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Change from the Inside or Starting Fresh

  • 1.  Change from the Inside or Starting Fresh

    Posted Jan 15, 2020 02:50 PM
    Should credit unions work to continue transforming themselves into a more digital, responsive and intuitive financial institution or build a subsidiary/separate entity built with the foundation of being digital first?  What are the advantages and disadvantages to each you have seen or would anticipate?

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    [Russell] [Evans]
    [VP Member Relations & Sales - Northeast]
    [CUES]
    [Madison] [WI]
    [53711]
    [russelle@cues.org]
    ------------------------------


  • 2.  RE: Change from the Inside or Starting Fresh

    Posted Jan 16, 2020 12:04 PM
    Russell,
    Great question and something we've considered here at Tucoemas.  I think there are a lot of factors that play into this decision: asset size, market place, target market, time in the market...etc.  We have decided that for our current operations, digital is a "hygiene factor" to quote Herzberg.  If we don't have "competitive" digital, members will leave.  But, having the best (that we can afford) will not motivate members to join.  We've decided to use digital to provide additional modes of contact and operation for our members, but are pushing deeper in to F2F where desired (somewhat contrarian).  We cannot compete on digitalwith financial institutions like Chase for instance, but we have to try to keep up.  What we can do, as a regional financial institution, is be even more personal, be more aware of local problems, and provide more tailored approaches to solving those problems.  Even our millennials want to come in.  We've all seen this in our own experience: have a real problem with your Google account?  Trying to find a solution though numerous FAQ, threads, etc is the ultimate in frustration.  You just want to talk to someone.  This is just one example of were the "digital first" landscape can be difficult for consumers.  There are more.  In essence, it's great when things are going well... a nightmare when they aren't.  Again, we're a county-based CU and so our market is smaller.
    That said, there are markets that we are trying to capture that may benefit from a digital-first footprint.  As we increase our focus on this strategic segment, we are considering pouring more heavily into a digital-first platform that is "separate" from our traditional operation.  We're not talking about millennials here, but about a geographic and demographic Venn diagram that recognizes that certain segments of our market are digital reliant and may benefit for a very directly targeted, digital strategy.
    Does that address your question?

    ------------------------------
    Brice Yocum CSME CCE
    CEO/President
    Tucoemas FCU
    Visalia CA
    559.737.5900
    ------------------------------



  • 3.  RE: Change from the Inside or Starting Fresh

    Posted Jan 16, 2020 02:34 PM
    Hi Brice,

    I like your thought process here and I admire the amount of attention you and your organization have given to this topic.  You addressed some of what I am thinking about but let me elaborate.  I think there are some smaller wins that cu's could afford to do that would help remove the friction for consumers and add to their convenience which is all that I think they want.

    Your google reference is spot on, the threads and forums you have to go through are a pain.  Now if I could text, online chat or Facetime someone at google and get an answer that would be ideal.  There aren't enough cu's proficient in this space and that is how members age 18-40 operate.  I can go a step further, can we keep our legacy processes and systems but have a member facing tool or solution that is convenient i.e. venmo's consumer facing platform seems easy however it still uses the legacy account info and processes on the backend.

    Most cu's can't start over internally to spend on all the new systems, skills and processes that would be needed to become as digitally focused as a Chase per your example and even small migration of internal systems and changing staff mindset can take alot longer than need be.  If a cu can't start over can they create an entity that would be built in the image of what they want to be while leveraging what's already there, similar to can add an addition on our house while using the piping that's already laid out.

    I was at CUES CEO/Executive Team Network Conference in November and one of the keynote speakers Walter Bond said "It isn't the big fish that always eats the small fish, its the fast fish that eats the slow fish.  How can we make our movement faster and more agile versus just thinking being bigger as the answer? And if something was built that was flexible and agile enough could it be scaled and used by the many as we are still a small piece of the financial services puzzle.  To me that's where fintech is an exciting space because they are starting from the consumer view and working backward towards systems and processes vs. working with what they having and seeing if that will be good enough to meet consumer need.

    A few innovations I have seen recently that excite me as a consumer primarily focus on being proactive and noticing needs before I even ask probably with machine learning.  For example,  having an online banking app tell me when there are irregularities in my checking or credit card spending or a bill charged multiple times. Being able to web chat on my phone, or text or Facetime to get complex questions answered anytime; responsive social media pages for companies who are listening to needs or responding to consumer sentiment both positive or negative;  proactively offering me loan solutions to save money or consolidate debt using the data on my payment amount, amount owed and estimating rate and term from the info they have.  Is there enough movement in these areas for example to provide advisory services for members from anywhere and anytime before amazon, apple, google and facebook get into banking in a bigger way than they are now.  We have a generation coming to banking that have grown up with the ability to get answers and interact anytime from anywhere, that's a tough standard to live up to individually, can we as as cu system?

    Great discussion, very thought provoking.  I hope others chime in.  You have got my mind working now Brice

    ------------------------------
    [Russell] [Evans]
    [VP Member Relations & Sales - Northeast]
    [CUES]
    [Madison] [WI]
    [53711]
    [russelle@cues.org]
    ------------------------------



  • 4.  RE: Change from the Inside or Starting Fresh

    Posted Jan 17, 2020 12:40 PM
    Okay Russell, I waited, but it looks like we're alone here... so:
    I want to expand on something you addressed and share a little more about what we're doing... "teams, and teams of teams."  This was a phrase I heard a few years ago at the Harvard Social Enterprise Conference (SECON).  The idea is that we have to move out of the assembly-line mentality, and into a more flexible, more responsive structure.  Rather than a traditional hierarchy and vertical alignment, we need to have teams, and teams of teams.  This allows us to better respond to changes in our environment, share information, etc.  It helps in what another speaker described as the new model for tackling business challenges: "problems, patterns, paradigms."  Our teams should always be looking for problems that our members are facing, recognize the patterns that tend to persist around those problems, and build paradigms to address them.  A team-based structure helps us do this better.  We can reduce friction when we are sensitive to those problems and patterns, and empower our teams to resolve, and/or request resources to resolve, those challenges.
    We are working toward this model as we experiment with what we call a "starfish strategy."  In a sense, we are going into our community and looking for "segments" that share similar problems or challenges.  We identify those segments, determine what problems we can solve for them, and try to build a strategy to resolve those issues.  It's always Tucoemas, always our same central structure (this is the starfish part), but we develop multiple, targeted strategies.  So to each segment we identify, we "look" like a tailor-built CU.  This allows us to compete on a level that larger financial institutions can't match... we're hyper-niche, if you like.  Additionally, it mitigates risk because we have multiple strategies in place.  If one is unsuccessful, then just like the starfish, we lose that leg and grow a new one.  So in a sense, we are "seg-based" again, but just on a more focused level.
    As to technology and reducing friction, rather than focusing on "how much does it cost?" we focus on "what is our return."  So the price is not nearly as important as the impact.  When I arrived just over three years ago, the team was used to a "we-can't-afford-that" model.  I started asking, "tell me why we can't afford not to."  Again, we're not looking to be a tech leader, but we can't be a laggard.  We have to reduce friction for our members.
    For one of our targeted segs, getting into a branch is significant friction.  So we are investigating how we might make a dedicated mobile environment for them.  Whether this is a landing page that is completely in Spanish, or a completely virtual banking experience that is Hispanic-centric, time will tell.  But in the meantime, we have a full-time employee that spends her entire week in a target community, building relationships, identifying patterns, and providing on-site, personalized solutions through our Pathways program.
    Sometimes reducing friction is high-tech and digital, other times its analog and F2F.  Having a starfish strategy allows us to adopt the right technology to the right needs.

    ------------------------------
    Brice Yocum CSME CCE
    CEO/President
    Tucoemas FCU
    Visalia CA
    559.737.5900
    ------------------------------



  • 5.  RE: Change from the Inside or Starting Fresh

    Posted Jan 17, 2020 01:08 PM
    That is great insight and I enjoyed learning your perspective on this.  How will you measure success of all that you are working on?

    Speaking about  starting a new vs modernizing whats already created I'm curious, If you were speaking to a college grad or an entrepreneur who wanted  to start a new credit union in 2020, what advice would you give them on modeling for consumer acquisition, delivery, engagement and retention that would set them apart from the competition?

    ------------------------------
    [Russell] [Evans]
    [VP Member Relations & Sales - Northeast]
    [CUES]
    [Madison] [WI]
    [53711]
    [russelle@cues.org]
    ------------------------------



  • 6.  RE: Change from the Inside or Starting Fresh

    Posted Jan 17, 2020 01:53 PM
    Russell,
    Every year we update our 3-5 year strategic plan, and create a set of annual "Strategic Initiatives."  It's the SI's that we measure success against.  These SI's represent some milestone or advance on our 3-5 year plan.  The include 5-6 financial indicators (NW, ROA, Avg Yield, Expense Ratios, etc) that are part of the traditional measurements.  Additionally, we have "programmatic" goals for each of our existing or planned strategies, but no more than 2-3 each.  So our SI's usually fit on 1-2 pages, and have clear, measurable KPI's.  I then use these to set goals for our VP's, who in turn set goals for their leads and teams.  This is how we try to assure strategic and mission alignment.  So far the results have been pretty positive.  In my first full year here, our team was able to grow net income by nearly 4x (2017).  Subsequently, we had a record financial year in 2018, and again in 2019.  We have been quite blessed.

    Funny you should ask about what I would say to college grads/entrepreneurs... as a former MBA program director and professor of entrepreneurship, I would say, "don't start a credit union."  Instead, I'd challenge them to look into their community, identify the financial challenges that are persistent, and create solutions to address those challenges, however they relate to money.  I would say, "tell me what problems you want to solve and why it's important that they're solved."  I would challenge them to come up with solutions that could be done in a week, with a $1000 or less.  I would have them research companies like Rocket Mortgage, Venmo, Green Chef, Trader Joes and their favorite local coffee shops.  Why do customers love these places?  What are they providing that others aren't and how are they providing it?  I would ask them to tell me what their values are and how those values will inform how they build a team.  I ask them to write down those values and tell me their mission and if that mission could be applied to any other organization I'd say they needed to work harder, focus more.    In essence, I would have them create a lean business plan: Segment, Problem, Product, Technology.  Finally, I'd want this business plan to be about one page (maybe Tabloid size), and then we'd start iterating, because as I always remind my team, "Bigger is Not Better, Better is Better."  In the end, this would be a credit union for the future because it has people and problems at its heart.  But if we started with "start a credit union," I'd fear we would be limiting ourselves from the beginning.  But that's just me, and what do I know about running a credit union, I've only been in this business for 3.5 years.  :)

    ------------------------------
    Brice Yocum CSME CCE
    CEO/President
    Tucoemas FCU
    Visalia CA
    559.737.5900
    ------------------------------



  • 7.  RE: Change from the Inside or Starting Fresh

    Posted 26 days ago
    I like that method of thinking.  What are the 2-3 financial challenges that have the most impact in the communities you serve?

    I would guess the challenges could differ by age demographic, gender, socioeconomic's, etc.  Is there value in looking at it by identifying a financial challenge or even opportunity at each point of a consumers lifecycle (student, young professional, family, retirement, etc.).  I think back on my evolution as a consumer and there were definitely points where most of my decisions financially were based solely on convenience.

    Great discussion Brice, I am enjoying learning from you.  ​

    ------------------------------
    [Russell] [Evans]
    [VP Member Relations & Sales - Northeast]
    [CUES]
    [Madison] [WI]
    [53711]
    [russelle@cues.org]
    ------------------------------



  • 8.  RE: Change from the Inside or Starting Fresh

    Posted 25 days ago
    Great question Russell... I think you are right in that there are many ways we can "slice" that pie.  But perhaps we should recognize the overarching reality that you identified, for most people its all about convenience.  According to research, it's the primary determinant for American consumers.  However, depending on the individual, "convenience" might be defined in different ways, but I'll come back to that...

    Just to continue the theme, we try to break down our target members into smaller and smaller pools.  That allows us to determine more meaningful, more tailored challenges that we can solve uniquely.  I'm sure most large financial institutions are looking at "what do millennials want/need," so that's not that interesting for me.  Sure, we need to look at the life stages of our members and have relevant offerings, but isn't everyone doing that?
    A question we might as is: "what are the challenges facing undocumented families in the Lincoln Elementary School District."  We'd build a list like: transportation, healthcare, employment, citizenship, access to funds, education.  This would be based on our experience with these families.  We'd ask questions, listed to conversations and do our research.  Then we'd look in our tool bag and see what we can use, or create, to address those needs in a tailored manner.  Interestingly, I think we have something to do with each of those categories.

    But to answer your question, in our Avanzamos program: ITIN lending is a big need for Hispanic families that we are looking to empower.  Access to healthy financial institutions is another; persistent poverty exacerbated by a lack of education is a bigger one.  We're working on all of these.
    In our PrimeTimer program (65+, high net-worth): challenges with technology, transfer of wealth (estate planning, bill pay).  We have a team member who acts as a personal banker.

    How we solve these things is part of our strategy.

    So convenience.  Most people think it's apps and technology, and that's not necessarily wrong, but that's just one aspect.  For the mother with all her kids in the car, still operating a drive-up window with a live teller is convenience.  For our PrimeTimers, allowing them to book appointments for a 30-60min session with their personal banker is convenience.  For our undocumented community, sending someone to the local school who can handle all of their banking needs onsite is convenience.

    I guess our theme is: dig deeper, ask more questions, seek to solve the problem not the symptom.  Our "new" way of being a credit union is not to be more like a big bank, we can't compete there.  Our "new" way of being a credit union is to be MORE personal, MORE niche, MORE intimate.  We're not competing on tech or rates, we're betting that we will know you better and actually solve your needs in a more personal manner.

    ------------------------------
    Brice Yocum CSME CCE
    CEO/President
    Tucoemas FCU
    Visalia CA
    559.737.5900
    ------------------------------



  • 9.  RE: Change from the Inside or Starting Fresh

    Posted 24 days ago
    That is a very practical approach. How does being more personal, more intimate require more sophistication and integration of your systems to help staff keep that personal touch with a large number of members, some of which prefer remote channels?

    I am learning a lot from this discussion and from your perspective Brice, very insightful.  Sounds like organizational agility is key at your credit union and that is why that topic is one of the more popular pathways in CUES learning portal.  This reminds me of some of the talks and lessons I have learned from a peer @Tj Adkinson  on how credit unions can continue to live the original cu mission especially as they grow very large and become very sophisticated.   Do you take this same approach to local businesses?

    Speaking of wealth building I had someone tell me once credit union should be more in the wealth building and money saving business for consumers and not in the business of adding debt for their members in the form of new loans to live beyond their means.  That's a delicate balance and might not be as helpful on the balance sheet however it made me think about what more can credit unions do to help their members money grow.  That is something everyone wants.

    I know that can happen through loans but there has to be other ways right?  The "Acorns app" concept of sweeping/rounding up purchases and the difference is place in an investment account of some type is very interesting to me and I wish that was part of the mobile banking package at more credit unions especially for their college age members.  ​I just found out my cu offers that feature and will put it into a savings account which is neat.

    ------------------------------
    [Russell] [Evans]
    [VP Member Relations & Sales - Northeast]
    [CUES]
    [Madison] [WI]
    [53711]
    [russelle@cues.org]
    ------------------------------