From Onboarding to Upsell: A Digital Playbook for Credit Unions

0:03 Hey, everyone, welcome to another episode of Leaders in Lending. I'm your host Matt Snow joined this episode by Kirk Drake Kirk. Welcome to the podcast. Hey, thanks for having me all today. Kirk a man of many talents. I've got your book here with me too, author of CU two dot zero, founder and owner of that company as well. I hear you own a winery yet I've yet to be invited up there, but sounds like you're involved in a lot. Maybe talk a little bit about your background, how you got involved with credit unions and what you're up to today. Yeah. Sure, Well, first off, you're always welcome, No, no need for a formal invite. But yeah, So I started working at a high school bank or started high school bank about thirty years ago, and then worked for a couple of different credit unions in the DC area. Somewhere along the line, spent a short stint at Feisser where it took I think nine people to approve a three dollars stapler, and I said that was not my that was not going to be my place of residence for long, and then went kind of back on the credit inside for five six years before starting a couple of different quso's ongoing operations see wallet. And then maybe seven eight years ago really kind of got passionate around how do I really help early stage entrepreneurs that are trying to break into credit unions and help credit unions who are trying to really devise a strategy to compete with with and partner with FinTechs in a more meaningful way. And so wrote the Crediting two point zero book, which really focused on digital transformation, followed by an aibook that got publised

1:35 a couple of years ago, similar to the Digital Transformation, but all really around how are you going to incorporate AI into your credit union and where to really be thinking about that? And then kind of in that same Vein was starting the Winery seven eight years ago as well. So it's been a busy seven eight years, but it's sort of come out the other end of it and really happy with where we are today. Awesome. Yeah, maybe that's a good place to start. When you talk about partnerships or FinTechs and credit unions working together, why do you think that's a good match? What makes that a good partnership? Yeah, I think there's two sides of it. I think the first side of it is, I think there's some level of it. It's just the reality of new entrants innovators dilemma, right situation where the FinTechs have the time, capital and ability to go really really deep on one particular part of the business. Oftentimes it feels like creditans are running with your sixty different businesses within that and so when you can get that specialization, you really find unique opportunities yield arbitrage, you know, et cetera, or service in that mode. And then I think on the other side of it is because creditans are trying to tackle so many things at the same time and not being able to kind of really focus deep on any one areas.

2:50 One of those areas, it's me it's a real opportunity to partner with someone who could really make their experience and their performance that much better by finding the right partner in that. And then I think the last piece of it is there's definitely a group of FinTechs that are actively trying to reach or eat credit unds lunches into trying to really avoid those by partnering with the ones who are really looking to help. Yeah, I agree with that. Is there do you think about that separation in those trying to partner versus take their business? What do you think the differentiator there is what causes one fintech to be in one camp versus another. Yeah, I'll start obviously, we were more in the partner camp, and we've got a point of view on how we got there, But curious like your perspective on that journey.

3:35 Yeah, absolutely, I mean I think a lot of times we really kind of classified as there's those that want to eat your lunch, those that want to eat lunch with you, and those that want to serve you lunch right and upstart certainly in the not to eat your lunch camp, And so I think it's usually it comes down to the recognition that fintech either needs scale and breadth a number of users, and credit unis are a great way to partner on that. So that's one angle, and the other angle is credit UN's being kind of a downstream distributor where there's a scale and a breadth that the fintech can get, whether it's on customer acquisition or particular type of loan or something like that. Where you know, a credit union sitting in a you know, a state or a region just can't get enough scale of that particular type of a product or opportunity, and so partner at the fintech who can really bring that scale to that particular loan product, service product, you know, depositive product, et cetera, ends up being really meaningful.

4:32 Yeah, I think that makes sense. I think the other thing that's interesting to me is thinking about, just as you mentioned, distribution, so physical versus digital channels. You know, I've been in banking and financial services a long time as well and was always surprised at the number of people like using the branch still engaged and use those as a touch point into financial services, Like is that do you think that's like accelerating downward? Will that always be a part of the equation, like that. Human interaction or how how do you view the like the trend of that in the near future. Yeah, I mean, I think we have some stats that shows something like seventy percent of consumers are going to Google to find a loan in the first place, right, And so if you think about eight thousand banks and credit unions competing for that that particular keyword or that particular type of loan, it's a pretty you know, it's pretty expensive to try and you know, target that. Versus a fintech that can really own a digital channel of digital experience and put themselves either in the flow point of sale piece of it or the right digital you know, piece of it, they just end up being able to be much more competitive at understanding and finding those consumers, pricing them correctly, and then bringing them into the credit union Versus when a credit union tries to compete in that space, oftentimes they can't even afford the marketing costs, let alone you know, the rest of the fulfillment of the rest of those pieces in there.

5:57 Yeah, very true, And it's funny even like the eight thousand, I mean, that seems like a huge number and is, but is even low considering where it was ten fifteen years ago. Sure, Yeah, do you see like the. Number of institutions still kind of merging or I hesitate to like putting the current context of what we're at the end of April here talking and who knows with the state of regulation and the government and kind of the. The Yeah, a pretty steady you know consolidation over the last ten years or last twenty years really since I started working in credit unions, and you know, it's not like they're going out of business, they're just merging and becoming healthier and having more scale. But I but I think it also brings up the you know, the kind of key piece of Just as much as those distribution channels are hyper competitive for people that aren't playing on a national level, your consumers are being in your members are being targeted on a national level, so you can be in you know, middle of nowhere America and that consumer because of the Internet and because of digital accessibility.

7:04 It used to be competed with the bank down the street and maybe a national bank who had some smart you know, you know, physical mail strategies or something like that. But now you're competing against everybody who has a digital footprint in that and that really shifts that that cycle so that the credit it isn't just competing locally, they're competing regionally, nationally and in a Britique setting, and that really shifts the balance to entities that can can understand and capture that on a much broader basis and put it directly in front of the consumer. Yeah, that's so true. I hadn't really thought of that competing on all those levels now and how hard that would be and kind of back to the idea of partnering with credit unions again, like for us at Upstart, I think we did not want to get in the business of trying to unseat banks and credit unions who've been building their brands in the community for hundreds of years and focus on the technology side, which we're good at. But it did get me thinking, especially after a conversation with Kurt Lynn recently who founded and runs Pinwheel, about you know again like companies focusing on what they're good at or what differentiates them and kind of building on what you said with banks and credit unions partnering with FinTechs, like credit unions have have developed a good relationship or specialty around certain member groups or you know, select employer groups, so there's some some tighter reason behind their existence other than just financial services. And you know, typically those were geography or

8:35 employer based. Like do you see that changing today? I started to do a little thought exercise, like what would be the community today, Like is it a YouTube influencer? Imagine like you give a. Little bit away personally with my kids and their age, but like mister beast, would he start a credit union. Is that a community that people would care about. Or it's funny? I mean, I certainly think my kids would jump on that in a second. It would be good, right like, So I agree, I mean, I do think it is it is much harder to create those communities and find those things versus I think they were much more natural when you had employer sponsorships or other things in that regard it. And I don't think, you know, it's it's you know, I think back to my parents and their kind of banking experience, and you know, my dad was big into toy trains because that's weird, and that's what he did. But you know, like, there wasn't a toy train, you know, operating credit union. But I suppose there could have been. But if there would have been, he would have joined it, right or he would have had He was a cal Tech engineer, so it would have been cal Tech. But other than that, those are the only two community things he would have been involved in Versus today, I probably have twenty or thirty different groups that I'm involved in, and and and so I think it really had shifted in the complexity of the modern consumer, where you know, we.

9:53 Travel a lot more. We we network a lot more, we. Read a lot more, were exposed to a lot more nuance. I mean even I even think back to when I went to high school in southern Oregon with his community bank that we started the bank branch with. And you know, at that point in time, whatever was happening in a major US city that was tech driven and you know, front end, you know, leading edge of type of things, it would show up in southern Oregon about ten to fifteen years later, right, And that that time frame took really a long time for a major national trend to get down to the local, you know, small town America kind of thing. Going to DC for twenty five years, coming back to southern Oregon. That gap of when Uber hit in d C versus when Uber hit in southern Oregon was about three years, right. And so there's just a pace of change and a pace of assimilation of this stuff that just occurs way faster now than it ever did before. And I think that makes it even tougher to find those pockets of community.

10:54 You know, in that Yeah, definitely. And so I continued that thought exercise a bit, maybe into something a little more reasonable but still newer and thinking about like crypto or bitcoin. And there were some credit unions I found, like United Financial Credit Union or we Street that that talk about those services, Like do you see any credit unions latching onto communities or you know, why do people go into two banks and credit unions? I think it's define that advice or to find someone who knows something about a complex Yeah, instagrament or system that they don't understand, like is that our credit unions getting in the crypto space or something similar. Yeah, they're definitely handful that are trying to play in that space, but I think they're definitely challenged to figure out exactly how to bring that to market. And again, you know, how do you take what is an international product tool and you know, financial medium and create value at the local level with crypto when it's still not mostly accepted. You know, it's not like you can go into your neighborhood winery and use crypto, you know, and so there's still those types of friction points. But I think and I think that is the thing that would drive crypto to the next level from an adoption from.

12:09 A consumer perspective. If that local small town had use cases, then you bring a whole bunch more people into it, right, I mean, even think about like Amazon, It took Amazon twenty years to get you know, two days shipping all the way down to that local, you know level. It wasn't something that happened overnight. And so I think, you know, when we think about these various trends, I do think you bringing up a great point, which is I don't think a lot of credit unions think about what is the modern community for younger members. Today and how do we tap into that? Right? I think they tend to think of it very much the way it was and whether it's those family values or you know, whatever it was in the fifties, sixties, seventies, and that has shifted pretty substantially generationally. And I don't even know that I can tell you amongst my friends where that sense of community and tie in would be if I were to take, you know, my ten friends in Southern organ were the community is because of that friend group. But it isn't because we have a shared religious affiliation. It's not because we have a shared interest in toy trains. It's not because we have a shared interest.

13:13 You know. And it's almost much more life stage community than it is you know, uh, communal interest in music or something like that. And I think that's just a really big shift in how the world operates today. Yeah, I think you're right. And I think it also shows up in where people are getting that financial advice, you know, the turn TikTok or YouTube or you complete strangers with no seeming maybe credentials but other than their follower size to get that insight where maybe you would have from your colleagues or those that shared your. Interests because those people were around you. And that's as far and as fast as information can travel there. Sure, And the reality is, who am I going to trust If we're going to google a complex you know, thing about how to do a derivative or get an interest rate swapper, I'm going to ask my dad, right, like, I mean, it's you know.

13:58 It's yes, he could probably tell me the theory behind it. But I guarantee the online education that I can find in eighteen seconds or a Reddit article is going to be far stronger and far more credible at the end of the day. Right, And so it's even that replicates that shift of I always think about this when I was a kid, you know, when I was two. My dad had twenty times in knowledge of me, right, and when I was ten he had, you know, four times in knowledge of me. And when I was twenty he had two times in knowledge of me, and now he has like one and a quarter, you know, one and a half times. And as that progression occurs, there's a pretty significant shift of how you think about expertise and where do you get where do you go to get sources of truth and how to navigate the world. And I think that's where, you know, the reality is, even that I'm forty seven, if I go online and want to learn something, I can probably find someone who still knows twenty times more than me.

14:50 Yeah. Yeah, that's a great point. And maybe bringing it back a little bit to the more practical a topic you and I've chatted about offline a handful of times, this idea of leading with lending or life is just getting more expensive, so the need for credit is certainly more pressure, and I think the access to credit hasn't kept up with that need. So getting lenders more comfortable with that being the lead into a relationship versus the traditional I get the checking account, or as you said, you walk into the bank, maybe get your past book savings when you're getting your first job or allowance and start to save money away to build that lending relationship. Are you seeing any trends or people getting more comfortable using a lending product as a way to get to know someone that their life stage and build a relationship.

15:39 Do you mean the credit unit or the. Consumer more in the credit union side? Yeah? Yeah, I mean I think, you know, it's always been the case that I think loans really drive account opening and some you know respect, because that's that solves a critical if you want to grow members and you were trying to do it exclusively on you know, either a digital foot and or just on a deposit rate basis. I think I G might be the only one I've ever seen successfully really crush that, you know, from a unique perspective, and I don't know that would work again today, right, They hit this right arbitrage point of online and market conditions and rate you know, in a unique way. So the loan piece is usually that's a much better spot for a consumer to enter because they're usually trying to do something else that gets them willing to do a little bit of work to get that thing. You know, they don't want a car loan, they want a car, right.

16:31 They don't want a home loan, they want a home right. And so when there's some other want, need, desire, emotional connection to something, them being willing to do some work and experience in friction to get it is what gets them to change, you know, behavior or something in that. And so loans I think are a great indicator of when that emotional trigger is occurring or that that event is occurring for the consumer that would get them to do that extra piece report. Yeah, and then how do you see eating is take advantage of that so or maybe compare and contrast the good and the bad, or like those can memberships in that environment? Yeah, in general, I think you know, I think this is an area where credit unions have not kept up with kind of the digital acquisition strategy. So we tend to think of consumer, you know, indirect consumer coming through one of these third party channels. They come in, they join the credit union, and then we send them a welcome kit, not recognizing that they came in from a digital channel in the first place, right, And so you know, a physical, tangible welcome kit is probably not the thing to match that. It's sort of like I'm sure we all of those people where we you know, we send them a text message orn email and they call us and leave us a voicemail and we're like.

17:40 No, no, I texted you. I expect you to respond to text right, Like it's it's weird to me if you call me back after I text you, right, unless you're my brother who calls me to make sure that I got the voicemail or text me to make sure that I got the voicemail. Right. Multichannel approach, Yeah, exactly. And so I think when we think of that from an indirect respective of something like forty percent of members close their accounts one hundred days later because they didn't feel that engagement. They didn't they didn't see a digital onboarding process that really aligned with the small step things that they need to do. The other piece. But I think that's really shifted is someone needs to go into a bank and you'd sit down and you fill out the form and they would do it all and you'd sit at the desk for an hour and then at the end of it, you get your check, you get your debit card, you know, whatever it is, and you kind of walk out and I think consumers today don't have that hour time, so they're expecting to do that onboarding and small five minute distracted you know, things between their Facebook feeds, you know, the Instagram posts.

18:35 They want to do those small little things. And I think that that digital onboarding gives the ability to give them small micro tasks that onboard them that don't require this huge commitment of things, you know, to do all up front. And you know, I think if people are going to do the work of switch, they want to do it on their terms, their timeline, you know, et cetera. And just because you sent them one email that they didn't notice doesn't mean that they don't want to do it. It's just the timing of that email wasn't right. Yeah, that's a great point. I hadn't thought of it in that way, the idea of micro tasks, or if you combine that with I know this is true in my personal life as well. But you know, no one wants to talk to a live customer service rep until you want to. And then you want that person immediately.

19:16 And so how do you create that almost concierge like service as a credit union to guide people through the steps let them do it. On their time, but you know you're there helping nurture them along. I think could be really important. Yeah, I'll give you a great example that occurred recently. I had two different credit unions that were clearly encouraging mobile wallets, and both encouraged me to put my credit card in my mobile wallet, only about ten years after mobile wallets really kind of became a thing in my mind. But either way, they finally got around to it. They in sented me to do it. I put my both cards in and then I went and tested the mobile wallet and both of them declined the first transaction because it's the first transaction, it's a high fraud risk. Well, the flip needs to be true, which is the first time your consumer try something. It needs to work one hundred percent of the time. You can put the fraud controls on number two through ten, right, put on that first one. You're better off just waving it.

20:02 Yeah, totally. And so how how does a credit union, you know, navigate stuff like that, because back maybe back to the partner idea, you know, build those customer relationships through technology that's maybe new to them or haven't thought through those use cases. How do you even begin to. Find a partner to know where your gaps are. It seems like that would be just a daunting analysis paralysis kind of exercise. Yeah, I think. I think there's a couple different ways. I think A, you can put the lens on. I need to find a partner that is going to do this naturally in my mode and kind of strategy and align with a digital onboarding experience and a process that is these micro components and aligns with that. So I think, A, that's super important. They need to have the tools and the capacity and the wherewithal to recognize these are individual you know, experiences and journeys and your your your systems and your processes need to be to find at that individualized basis so that if I mean, I can tell you like every time I Credit Union says enroll in these statements, when I'm already enrolled in the statements, I want to poke myself in the eye and be like, how do you not know I'm enrolled in need statements? Especially because if I forget and I go log in and it tells me I'm in rolled in statements, I'm like, now I'm even more frustrated that I did this five minute thing, and it's you know, and it's almost brand Uh, it's a reduction in the value of your brand when you don't treat and understand the consumers you know, spot in that process. And so I just think that's a continual thing credit is to evaluate.

21:35 Yeah, totally totally agree. Well, I know we've covered a lot already. Are there things you think that we've missed or you want to make sure we highlight in terms of you know, partnership, cross selling, you know, onboarding consumers, any anything. Yeah. I think I think that you know, understanding that first hundred days and understanding the digital tools and the analytics that you need to help drive that in which partners can really help you there is key. I think the second piece really is also understanding what are the other pain points and opportunities that are just low hanging fruit in there to help the consumer migrate, right, So not be just you know, how do I help them going through this process, but if they move a car loan over to me and I noticed they have this other loan that I have a better rate on, that's your opportunity to grab that business and make that super simple as well, and not just asking the same fourteen questions either right right.

22:24 Yeah, great, yeah, I think great advice, great place to end, you know, appreciate the time. Is always always good to catch up a bit. And maybe we'll do a follow up episode live from the winery sometime. Sounds great, that'd be awesome. All right, well, thanks again, Kirk,