave research that formed the foundation of the Assessment outlines four paradoxes in consumer financial services today: 1. Financial Health Consumers’ perceptions of their financial health is quite optimistic versus consumers’ actual behaviors, which indicate futures filled with debt; the opportunity for the financial services industry to address this gap is large, particularly as members recover from pandemic-induced economic shock. 2. Trust Consumers lack trust in the financial services industry overall – even though trust with their PFI was still quite high. 3. Convergence It’s harder than ever to differentiate – and consumers have a harder time perceiving the differences in the current, crowded financial services landscape. Despite claims to the contrary, financial service companies have changed very little over time. 4. Digital In a digital-first world – and as COVID-19 has accelerated demand for safer, contactless and digital products – consumers still need and want human interactions; finding that perfect balance is a tough call for financial service companies. The research points towards these four paradoxes leading to a complete reframing of consumer financial services over the next 5 years. “Financial institutions face major choices that will determine how they stay relevant, earn more customer trust and play to win,” the report predicts . Making the right strategic choices to earn Primary Financial Relationship (PFR) status has never been more critical. However, it can be hard to know where to place big bets with limited resources for the maximum results. That’s where The CU Strategic Investment Assessment Powered by CO-OP and backed by EY Nextwave™ comes in. By investing the time and resources upfront to complete the Assessment, participating credit unions benefitted from a program that integrates industry-leading research with their enterprises’ distinct profile to identify the strategic model that offers the most upside potential for their credit union. There are five strategic models positioned in the Assessment: Vertical Integration, Digital Native, Financial Utility, Product Producer, Ecosystem Integrator. These are flexible – not static – strategic models that can create the kind of differentiation financial service institutions will need to address the four financial paradoxes uncovered in the research and to respond effectively as the economy stabilizes and recovers. Each credit union may have a propensity towards one or more of these models.
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Activate Your Next | ACCELERATING YOUR NEXT
The customized Strategic Blueprint results use each credit union’s unique inputs to recommend a main, strategic model to create the greatest upside opportunity in terms of revenue and share of relationship. Because the data inputs are critical to providing the best outcome, CO-OP recommended that each credit union identify a cross functional team to take the Assessment together. “The Credit Union Strategic Investment Assessment will enable us to understand where we lie in our technology investments, what those mean to us, where our shortcomings are and where to invest. We’re very excited about that," says Dave Libby, CEO of Town & Country Federal Credit Union. Here’s an overview of what credit unions received via the Assessment report: An executive summary of your credit union’s results A strategic blueprint outlining the strategic models with high potential to drive growth at your credit union and the data and meanings behind your current state and future state opportunity, specifically: • Who to Target: Opportunity segments to focus on for your strategic model. • Where to Invest: Solution sets and capabilities needed to serve these markets. • What it’s Worth: Incremental segment penetration potential to create economic upside. A supplemental package enabling you to dive into more detail regarding your strategic model, target member segments and recommended capabilities.
The process emulates an extensive EY consulting engagement to make a premium Management Consulting service accessible to all credit unions for just $1,200 – an incredible value! “Credit unions would have to pay hundreds of thousands of dollars to receive this type of in-depth, and insightful strategic mapping and consultation. CO-OP is scaling consultation to make it accessible and self-serviceable as we look to build and preserve the modern credit union movement,” says Todd Clark, CO-OP CEO. ! The Assessment was open from May 11 - July 2, 2020. For more information about The Credit Union Strategic Investment Assessment Powered by CO-OP and backed by EY Nextwave please visit co-opfs.org/cusia.
Sources 1 NextWave Consumer Financial Services: "Financial Subscriptions Are Coming." Page 4. 2018.
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Becoming the Primary Financial Relationship Requires from Life Stage to Lifestyle
Activating a Shift in Focus
Think through the journey of the average credit union member: there are only a handful of times throughout their financial lives that trigger the need to borrow money. Contrast few-and-far-between life stage events with daily financial needs – like getting gas, buying a gift or paying the babysitter – and the key to PFR begins to crystalize around a distinct suite of products: Payments. While payments traditionally are not considered significant in terms of revenue, they are exceptional at producing the deposits and engagement on which credit unions depend for lending. Deposits fund the loans, and daily payment engagements ensure members think of their credit union when the borrowing need arises. Loans and payments strengthen each other. The Financial Case for Getting Serious About Payments Global payments revenue is expected to grow 5.9% annually through 2028, reaching about $2.5 trillion . However, payments currently represent but a small part of a credit union’s business; credit card loans, for instance, account for only 6.5% of the total loan volume for credit unions, worth about $990 billion . For big banks, however, credit card loans account for roughly 21% of their total loan volume worth about $1.39 trillion. In other words, credit unions are missing out on close to $500 billion in annual revenue to big banks. Increasing that percentage to 6.5% of their total loan portfolio would result in additional $30 billion annually to credit unions! At the same time, payments can help offset a declining lending market. In 2019, credit union loan balances increased just 6.6% . This figure represents a sizeable decrease compared to balance increases in the double digits the prior four years. To combat this trend, credit unions must be more actively engaged with members through payments.
S
6.5%
TOTAL LOAN PORTFOLIO
By Tom Church-Adams
ince their inception, credit unions have grown their businesses through healthy loan volumes sustained with reliable deposits from loyal members. As Big Banks and Big Tech siphon away some of these bread-and-butter assets, future-looking credit unions are making a significant mindset shift: to secure the Primary Financial Relationship (PFR) with modern members, we must focus on lifestyle, not just life stage.
INNOVATION
Activate Your Next | BECOMING THE PRIMARY RELATIONSHIP
By becoming the central hub for where a member spends and moves their money on a daily basis, it increases the likelihood that member will think of their credit union when a borrowing need arises. Members Need Credit Unions in the Payments Game In the face of this competitive threat, several of CO-OP’s credit union partners are taking an aggressive stance against Big Bank and Big Tech payments domination, and it’s all in the name of financial wellness. Members want a trusted relationship with a payments provider that knows what they need in terms of money management, movement and budgeting. At the same time, they want payments tools that are tech-forward and IIF (invisible, instant and free). They also want to feel seen, to be rewarded and to become part of something bigger than themselves. We have an opportunity to help members trust that credit unions have the capability to deliver the way they want to engage every day, while helping them understand how they are performing in their day to day financial lives to accomplish their financial goals. Payments Are the Most Powerful Driver of PFR Payments have the ability to change a credit union’s economic performance while fulfilling its mission. While it’s true that lending is a powerful driver of revenue and membership growth, macro trends are impacting this once steady profit center. With deposits, engagement and the member relationship under mounting attack from Big Bank and Big Tech, and consumers increasingly comfortable using a variety of apps to meet their financial needs, now is a critical time for credit unions to make bold moves toward securing member PFR. Own the lifestyle, and you’ll own the life stage. Do it at scale, and you’ve secured the long-term vitality of a credit union. We here at CO-OP believe strongly in the power of payments to become the credit union industry’s most powerful driver of revenue and PFR. Our distinctive product roadmap that puts potent payments technology in the hands of our clients to ensure credit unions will be a fast, agile and dominant force against competitors. In short, together we’re challenging Big Banks and Big Tech in the battle for PFR, and we intend to win. !
Sources 1 BCG Global Payments Model 2019 2 All balances as of 9/30/19; CU data from Callahan database; Bank balances from 10-Qs (BofA, Chase, Wells Fargo,Citigroup) 3 CUNA Mutual Group Credit Union Trends Report (Oct 2019)
...future-looking credit unions are making a significant mindset shift: to secure the Primary Financial Relationship (PFR) with modern members, we must focus on lifestyle, not just life stage.
The New Consumer Value Stream: Capturing Share of Moments Will Require Organizing and Integrating Products, Services and Experiences to Create Value Propositions
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By becoming the central hub for where a member spends and moves their money on a daily basis, it increases the likelihood that member will think of their credit union when a borrowing need arises. Members Need Credit Unions in the Payments Game In the face of this competitive threat, several of CO-OP’s credit union partners are taking an aggressive stance against Big Bank and Big Tech payments domination, and it’s all in the name of financial wellness.
Developing the
By Scott belsky
For business leaders, the journey from where you are to where you want your business to be is never easy to na vigate. “While we love talking about starts and finishes,” says THINK 20 speaker Scott Belsky, “the middle miles are more important, seldom discussed, and wildly misunderstood.” In this excerpt from his bestselling book, The Messy Middle: Finding Your Way Through the Hardest and Most Crucial Part of Any Bold Venture, the Adobe Chief Product Officer and EVP of the Creative Cloud breaks down how leaders can develop the energy to endure while providing vision as the “storytellers” in the middle of the journey.
ENERGY to endure
The middle miles of a venture are full of ambiguity, uncertainty, fear, runarounds, crises, disagreements, and endless bouts of the mundane. Every time you untangle yourself and find your way out of a jam, you'll fall into another one sooner than you think. These are the inevitable and seemingly endless dips of the middle that we must endure. Endurance is about much more than surviving late nights and laboring without reward. It's about developing a source of renewable energy and tolerance that is not innate. Without any customers or evidence of progress, the continuous validation and encouragement that motivates teams will be absent. Without a steady stream of rewards, you will feel empty. You must supplement this void with manufactured optimism. You will have to endure anonymity and a persistent state of frustration. You'll have to generate a unique and intrinsic sense of belief in yourself as you manage the blows to your plan and ego. The line between a big win and failure is thin. You can get the important stuff right and still lose by not enduring long enough. The middle of a venture is like a lengthy road trip without windows. It is psychologically torturous to travel without any sense of where you are along the way – no sense of progress or landmarks – and without a sense for how many miles remain. Your concept of time becomes warped, and impatience stews.
Teams need to be reminded where they are and what progress they are making. As a leader, you are your team's window. You need to call out and describe the landmarks that you pass along the way, constantly reinforce the terrain you have already covered, and prepare folks for the map ahead. Reporting facts and managing expectations are only a small part of this job. More important, you are a storyteller. Your job is to make history more interesting and relevant when retold than when it happened. After all, the middle of a journey is a blurry, mundane landscape. To get through the tremendous voids of nothingness in between the milestones, provide guidance. You're the narrator of this journey. People who worked with Apple founder Steve Jobs over the years often talked about how his "reality-distortion field" could alter his team's perspective, assumptions, and limits to allow for new ideas. Perhaps Jobs believed in his vision so much so that the reality around him was distorted by the power of his conviction? When you're articulating a vision and set of assumptions with such passion and confidence, reality starts to bend your way. You're not lying or manufacturing perspective-you're merchandising your perspective. You're not creating a story that you think others will believe-you're retelling the same story you tell yourself. !
Behavioral economics is the study of why people do the things they do and buy the things they buy. Beyond that, it helps us to understand the decisions people make and more accurately predict behavior on everything from littering to choosing a checking account. Brainy Decision Making Before getting to driving member behaviors, it’s important to share a little about how the brain works. In his book The Buying Brain, Dr. A.K. Pradeep shares that 95% of decisions are made by the subconscious brain using rules of thumb it has had success with in the past. Like choosing to eat eggs for breakfast this morning because yesterday, eggs tasted good and gave you energy. In many ways, these rules serve us very well – but much more often than we realize, they are leading us to illogical and irrational choices. For example, there may be a more optimal mix of protein and carbs for breakfast. This is true of you, your peers and all your members. Sometimes, the default way we look at decisions isn’t the most optimal. You can have the best purpose, vision and brand, but if it isn’t aligned with the way your member’s mind works, it won’t drive desired behaviors. And all that data you are trying desperately to unlock will not accurately predict behavior if you don’t understand and incorporate the mind of your member. Trip-Ups in Traditional Economics Traditional economics had (or has) one major problem: It assumes the world is comprised of logical people making rational choices. Unfortunately, that’s not the world we live in. The result is a lot of economics models predicting what people “should” do instead of what they actually do.
By melina palmer
ometimes, credit unions can find themselves at odds with their own members. It might feel like members expect you to understand what’s on their minds. You’re not a mind reader…but can you be? The truth is that it can be difficult to match the strategic bets we make with member behavior. The good news is there is a scientific methodology to help combine member behavior and strategy in a clearer way. And it’s called behavioral economics.
Activate Your Next | How Behavioral Economics Can Help You Activate
95% of decisions are made by the subconscious brain using rules of thumb it has had success with in the past.
These inaccurate models have encouraged economists and psychologists to start asking, “Are there any common threads we can use to properly predict behavior?” And that’s how behavioral economics was born. The subconscious rules of thumb the brain uses in decision-making essentially form the foundation of the field; they provide the concepts that can be used to more accurately predict behavior. Instead of suffering from a case of the “shoulds,” these concepts are based on scientific studies from around the world and are proven across demographics and cultures. Sophisticated labs like the Human Behavior Lab at Texas A&M University can predict whether someone will buy a product with more than 80% accuracy – without having to ask them outright . This can be done by evaluating brain activity, skin response, eye tracking and more. In some cases, all those tracking gadgets can fit inside a backpack, allowing a subject to be completely mobile while gathering data in real time. The brain of your member is not as elusive as we have been led to believe. On the contrary, we now know behavior is very predictable, and there are new advances every day. Three Subconscious Rules to Consider at Your Credit Union The subconscious brain can process 11 million “bits” of data per second (compared to only 40 bits by the conscious brain) . It sorts through all these choices using hundreds of rules of thumb that are known and studied by behavioral economists. Here are three to consider at your credit union: How you say something matters much more than what you are communicating. For example, when buying ground beef, those labeled “90% Fat Free” are much more appealing to the brain than those labeled “10% Fat” (even though they are saying exactly the same thing). Understanding what matters to the member and properly framing your messaging to appeal to those behaviors can make a huge difference in conversion rates. One credit union example is rates. The human brain is lazy and asking it to do even simple math is a one-way ticket to “I’ll think about that later” land.Changing the message to be about payment amounts – real dollars – is much more effective. For example, your credit union could reframe a 2% cash back rewards program by saying the member will receive $2.00 back for every $100 spent. Small things that shouldn’t (there’s that word again!) impact behavior absolutely do. Researchers at Yale found that people who hold an iced drink for a few seconds evaluate others as colder and more difficult than those who held a hot drink .
Members are the lifeblood of a credit union and they cannot be seen as the illogical barrier to success any longer. It’s time to work with the brain. It's time for behavioral economics.
Another study found that those in a room with a backpack are more cooperative than those in a room with a briefcase (and, of course, no one remembered seeing either item) . The images you put on your website and in your branch are incredibly impactful on future behavior, but it goes beyond that. All the senses need to get involved when you are priming people for your products and services.How is your brand felt (and smelled and heard) across all your platforms? Take a minute to scan your website right now. Are all the images obviously stock photos? What is that saying about your brand? Studies prove again and again that it takes double the joy felt by a gain to equal the pain felt by a loss. People really hate to lose things, but too many companies shy away from this tactic for fear of appearing pessimistic or harsh. The good news is, leading with losses works and it doesn’t have to be negative. People choose more expensive cars when they are presented fully loaded with the option to remove anything they don’t want, than if presented with a base model and instructed to add on any features they would like. This shows how easily framing for loss aversion can impact sales (for better or worse). With the fully loaded model, people are averse to losing out on the car their brain took ownership over almost immediately. In the “add on anything you want” model, they are more averse to losing out on the money in their bank account. At your credit union, consider incorporating a credit card application in a package with a new bank account, rather than requiring members to ask for it separately. Members are the lifeblood of a credit union and they cannot be seen as the illogical barrier to success any longer. It’s time to work with the brain. It's time for behavioral economics. !
Three Subconscious Rules to Consider at Your Credit Union:
1. Framing
2. Priming
3. Loss Aversion
Sources 1 Palma, Dr. Marco (Contributor). February 1, 2019. The Brainy Business. Inside the Texas A&M Human Behavior Lab. Retrieved from https://www.thebrainybusiness.com/33. 2 The Buying Brain by A.K. Pradeep 3 https://news.yale.edu/2008/10/23/hot-coffee-we-see-warm-heart-yale-researchers-find 4 www.nytimes.com/2007/07/31/health/psychology/31subl.html?8dpc
Learn more from Melina Palmer at thebrainybusiness.com.
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Activate your Culture
Meet Evolving Business Models in a Socially Distanced World
As businesses, credit unions are faced with many of the same dilemmas that other companies share, among them – how to keep your workforce motivated and engaged as your business model shifts to meet changing member needs. The actual process of advancing technologically can significantly impact the way your credit union operates. And these changes are not always comfortable for employees who may suddenly find themselves in new roles, grappling with new tools and processes. If that weren’t enough to manage, our post-coronavirus world has served us up a heaping dose of rapidly shifting demands from consumers for touchless and branchless interactions as well as large percentages of our staff working from home. Getting employees – from the C-suite on down – to adopt a modern mindset and adapt to change is essential to your growth and success going forward. Here’s how to get them on board.
Activate Your Next | Activate Your Culture to Meet Evolving Business Models
By Cheryl Middleton Jones
Communicate and Champion the Cause (Six Times, in Six Different Ways) To dispel employees’ fears and ultimately get their buy-in for new methods and technological changes, have a sound communication strategy in place. I had a former boss who used to say that you had to message a change six times, six different ways for people to hear and understand the change. While memos, FAQs and other documentation should play a role in your communication strategy, (virtual or in person) meetings can be an effective way of informing and engaging employees. Having leaders deliver the message shows employees that the initiative is important to your credit union. Giving examples of what the change means – or how it will impact them personally – also helps message how important the change is to the business. Designating a resident expert (someone directly involved in the initiative) to champion the new technology can help spread enthusiasm for the changes to come while giving employees a point person for their questions and concerns. Make sure your message resonates as well. People want to know three things in about any change: why the change is being made, what the benefits are to them and their customers, and how the company will benefit as well. Keep your messaging clear and consistent across all communication channels. Giving employees an elevator speech, for example, to deliver to members is a best practice that also helps them visualize how new tools and processes will work. And maintaining consistent messaging organization-wide gives employees a sense that we are all in this together, playing off the same handbook, which increases their confidence in the pending change. Implementation Basics: What Gets Rewarded Gets Done Any initiative can quickly go over budget or fall behind schedule if not managed properly. So, throughout the implementation, make sure your management team is tracking its progress and measuring success along the way. Ultimately, what gets measured gets done. Set goals, even stretch goals, and challenge employees to meet them. While your stretch goals may or may not be fully realized by employees, you’re certain to make better progress than if you hadn’t set goals in the first place. Remember also that what gets rewarded gets done. Your leadership team should publicly recognize accomplishments up and down the organization, giving credit when milestones are reached. This is more important since COVID-19 might have impacted staff morale. Employee training is also essential. Be sure to teach the specific skills your employees need to be successful with your new technological assets. Once you deploy the new technology, continue to communicate. Talk to employees about what is happening with them, what members are saying, what the successes have been – and what isn’t working. Two way feedback helps the team feel like they are part of the process and can give leaders new insights to apply to that and other change initiatives. Recognize the Advantages of Data. Avoid Analysis Paralysis. Many new, large initiatives are often centered on an overarching goal of leveraging data. So, how does more data translate into more value for credit unions and members? It’s true that knowledge is power and that data is a powerful tool for decision making. The better you can understand patterns and trends, the more you can shift the decision-making process from one of estimating to one that knows with certainty trends are occurring – because that is what the data says. Too much information, though, can lead to analysis paralysis. If given too much data, it becomes hard to discern what is important – and what is not – making it a struggle to make sound decisions, which is counterproductive.
I had a former boss who used to say that you had to message a change six times, six different ways for people to hear and understand the change.
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Beyond Computing: There Is No Substitute for Human Empathy There are differences between data, information and insights. Data points collectively provide the information needed to form insights. And insights are what you need to solve problems. I spoke with a colleague of mine, Catherine Maloney, CO-OP’s VP of Data Management and Analytics, about her thoughts regarding data, and how it can be used. She said, “Consider also that insights are gleaned by humans – not machines – and this has implications.” Take AI and machine learning, which bring valuable repeatability, consistency and efficiency to decision-making processes. Our industry will increasingly rely on AI and machine learning as the future unfolds. However, while these technologies aid tremendously in problem solving, they fail to account for the human condition. Unlike machines, people bring empathy and experience into their thinking – and these attributes are critically important to many of the decisions credit unions make. Catherine provided a great example of this: If a member has experienced fraud, a live agent on the phone can hear the emotion in his or her voice (perhaps anxiety?) and comfort that person. And that agent may take a different course of action than an AI calculation recommends based on the situation’s emotional context. In my experience, there is no technological substitute, either, for human collaboration. Ideas alone might be great, but when you co-create with others, the cohesion you develop as a team and the synergies realized between individuals, transcend the realm of computing. Ideas lead to more ideas – and better ideas – when many voices are brought to the table. And that is how innovation happens. Advances in fintech remain as valuable to credit unions as ever. But human insight, imagination and collaboration should also sit at the heart of our digital transformation strategies. Employees are your secret sauce for driving change – and empowering them with tools to unleash their creativity is a blueprint for success. !
20
What A Moment!
How Financial Services Has Changed
To say the past decade in financial services was transformative would be an understatement. Ten years ago, we were entering a very different recession, coming off of the housing collapse and ensuing financial crisis. Now, here we are again, at the beginnings of yet another tumultuous decade. The financial service industry is poised to be affected by the external economy in large and evolving ways, yet again. The Wall Street Journal included an entertaining story in its December 17, 2019, edition about how difficult it would be to try and use 2010 technology today – back before there were digital personal assistants, ridesharing services, wearable devices and mobile banking apps. Each of these technology innovations has completely reshaped the modern consumer experience and that has had a ripple effect on every industry, including ours. For credit unions, the last decade was largely about catching up to these trends and reimagining our businesses to meet the digital and service expectations of our members. As we’ve entered into 2020, meeting the unforeseen challenges of a global pandemic, there are many lessons to be learned from the previous decade and how pre-coronavirus trends have only accelerated in our post-coronavirus world.
CONVERSATION
Activate Your Next | What a MOMENT! How Financial Services Has Changed
By TODD CLARK
(and Where It’s Going)
I asked my colleagues, the heads of CO-OP’s solution lines, to highlight how their individual business areas have changed and how they predict trends will accelerate as the economy stabilizes over the next few years. Here’s what they had to say:
Payments, as a whole, has become a much bigger and more competitive market. Global payments revenue has gone from about $904 billion annually to $1.5 trillion, according to Boston Consulting Group and is expected to grow another 5.9% in the next decade, reaching about $2.5 trillion . Members used to visit their branches a couple times per month, receive monthly statements and speak to their credit union staff when they needed a loan or account support. Now, because of digital usage trends massively accelerated by the COVID-19 crisis, so much of our members’ daily financial behavior takes place on their smartphone or computer. The pandemic has provided a powerful opportunity to engage members digitally and financially on a deeper level. Of course, the catch is that members today have much higher expectations and want payments to be IIF (invisible, instant and free). For credit unions that creates a lot of pressure to make sure you’re not only developing the right payments solutions but also that they work seamlessly together. The bottom line is that the past decade taught us that payments are no longer a “set-it-and-forget-it” part of a credit union’s business: They are the key to long-term growth and to something CO-OP is talking about as the primary financial relationship. Having a strong payments strategy based in financial wellness and digital-first experiences, moving into the next decade is crucial for both small and large credit unions.
SVP, Head of Pay Solution Line
Over the past decade, engagement became the new battleground for how we as credit unions differentiate from and compete with other financial providers. We know that consumers today are willing to pay for convenience, speed and accessibility but we can’t underestimate the power of “surprise and delight.” What that means is: In the decade ahead, we have to be really, really good at knowing what our members want and then delivering beyond their expectations. Even though COVID-19 has accelerated the adoption of digital products, it’s not enough to just have a mobile banking app or a digital wallet; members want to feel like the products and services they use are personalized to their lifestyle. Finally, I would highlight that even in the digital age, human service still matters. The start of 2010, held the promise of tech solutions to seemingly everything. But rounding the corner of the fastest-moving tech decade in history, we’re learning that what makes our industry so special is that our members feel like we know them. That emotional connection should be apparent across every channel, whether it’s digital, self-service or in the Contact Center. COVID-19 hasn’t changed that; it’s simply forced us to be more creative about providing service on multiple channels to our members. This will benefit us moving forward, both as the economy recovers, but also for a future of growth.
Dr. Kathy Snider
SVP, Head of Engagement Solution Line
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As my colleagues have pointed out, the past decade’s rise of digital and connected devices, accelerated by the usage trends seen around COVID-19, has created a plethora of new ways for members to consume and transact; unfortunately, it has also made businesses and consumers more susceptible to fraud. Fraudsters are not only inventing new methods to hack into systems and devices, they’re learning how to mimic consumer behavior in ways that even the most sophisticated fraud specialists and technology cannot detect. With more digital transactions than ever before, card not present fraud is on the rise and stimulus check and government payment program scams abound. At the same time, over-caution is leading to more “friendly (or chargeback) fraud” and the need for a better way to process disputes and chargebacks. A decade ago, machine learning was considered the “cool new thing” but it is now quickly becoming table stakes for allowing businesses to adapt at the same rate as fraud. Similarly, tokenization and advanced authentication have moved out of their initial testing to become globally mainstream. In the coming years, we’re going to see the landscape of fraud mitigation continue to shift dramatically. We can expect to see more development in the areas of 3D Secure and EMV adoption, particularly as the major processors begin to make them a requirement for issuers. A centralized and consolidated fraud operation, whether in-house or outsourced, is now more essential than ever. Credit unions must recognize the rapid pace at which fraud is adapting, and allocate resources and technology development accordingly.
Ajay Guru
SVP, Head of Protect Solution Line
Technology integration has always been important for any business enterprise but in the last few months it’s really taken on a new meaning. Integration used to mean connecting to a certain system, processor or software in order to perform a certain function; but now integration is about the process by which all of those different systems function together. Think about the Uber app on your phone. It has GPS, communication, payments and rewards functionality all built into one interface. Uber didn’t build those services, they simply acquired and integrated them. Now, thanks to COVID-19, credit unions similarly have to think about how to pick and choose the best-in-breed solutions that allow them to serve their members and allow members to serve themselves. The way to do that is by adopting a more open infrastructure, building relationships with multiple partners and then building a suite of micro-services for your members. APIs will play a huge role in helping credit unions become agile enough to make that happen at scale and, of course, data will be the lifeblood of integration. !
Nish Modi
SVP, Head of Integrate Solution Line
Sources 1 Boston Consulting Group. “Global Payments 2019 Tapping into Pockets of Growth.” September 2019.
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THINKING OUT LOUD
Leading and Activating with a Growth Mindset
Dave Libby: We understand that younger members are not just interested in technology but the experience it provides. We solicit feedback and understand the importance of listening to it. We are continuously assessing and make enhancements to improve the experience. This commitment is one of the reasons our average member age is among the lowest, if not the lowest, in our state (Maine). Technology is a conduit for us to provide more human interaction, albeit using different tools. While we put a significant focus on technology, we take great steps to invest in the right technology from a member experience standpoint. As a result, our mobile app is among the highest rated in the industry.
Activate Your Next | Leading and Activating with a Growth Mindset
THINK Review asked three industry movers and shakers how they think leadership is changing for credit unions activating a growth mindset.
John Janclaes CEO Partners Federal CU
David Libby CEO Town & Country Federal CU
Dean Michaels, Chief Strategy Officer CO-OP Financial Services
Q: In 2020, we can’t talk about growth without talking about technology. Town & Country FCU has been especially successful at using technology to court younger members. What’s your secret?
Libby: Our eyes are always out on how we can move technology forward to better serve our members – not just younger members, but all members. So, for example, we were the first credit union in the country to enable Alexa (Amazon’s voice-activated virtual assistant) in 2017. However, we don’t always have to be first with a new product or service. It’s more important to be “learning first.” Dean Michaels: Sometimes, yes. CO-OP has been first-to-market with key technologies, like card controls and Apple Pay enablement, and I think that’s helped establish our leadership. But that can overly simplify the question. Leadership has to include more than just being first – you need to be great at and continuously working to improve the solutions you already provide. Sometimes the hardest part of being a leader is NOT being first, or even second, but saying to your clients we don’t think that’s the best place to invest our (or your) scarce resources at this time. Michaels: The underlying challenge here is that the digital expectations of consumers are changing at a pace that most legacy systems just can't keep up with. That’s really the challenge to solve: You need to find partners who are going to help you advance toward digital maturity. And since no one partner is going to be able to do everything, you want to find partners that are interoperable, so that your technology works together. John Janclaes: CEOs need to set an agenda specific to digital maturity. Here are a few arrival points on the maturity curve: Janclaes: It feels like roles in our industry are changing in two profound ways: how we execute and with whom. Today, the number of players (internally and externally) is increasing at a pretty quick pace and with greater complexity. As a leader, you stay awake and open to new ways of working. Janclaes: Our executive team at Partners FCU is collaborating with others more than ever before. This includes meeting in-person with partners at least every six months; co-creating projects with technology providers; and forming or participating in thought-leadership exercises and roundtables with peers and business partners. Michaels: Our executive team at CO-OP has also become more collaborative with each other, too. And leveraging our incredibly invested board has been a game-changer. We have become more collaborative with our board – meeting six times a year now. However, our real innovation has been creating our Co-Creation Councils, where we bring together our clients and leaders throughout CO-OP to co-create the next wave of solutions for the credit union industry. These meetings have been invaluable to improving our strategy, product development as well as operations and we’re the only CUSO doing anything like it.
• The executive team must be the digital transformation engine. • Articulate a digital vision and get going! • Design a digital roadmap and share it with all stakeholders. • Create a sustainable economic engine to fund the roadmap. • Select digital partners carefully. • Retrofit the culture (people, processes and technologies) to drive execution. • educate your team on digital technology continuously – then re-educate.
The underlying challenge here is that the digital expectations of consumers are changing at a pace that most legacy systems just can't keep up with. That’s really the challenge to solve: You need to find partners who are going to help you advance toward digital maturity.
Q: Does leading mean being first with a new technology?
Q: How do you ensure digital maturation?
Q: In this environment, it feels like we’re seeing a resurgence of time-tested credit union values: cooperation and collaboration. Is that your experience?
Q: How do you activate collaboration on the ground level at your organization?
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Libby: The pace at which our industry is changing can be mind-boggling. Collaboration strengthens us in key areas: payment tools, fraud prevention technology and overall member experience. The Co-Creation Councils facilitate the spirit of collaboration and cooperation by providing a framework for us to share knowledge, observations and experiences. Michaels: Our internal teams are expanding from the outside. By that I mean, if we want to be technologists, we have to hire technologists. This will include folks that have grown up through the credit union hierarchy and we must bring in thinkers from outside the credit union industry as well. We need to ensure these outside thinkers understand and embody that core quality of being mission driven. To support that, CO-OP will be piloting a program this year with our staff to help create the shared credit union mindset. Janclaes: The way we activate our vision is preparing all to lead. Therefore, all employees attend annual leadership training – that’s about 500 people. We also provide college tuition reimbursement, scholarships to WCMS and other industry training. We are trying to build a culture that is an invitation to come learn about our vision, stay, grow and possibly move onward, so that you can be more, contribute more, serve more. It’s how we build a better society – by focusing on helping people to thrive. Libby: One of my most important jobs is to provide an exciting culture where staff believes they can accomplish anything. To that end, a modern credit union leader needs to be approachable and accessible. Some of the best ideas and initiatives come from employees, if they believe their voices will be heard. Janclaes: I think the most helpful characteristic of a modern leader would be curiosity. Curiosity helps us reassess how to get things done and how to create ever-increasing value for members. Leaders succeed today by integrating existing and new leadership characteristics that enable a continuous revitalization of self and team. Libby: Being open to change is more important than ever, and that includes providing an open culture. In my opinion, listening, transparency and communication are all playing significant roles. Employees want to know what’s going on – vision, goals, objectives and frequent updates – and they also want to know how they can be a part of it and make a difference. Michaels: Agreed. Regardless of industry or decade, being a builder of great teams and being able to look beyond the short term are timeless leadership traits. In today’s environment, leaders need to identify trends, think and react in a nimble manner. But if there’s one quality that stands out among credit union leaders – what I really respect in the leaders I work with – it’s being mission driven. It’s asking, “How do I help my members make their financial lives better?” That’s an essential part of the character of any successful credit union leader. !
Q: Town & Country FCU s an active member of CO-OP’s Co-Creation Councils. How does that fit into your leadership work?
Q: Outside collaboration seems to dovetail with the notion of teambuilding within our organizations. How do you create cohesion around your mission?
Q: Being approachable and accessible is certainly an imperative for modern leaders. What other character traits do you think credit union leaders need today?
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Just How Hard Should It Be to Activate Your Next?
Activate Your Next | Just How Hard Should It Be to Activate Your Next?
CO-OP’s Chief Product Officer, Bruce Dragt, discusses the common challenges of tackling ambitious objectives and turning strategy into reality.
Bruce Dragt: In the past few years, CO-OP has gone from being a reseller of technology to being a provider of it. That means we are building technology ourselves. And we’re taking a platform approach, meaning that we are delivering a core technology infrastructure. Our core challenge, then, is to deliver this platform while also delivering key, incremental capability that is usable by our clients. It means we keep the end goal in mind, always build to that goal, but make conscious choices on the use cases that will arrive first and enable our clients to translate our activity into value for their members. COVID-19 has accelerated the trends towards digital transformation that were already happening. Also, we are asking people to do new things for the first time, using technology they’ve never used before. We’re also asking them to put dates and financial constraints on that achievement: What’s it going to cost? When will I have it? It’s as if you were asked to climb a very high mountain and then asked for the exact minute you would arrive at the top. Dragt: As a leader, I have to get people to step into being comfortable. I just want people to start working, to start doing it. One example from the past year is the introduction of the CO-OP Developer Portal. It’s an API environment for our credit unions to use to integrate our services into the user experience for their members. It’s an important core component for credit unions – and for CO-OP in terms of how we’ll deliver almost everything in the future. The teams working on this project were developing a solution that most of them had never interacted with before. They were using technology they had never touched before. And they had a very firm budget and delivery date. A lot of people across the company had to come together and step up. We were all the way to the last week before deadline and we discovered something that needed to be changed. We had people who took themselves completely out of circulation – working day and night – to make sure we overcame the obstacles and the Developer Portal came out as expected and on time. It was a stretch, but we did it. And over the years I’ve found that once you’ve done something three times as a team, you get pretty good at it. The first time, you’re feeling things out. But by the third time, you’ve discovered some norms and expectations. Dragt: Often, when I go to visit a credit union and ask to see their digital journey map for the member experience, I get silence. And the reason is that many credit unions haven’t yet taken the time to actually document a complete view that shows what they’d like their members’ digital journey to be. That’s an important launching point. From there, we can help them accomplish their objectives – and offer suggestions on using our tools to upsell, cross-sell and serve their members better. Dragt: Far and above, it’s the CO-OP team. We’ve built a world-class stable of innovators, developers and technologists. Their passion, intelligence, innovation and commitment inspires me every day. !
Q: How would you describe your central strategic challenge?
Q: Using these lessons, what is one key step credit unions can take to move from strategy to activation?
Q: Innovation is a marathon. What keeps you energized?
Q: Is part of the challenge getting comfortable with the discomfort of attempting the unknown?
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credit union SPOTLIGHT
Activate Your Next | How After-Hours Lending Generated $5-$8 Million/Month
By Sierra Central Credit Union
How After-Hours Lending Generated $5-$8 Million/Month
The ROI on this service is so close to the ROI on the business we handle ourselves – it is within basis points – that it costs less than a quarter of a percent for us to fund a business that we never would have seen otherwise. At this margin, it is phenomenally profitable for us.
- David Kelsay, SVP of Lending
When Sierra Central Credit Union’s SVP of Lending David Kelsay took a closer look at his credit union’s auto loan portfolio, he noticed a unique opportunity to better serve the needs of Sierra Central’s members but also to drive meaningful revenue. Kelsay noticed that a high percentage of loan applications were being submitted at night and on weekends, when Sierra Central’s branches were closed. As a result, dealerships began fulfilling those loan requests elsewhere. “Dealers have itchy trigger fingers,” said Kelsay. “By the time we’d get to the loan queue on the next business day, a very high percentage of those loans had been placed elsewhere.” Kelsay looked for a way to provide after-hours lending support for their members without significantly inflating costs with additional staff and extended branch hours. So, Sierra Central engaged CO-OP Contact Center to route their after-hours auto loan applications from their CUDL system to CO-OP’s ExpressLink service. In order to do this, they needed to ensure CO-OP would be able to understand and enforce Sierra Central’s underwriting guidelines. “CO-OP took a microscopic approach to review everything that we do and to learn our guidelines,” said Kelsay. “The CO-OP staff spent a lot of time engaging with our staff and familiarizing themselves with our guidelines and philosophy.” They began experimenting with a small loan queue outside of Sierra Central’s normal business hours. Within three months, Kelsay found it to be wildly successful. “After the first full quarter of using CO-OP Contact Center Lending Services, we did an analysis of the funding rate and profitability of loans initially decided by CO-OP compared to loans we reviewed during regular business hours,” said Kelsay. “We found that we were actually funding CO-OP approved loans at a higher rate than loans we approved ourselves.” Those new loan applications, which Sierra Central would not have otherwise seen, resulted in a 25-30% increase in monthly funding volume, which translated to $5-$8 million in additional monthly auto loan revenue. Kelsay claims, the ROI on this service was “phenomenally profitable for us.” The key takeaway: Opportunities don’t always present themselves; it is up to you to find them. A closer look at their auto lending portfolio combined with a bold decision to try a new approach yielded powerful results for Sierra Central Credit Union. !
=
25-30%
INCREASE
in average monthly funding volume
$5-$8
MILLION
monthly auto loan revenue
Learn more about how CO-OP Contact Center can help you grow and retain your membership, and strengthen lending operations without additional staffing or operational costs: co-opfs.org/contact-center
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Activate Your Next | THINK REVIEW SUMMER READING
SUMMER READING
Want to explore more of the thought leadership behind the THINK 20 Virtual Event lineup? Check out these books from our contributors– including our editorial takes on why they might match your mindset.
THINK Review
Chef, Entrepreneur, Community Activist “Filled with over 85 inspired recipes that meld the overlapping traditions and flavors of L.A.—including Korean fried chicken, tempura potato pancakes, homemade chorizo, and Kimchi and Pork Belly Stuffed Pupusas—L.A. Son… tells the transporting, unlikely story of how a Korean American kid went from low riding in the streets of L.A. to becoming an acclaimed chef.” (from harpercollins.com). THINK Review Editor takes: "Perfect if you’ve ever waxed poetic about a food-truck taco at 2AM". – Bill Prichard "If you’ve got a hankering for personal inspiration with a side of Kimchi, check out this book." – Amanda Atcheson "You had me at Kimchi and Pork Belly Stuffed Pupusas." – Samantha Paxson
Roy Choi
LA Son: My Life, My City, My Food
Adobe Chief Product Officer “…the indispensable guide to navigating the volatility of new ventures and leading bold creative projects.” (from penguinandrandomhouse.com). Read an excerpt from The Messy Middle on page 22. THINK Review Editor takes: "A great mental cleanse for mucky mucks." – Bill Prichard "When the going gets messy, the messy… should get this book." – Amanda Atcheson "Must-read for anyone who’s ever asked, “Are we there yet?” – Samantha Paxson !
The Messy Middle: Finding Your Way Through the Hardest and Most Crucial Part of Any Bold Venture
CEO, Entrepreneur, Columnist & Author “…this refreshing book challenges us to resist the false promises of technology and efficiency and instead to mine our own creativity and humanity for the capacity to create the futures we want and can believe in.” (from simonandschuster.com). THINK Review Editor takes: "If you’re not sold on algorithms controlling our future, then you might want to buy this book." – Bill Prichard "If you’re more “just-in-case” than “just-in-time” then this tidy manifesto is for you." – Amanda Atcheson "How to operate with optimal inefficiency. A perfect business book for this oxymoronic era." –Samantha Paxson
Margaret Heffernan
Uncharted: How to Map the Future Together
Hear more from these authors at our THINK Virtual series of events happening throughout 2020. For a complete list of THINK 20 Virtual events and to register, please visit co-opthink.org
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Living Your Mission
Over the years, I’ve honed a number of icebreakers that work – and I pick one for each crowd and occasion. One is a simple set of two questions: “How are you feeling?” I’ll ask my audience. This elicits smiles, shouts of “great!” even occasionally, applause. Then I ask, “And how are you feeling about your money?” The response to this is totally different – it’s quiet, uncomfortable, with the occasional “booo!” I know this is coming – I’m expecting it. Because as a country we feel lousy about our money. More specifically, we feel stressed. The 2019, The United States of Stress Report from Everyday Wellness reports 57% of respondents say they are “paralyzed” by stress. The number one cause of this paralysis is money. It impacts women more than men and GenX more than other generations. Obviously, the COVID-19 crisis has brought our financial stress to a whole new level with shocking numbers of members unemployed and small businesses shuttering. But I want to be clear: credit union members have been struggling well before the current crisis. Why is this Happening? It’s important to ask that question. If you took one look at the glowing, pre-coronavirus, economic headlines (and even some of the confusing gains in the stock market post-coronavirus), and you would think Americans would be feeling a whole lot better. So why are your members feeling so stressed? I would offer four reasons. First, although stock market participation is generally rising, about 40% of Americans don’t own stocks. Second, wage growth is stagnant. It wasn’t until 2014 – five years after the “end” of the great recession – that wages started rising. And it wasn’t until 2017, that real median household income surpassed 2007 levels. Wage stagnation amidst rising prices meant a lot of struggle for a lot of people. And for 14 million newly unemployed since February 2020, wage insecurity is an even larger threat . Third, we bear an increasing amount of responsibility for our own financial lives every year – in both retirement (as 401(k)s replace pensions) and healthcare. And fourth, we have less confidence that Social Security and Medicare will fill in the gaps, not just for us but for our children as well.
E
By Jean Chatzky
very speech needs an icebreaker, but speeches about money need them more than most. That’s something I’ve learned while talking about a topic that many people would rather ignore.
Activate Your Next | LIVING YOUR MISSION
Activating Your Members Through Financial Wellness
Enter Financial Wellness The financial wellness movement has been driven largely by employers who realized that constant worry about money was impacting their workers and their bottom line. A 2019 MetLife report notes that “employers report $250 billion lost each year to employees stressed at work.” They also began to recognize that providing solutions can foster loyalty and satisfaction – which is why credit unions belong in this landscape as well. But what is financial wellness, exactly? How do you get financially well? A Fidelity 2019 study looked at what differentiates women who were stressed about their money from those who were not and came up with three data points: 1. Most had a six-month emergency savings cushion, 2. Many were saving at least 10% of their earnings for retirement, and 3. The vast majority had some sort of financial plan. Those are the sort of actionable goals members can work toward. But they need help. Credit Unions Can Be the Linchpin The roaring 2020s of this century might turn out to be more like the 1930s of last century, but credit unions were made for tough times – in fact, the credit union movement came of age in the Great Depression of the 1930s. According to MetLife, 80% of employees want access to financial planning workshops or financial wellness tools. However, only 20% of employers provide them. Credit unions can fill the gap. The challenge is to put your energy and dollars into initiatives that actually work – and by “work,” I mean change behavior. It is one thing for your members to be taught the right money moves to make. It is another for them to actually make them. We now have a decade of work in behavioral economics that explains why humans make financial decisions that we know are not in our best interest. But we also have programs developed with insights from behavioral economics that improve performance. Specifically: auto-enrollment into 401(k)s and auto-escalation of contributions. 401(k)s work because they take the human element out of the equation. The money is swiped out of our paychecks automatically – before we have a chance to see it or touch it or spend it. That’s huge. At companies that have implemented it, auto-enrollment has increased participation to 80 to 90% of employees. Auto-escalation boosts contribution from the 3% where they typically start to where employees actually need to be. Credit unions need to borrow from this magic to help their members. And some forward-thinking ones are. For example, the “Savings Accelerator Loan” offered by Town & Country Federal Credit Union in Southern Maine, allows members to refinance their car loans (at the low rate credit unions are known for). But the first three months of payments – rather than going to the car – are funneled into a savings account, allowing them to get a jump emergency savings. “In the end, it puts members in a place where they have financial savings they’d otherwise be unable to build,” says TCFCU CEO David Libby. And because it happens automatically, it actually works.
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Fin Touch not Fin Tech The most important lesson that Libby and others who are leading the financial wellness charge have learned is that despite advances in technology, you shouldn’t take humans out of the equation. Town & Country has launched a successful series of financial wellness training classes at recovery houses in Portland. They step in at the point where people in recovery get new jobs – and new income – and help with budgeting, new credit cards, car loans and the other tools they need to get back on their feet. You need to be there with people, to build trust and answer questions. My team at HerMoney.com has had a similar experience with the HerMoney Happy Hours we facilitate. These gatherings of women are facilitated discussions about money that play out as a party game, with participants answering questions from our Happy Hour deck of cards like “What’s your biggest money fear?” and “What does it mean to have enough?” Two hours later, participants leave feeling (their words) empowered, liberated, and ready to act. (If you’d like to hold a Happy Hour for your members, you can reach out to us at contact@hermoney.com.) The Bottom Line According to J.D. Power’s 2018 Retail Banking Advice Study, “Seventy-eight% of U.S. retail bank customers say they are interested in receiving financial advice or guidance from their bank.” The same study also found that only 28% of U.S. retail bank customers “can recall recently receiving any type of financial advice [from their bank].” This is a missed opportunity – and credit unions are poised to grab it because they don’t just have the tools and knowledge necessary to deliver financial wellness; they have the trust. The American Consumer Sentiment Index sponsored by the Kellogg School of Management at Northwestern University and the University of Chicago Booth School of Business shows that trust in credit unions is at 60%, while big banks level in at 30%. More than that, though, delivering financial wellness is central to your existence. Take this opportunity to focus on your members’ long-term financial wellness, and work to be seen as the “compassionate banking alternative.” You can live your mission if you serve your members in this way now more than ever. !
According to MetLife, 80% of employees want access to financial planning workshops or financial wellness tools. However, only 20% of employers provide them.
Sources 1 https://www.pewresearch.org/facttank/2020/06/11/ unemployment-rose-higher-in-three-months-of-covid-19-than-it-did-in-two-years-of-the-great-recession/
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CLOSING THOUGHTS
Activate Your Next
At the beginning of this issue, my colleague and THINK Review Editor-in-Chief, Samantha Paxson, mentioned that whatever your credit union’s next big step, how we activate will set us apart. So how do I think we do it? We do it together. As we enter a brand new normal, CO-OP remains committed to being the credit union industry’s R&D partner on this journey. When we look back in 10 years, we’ll see THIS moment in time as pivotal. As the nation’s largest CUSO, CO-OP has invested millions in designing the credit union movement of the future – one that can compete not just against Big Banks, but against Big Tech as the compassionate banking alternative. We believe achieving a Primary Financial Relationship with your members is attainable and our platform ecosystem is designed to provide the digital payments solutions and technology that will drive engagement, fuel growth and lead to members’ overall financial wellness. Every great human achievement – from putting the first man on the moon to getting Apple off the ground – happened because a lot of individual people chose to work together cooperatively. Neil Armstrong and Steve Jobs may be singled out as figureheads, but great leaders are nothing unless they band together with like-minded individuals to leverage the scale of people power for change. Credit unions have been leveraging their collective scale through CO-OP for almost 40 years, by creating the largest ATM and branch network in the country. As we head towards a low-touch, contactless, digitally-driven future, we are continuing to leverage that collective spirit to scale technology to meet the needs of the members of today and the future. More importantly, we’re leveraging collectively what the Big Tech wishes they had: the trust of our members. CO-OP is committed to the industry’s timeless "people helping people" mission as we activate our next wave of technology solutions that will secure your Primary Financial Relationship with your members. Although our mission remains the same, how we deliver that mission has changed over time…and will change some more in ways we can’t even imagine yet. !
Visit co-opthink.org to register and and learn more.
