Leaders in Lending
Leaders in Lending

Episode · 1 year ago

Entering a Digital World Through Partnerships

ABOUT THIS EPISODE

It’s tough for smaller credit unions to compete in a digital transformation world. Most of the time, they just don’t have the IT budgets to play in that space.

But with the help of credit union service organizations, or CUSOs, and fintech partnerships, credit unions can close the gap in the digital divide.

In this episode, Drew Megrey, CEO of Ohio Teamsters Credit Union, shares how credit unions are adapting to a digital world.

We discuss:

- Why members prefer a personal touch

- How credit unions adapted to COVID

- Leaning on CUSOs for digitization

- Building effective partnerships for the future

Want more lending advice? Find us on Apple Podcasts, Spotify, and here.

Listening on a desktop & can’t see the links? Just search for Leaders in Lending in your favorite podcast player.

I think this is across all platforms, credit unions, banks, no matter the scope of size. COVID actually helped digitize banking, digitize everything. You're listening to leaders and lending from upstart, a podcast dedicated to helping consumer lenders grow their programs and improve their product offerings. Each week here, decision makers in the finance industry offer insights into the future of the lending industry best practices around digital transformation. In more let's get into the show. Welcome to leaders and lending. I'm your host, Jeff Keltner. This week we have a conversation with drew megrey, the former CEO of the Ohio teamsters Credit Union. Full disclosure, drew is now an upstart employee, but when this conversation we really just delve into his time running a credit union. This was a bit of a unique conversation. Bill Higo team service is a much smaller institution by asset size than most of the people we talked to here, and I think that really gave drew an interesting perspective on a new approach is to digitization the importance of fintech partnerships. I also think the Ohio teamsters Credit Union as is kind of state of the name has a slightly more traditional user base than what many institutions are targeting, looking at millennials or more tech savvy folks, and so I think that really gave a different perspective on what the importance of branches and person experience and how you marry that with digitization. So really interesting set of perspectives, a little different and in some ways than other guests we've had, and I'll I'll also point out this is, I think, part of a trend for getting a little bit more diverse perspectives, both from types of institutions, whether they be actual lenders or Fantax, and different kinds of role. So if you've got other suggestions for topics, guests or areas we can delve into, please do send them over to me. Find me on Linkedin or I'm jeff at upstartcom the email and would love to have your suggestion so we can get you, guys, the guests and topics you want to cover and without further ado. Please enjoy the conversation with drew. Thanks for joining us and welcome to the PODCAST. I appreciate your making the time. Thanks, Jeff. Happy to be here. Yeah, so you know, I kind of wanted to start. I've talked to a quite a few financial institutions now on this podcast and I'm pretty sure you guys will rate. As you know, a high team starts. CREDIT UNI is one of the smaller institutions, but at least by asset size. But I'd love to understand a little bit about the nature of the institution, the the type of membership or are these the teamsters I'm thinking of from the from the movies and whatnot like this, is that's the membership based you guys have. These are the the Jimmy Hoffa guys, you know, saver. We go. Yeah, so the team stirs, if for those of you who don't know, is it's your service industry, so people that drive trucks all across the United States, whether that be ups, milk, beer, what have you, that in their their blue collar workers with with the old school mindset. So I do find it very unique that in some of the executives that you've spoken to in the past on the podcasts are you know, like you already aliterated to is is that there their mass scale from it from an asset size, and where I came from was a smaller asset size and with that there are in looking at digital ways now that that that's just not a thing that they're very interested in and it's more of a branch a branch access as opposed to using their phones, tablets, computers, things like that. But just just a brief recap of Ohio. teamsters, credit unions, small area, small market in Cleveland, Ohio, and it is for the service industry drivers that that our teamsters, you know, teamsters, local individuals and, like I said, very very blue collar, very small scale. In Yeah, that that there, it is, there, it is well, I think it's a really interesting and a bit unique perspective. So I want to dig into two parts of that and this conversation. The first thing you kind of alluded to a little more branch oriented. So talk to me about I know everybody's I can't talk to a bank executive without the digitization conversation coming up. Is Maybe the most critical thing they're doing in some way, and it feels like you may have had a different experience with your members in terms of their orientation to the branch.

Talk a little bit about that. Was it was this still primarily branch led, where you seeing a desire or a push towards citization. I'd love to dig into, for a slightly different customer base, what that transition looked like and and maybe how it differed from what we've heard from other guests. Yes, so I think we're the real offset comes from is is our member membership base was very, you know, let's say s sevent s style. So so there wasn't any any backlash from a digital standpoint. It was just a matter of, from the scope of our size credit union, were we able to budget to implement a more digital approach to our membership? And then, on the back end of that, I think our membership also really like that touchy feel. You know, where credit unions differ from that of banks is there's there's a very, very close knit community relationship your for your members, and with that relationship, those those individuals are consumers, that that that do bank with the credit unions. They want that personal touch, they want to come see somebody and that might be from an informational standpoint. I want to know about rates, I want to know about your deposit accounts, what have you. But from there, once you have those conversations in that and that relationship deepens, they continuously want that. It's not that they're afraid of digital, not that they oppose of digital, it's just that community feel really makes them feel better being in front of somebody than to just press button. Yeah, I still feel like a lot of people, particularly those who are maybe less savvay financially or not as familiar with different instruments and it's just appreciate the trust. I've always loved the phrase members that the credit unions used to describe their membership. where I there's only talked to one bank that actually uses that, that word to describe their their customer base, and I think that degree of trust you get from an in person interaction and the consultative one where you can help somebody make the right financial decision. And let's be honest, even even as a savvy consumer, I can be very hard to understand different kinds of mortgages or different kinds of loans and different durations and is this a good idea or a bad idea? And I think that degree of trust is critical. Curse where you seeing drop off in I know how many banks are closing branches because nobody's coming in and they're empty or they're just too many and we don't have the traffick to support them. Where you seeing similar dropoffs or were you still seeing people come in and utilize the branch at a similar rates over time? So we're align prior to Covid, because covid kind of threw a monkey wrench and all that. Right, covid screwed up everything, but I'm very free covid trend and we'll tell good. So, Pre Covid, the branch traffic was, I would equate, too heavy. So you know, just real quick, before I came into the Credit Union space, I was in the banking space and, as you've to bank banks are very digital and let's do everything fast now and their consumers have definitely grasped that concept, whereas on the Credit Union space, with, you know, having that relationship, I feel that the the branch is still very heavily oriented through their traffic, and I think that just goes back to what we were just talking. Point on is, you know, they have that relationship. Feel that okay, I'm going to go in and see teller a because I really like our weekly chat. That's when I take my money out from my direct deposit or I really like banker a because I, you know, I just want to have a chit chat with him, her, what have you, and from there that just those relationships that evolved continuously brings members back into the branches as opposed to I just want to click buttons things of that. Now you're from from a higher scale credit union, you know, with asset size. Yeah, there's there's still that relationship feel. Definitely. You know, they're able to budget for those those digital things that you can offer to your membership. But I would say, coming from the banking side and going to the Credit Union side, that the the amount of foot traffic has stayed steady within the credit union, even with a digital age. Well, and now tell me how covid impacted that, because that feels like in some ways covid is a...

...larger disruption for which, in some ways perhaps the Crediti was less prepare. I mean that banks have been shifting to digital, the investments were made, that was kind of where they were in many ways, trying to push consumers. Yeah, some of them were writting, some of him weren't, and you weren't as much pushing that direction. Then all of a sudden covid comes and throw a monkey wrench and and the branch plan. How did that play out, you know, in that context? Yeah, so, so fast forward. You know, during Covid, I think myself and everybody in this in the financial service space, was kind of scrambling. You know, what do we do? Can Stay continuoucy fun funding plans here? What are we going to do? And in that helped digitize stuff from a certain standpoint, I would say, especially with, you know, signatures of documents being done electronically. People now going more towards okay, I'm going to have to check my accounts online rather than, you know, make that phone call, transfers, Doing Ach's and stuff that they didn't really participate in prior to that. And then, you know, from the scope that I came from, they were knocking on the door like, why are you guys not open? We have our masks on, we missed, we miss you guys. But no, I really think that the membership from where I came from, and I think this is across all platforms, credit unions, banks, no matter the scope of size, covid actually helped digitize banking, digitize everything. You can buy a car now from your couch. You can pull into the grocery store and not even get out of your car and they give you your groceries. So, from that end of the spectrum, I think that it gave membership, at least where I came from, it gave our membership a sense of this is where things are going to go. We were we were going to adopt it, and they did. In moving forward, there's a lot more usage of digital platforms within within the scope of things, but they still want that interactive feel. So so, for just to give you an example, let's say someone walks in, you know their longtime member of the Credit Union, looking to get an automobile alone, check in rates, what have you. Okay, cool, we had that touch, you feel experience and now we're going to rewind and I'm going to go apply online and I don't want to come back. I want to send everything to you digitally through, you know, through email, what have you, and then when we found it and do loan closing, I just want to sign some electronic documents. I don't want to have that that back office, for lack of better term, garbage that I can just click a few buttons that I'm done. I wanted to have that personal experience to start it and then I want to finish it digitally, and I think covid definitely helped our credit union advance into that. That that worlds. I've got two questions to FAULLP on that one. Did you see changes in the way the skill set or the activities of the team members in the branch? And I asked that because it feels like what you're talking about is some of the consultative stuff. Is there some of the processing review, like actual take the application, fill it out with like kind of goes away? Is that something a trend you saw where there were there changes in the kinds of skills people needed or the kinds of activities they were taking part in the branch? Because that's an interesting trend. That kind of what that frontline team member needs to do is kind of shifting. It's like it's not going away, but you're actually shifting that activity from maybe more of an administrative processing I'm your lone officer filling out give me the paperwork and I'll go photocopy your ID and all the fun stuff, to Hey, let me help you make a choice about a financial product and evaluate your choices. That's an interesting shift. You know, it's shifted very rapid and and I think you know in planning during covid you had to make that shift and in training your staff to say, you know, we have to go digital, we still have to make money. Right we can't, we can't open the doors. We don't know what's about to happen with this this covid thing. So so in planning, in being prepared to tell your membership, look, this is where we got to go right now. We know that you don't fully like that, but we don't either. By the way, we would like to...

...be in the office to yeah, we want to see you, but we have to make money. We and we want to give you money for a loan or deposit what have you. But I think that that that change definitely happened rapidly and we did a very good job, and I think a lot of people in the entire space of the financial service industry has done a great job in just letting their membership know that this is the way of the world right now and it's kind of just evolved naturally. Would you agree with that? I think it's just it's the way of the world now. I think it's actually I don't know it feels to me a bit like, you know, the what they say about the intelligence services was just like you never get credit for doing a good job, and I feel like this could have felt like such a massive disruption and the fact that it felt natural and relatively seem less to the to most consumers, to shift to an almost entirely digital rollmaking it's kind of a huge credit to the financial services industry that that that transition happened without massive disruption and it kind of like it wasn't noticed or credited, but like yeah, that's kind of because it just worked and that's kind of remarkable to me in some ways. I think you're right that it did feel natural and I think about it ago. It's kind of unbelievable that you can take a ten year transformation road map do it in one and nobody thinks of it as a big thing and it kind of just works like it's not how most ten year technology projects. So now we have a moving forward. It's got to do at a rapid pace as you can get this done in a year and a half. We don't need ten years. Right. Do you think that the investments, you know, as a credit union that's looking at a membership that still likes coming into the branch, it still likes the first connection. Does that shift where you make digital investments? And I really think of kind of the difference between front office and back off as the things where I'm not trying to force you to do everything through the phone, but I'm trying to simplify what has to go on behind the scenes because I'm investing in technology that kind of automates processing and back office elements, as opposed to here's the mobile APP, there's no tell or anymore good luck. Branches closed it. You think that's different for a credit union like teams was Ohio than it is for a you know, JP Morgan Chase, the where you think of the digitization happening? Or am I just making that up in my head? No, I think the digital wave that that has come for a bank the size of chase is definitely something that the scope of the size of credit union that I came from cannot afford, you know, in an IT budget or right. Yeah, so there's really an offset there. It's tough to plan and move forward in the space to give to your membership, however, through I don't know how many people have heard of a quo credit union service organization. What those Credit Union service organizations do is they are actually like a back end profit money pool, right, and and what they do is so, for instance, the scale of the Credit Union that I came from being small to play in the market of that of the chases and wells and what have you, or even larger size credit unions, they can then take their expertise and then give it to a smaller based Credit Union and in turn that could allow that smaller based Credit Union to get more into the it stuff and digitizing stuff and then being able also within that que so not just, you know, not just being their expertise, we can also that q so can also do the marketing material for that Credit Union at a certain fee or what have you. So it's really this. You don't see that in a bank, you see that in a credit union. Know, and I think what's interesting is within that Credit Union space everyone is so interested in helping each other out and let's get them up to our scale, even though we know that they can't do it internally. So within that Credit Union organization or Q so, you know, those partnerships there are going to eve continue to evolve all and just allow smaller sized community banks and credit unions to enter that world without that added cost. It's interesting because it I mean if if credit unions in general...

...or more community based to their their membership, it feels like they're more community based among one another. Two in terms of, you know, pooling resources and expertise to kind of enter into markets and given their size, I guess that's a requirement. That queso structures are really interesting way of joining forces, if you will, with with multiple institutions. In a way, that's your point. I think feels different than what the banking side of the house would do. Joining Forces is opposed to, know, just kind of competing. Yes, it's a it's definitely an interesting feel, you know, coming from the bank side of stuff too, it's just there's there's a real relationship among credit union leaders, whether it's, you know, your c suite or even, you know, if the teller's talking to another teller through the form of of these partnerships that credit unions have, such as, you know, queen and mutual or, from where I come from, the Ohio Credit Union League, and there's also the small Credit Union initiative. That there's so many different communities built inside of these communities that you can turn to for help, whether it's in how do I go digital, how do I ramp up my consumer lending portfolio? And it's just amazing to me that in that space, that they're willing to share some of their positis and procedures and it's a really cool experience to have been a part of. That's really interesting. I imagine you also as a smaller institution. I mean to your point, some of the big banks have, you know it, budgets that are orders of magnitude larger than your asset base. You know, they're investing in a way that you can't, and I think it's I mentioned being the sharp end of the sphere, and part of that is I think it kind of forces you towards a partnership model, both among credit unions but also with fintext or digital players, where you just, you know, I think many banks feel like they can build or should build some of the stuff in house, particularly if you get, let's say, over a hundred billion assets or fifty billion in assets. I just go hey, we've got an IT team. We want to own that as a core competency and obviously you know at a smaller scale. You just you can't have that belief about yourself. So I'm curious what you think of that. I mean it feels me like in some small credit unions or going to lead the way in terms of partnerships. How did you think about, you know, how you build a digitization or technology road map in the vein of I really don't have an IT budget of any scale or size, so I've got to go out and partner. How did that change your approach to figuring out what kind of technologies are players you work with and how you build that Road Mount? Yeah, you you hit the nail on the head. So it just a a wind from from it. From a cost standpoint, the as a smaller, smaller based Credit Union, they cannot afford that it budget, that that chase can write. We've talked about Oh yeah, a little bit. So that's where you you almost have to partner. And as we fast forward into this digital age, it's going to be the norm and credit UNIANS are having to adapt. And Credit Unions, you know, no matter the size, all banks and credit unions right now, everyone knows we're sitting on a bed of capital. We have a lot of cash we have a lot of liquidity and I think through partnership, you know, from from an IT standpoint, marketing standpoint and all those fun things that we can kind of put through a Quso which we which you talked about a little bit, it will help those smaller sized credit unions enter into the space of something that they can't take, that on, they can't sough. Through partnerships and through the Quso's that will allow, you know, a credit union of a smaller size to start playing in that fintech world, which is definitely going to be a thing of the future. It's rapidly growing, we know, and from there and being able to utilize those partnerships, they can play in the space. Then it's just a matter of what's the cost to do so? What is your return on the back end of it? And that's some stuff that we would have to of course sort out internally as a credit union at upstart what have you. But I think there is a huge market potential there...

...and I think through partnerships, through the through the QUESO programs, you know, there's leaps and bounds that we can make and moving forward. It really sounds like what you're what's your message is at least a small credit unions out there, and medium size is like building the muscle of effective partnership, both with a Fintech player and with other credit unions in the form of Queso's or other joint structures. It's kind of a critical muscle to build to be competitive, yeah, future, because those are the things that that give you the advantages of scale that you don't have from, you know, a membership size or asset base size. And one thing I would say is just just be open to it. I mean even even if just to have that that thought in your head, because this is going to be something that I said, it's going to be a thing of the future. It's going to be a never changing thing of the future, and being open to what this could become at an early stage of it could make that that partnership that much easier from from a now damn point right. Very good. was there anything you were hoping or fearing that I would ask you today that I didn't get to know, not off the top of my own, because we covered it all right, that's good. I sometimes ask at the end. Well, as you know, drew, I ask everybody the same three questions to end our podcast. So I'm going to I'm going to hop there now because I think we covered all the things you and I talked about. So kind of rapid fire mode. Number One, what's the best piece of career advice you've ever done? So it's goes hand in hand with my career. But will actually refer back to know, as an adolescent into my early S, I can find I did it in my father often when you know good, bad and different. And at the at the time, you know, as I was an adolescent, my dad was battling cancer and you know, I would come to him for problems, issues, what have you, and he would always just look at me and say these three words embrace the opportunity. And you know, at that really didn't stick with me at a young age, of course, but as I grew older and really understood the concept of what he was saying, you know I kind of took that true and true into my career. And I come from, you can see here Cleveland, Ohio, blue collar. You have to work hard to achieve your mobiles. I'm sure everybody knows that about the the you know the Midwest. But you know, and taking that comment that my dad said to me at such a young age and putting it into my career focus. I wanted to be successful and we know that there really is no road map to success correct. So I thought of it as this, taking those three words of embrace the opportunity. You got to climb the steps to success. You can't take the elevator ride. And I did that and I've I've worked hard and I took those those three words and I embraced the suck. Right. So if you embrace the suck, you're going to then embrace the opportunity and then organically your success it'll come true and true. I love that. Embrace the opportunity. I do feel like you know, I was reading this today and it reminds me that too many people have long term career plans and I think having ambitions is one thing, but you got to be open to the opportunities to come and sometimes take. Right now, people are people going, hey, that wasn't what was in my five year plan, and like what you but you got to embrace the opportunity that comes your way. You got to take advantage of it and I think that's a great, great mentality and message to take for I like that okay, three three words of wisdom from Dad. Embrace the opportunity of break. Embrace the suck. Is like the marines or something, right, don't don't? They use so embrace the suck is a term that that I actually stole from not many people know this about me, at least within upstart. Some do. I'm a massive clemson tigers fan and debos sweeney just has a way with words and a gable. Dabo Sweeney always says embrace the suck. I like it. Embrace the suck. You gotta got to be willing to put in the work and, yes, kind of it some ways. Enjoy. Enjoy the work if you want to enjoy the destination. All right. So a second question. What's the best piece of advice about consumer banking or consumer lending you've ever gotten? I don't believe I've ever really been given any advice. We'll see. Just learned it all the hard way. They have.

...will a hard yep, embrace the opportunity right now, but you know I will. I will actually give a piece of advice, all right, will. I don't got to work for us. And what I'm going to say in my advices to the consumer and into the consumer. I think really where there's an offset is consumers need to be open to change. We are rapidly change using the way that that consumer lending is being done, and we talked about earlier on the call. You know, you can buy a car from your couch. No, you could probably buy a house from your couch now, whereas if you were, if you were wind ten fifteen years ago, we were just getting our first iphones. We didn't even know what these things were. We were just starting to enter the space of online banking and bill pays and all that. Funds to direct deposit was fairly new to some people. That's just ten to fifteen short years ago. So what I would say advice wise to consumers is be open to change as we go through this rapid changing market of banking consumer lending. Just be open to the change and yeah, I mean that's that's really all I can say. And just embrace it. Be Open to the change sounds a lot like embrace the opportunity. We have theme, theme going here through your advice. Definite history. We'll see if it continues to my third question, which is what is a bold prediction you have about the future, and you got to do better than our cofounder Paul, who couldn't come with an answer. So I'm going to give you. I'm going to give you two bold predictions. To bold you're going to make up for pulse, so we get my back. First are prediction. I like it. My first bold prediction is is totally off talk topic, but I'm going to say Clemson Tiger Football, two thousand and twenty one national champs. That's all right, Clemson, Clemson National Champ. That doesn't feel that bold. I mean there are usually pretty pretty well received. They'll be they'll be there. They'll be there. Second bold prediction, don't hold me to it. I don't know the time frame that this will happen, but I think everything, banking, consumer lending, groceries, what have you, it's all going to be digital. And I don't know if that's five years down the road from now, I don't know if that's ten years down the road from now, but you're already starting to seem some form of that and I really think in fast forwarding let's say fifteen years from now, things are going to be so digital, which kind of scares me a little bit because there's not going to be so much interaction from a person to person standpoint, but I think the majority of things that we do in our life will be in a digital format. I see old softwarees eating the world from from Mark Andrews and and what is it? Arthur C Clark always said like we always overestimate technology in the short run and underestimate in the long run. And Right. I think you're right that the coming wave is is kind of inevitable, but it'll be. I guess the question now is, what do you do about it? And now what does that yeah, how do you make smart decisions given that reality? If you take that as a given, what do you what do you do? Yeah, that's, I think, a topic for another another podcast. Yeah, the other episode. Well, Dr I appreciate your joining us today. This was a really fun conversation and I appreciate you make of the time. I appreciate it as well. Jeff goods, good talking with you. Up Start Partners with banks and credit unions to help grow their consumer loan port folios and deliver a modern, all digital lending experience. As the average consumer becomes more digitally savvy, it only makes sense that their bank does too. Up Starts AI landing platform uses sophisticated machine learning models to more accurately identify risk and approve more a plicants than traditional credit models. With fraud rates near zero. Upstarts all digital experience reduces manual processing for banks and offers a simple and convenient experience for consumers. Whether you're looking to grow and enhance your existing personal and auto lenning programs or you're just getting started, upstart can help. Upstart offers an into end solution that can help you find more credit worthy borrowers within your risk profile, with all digital underwriting, onboarding, loan closing and servicing. It's all possible with upstart in your corner. Learn more about finding new borrowers, enhancing your credit decisioning process and growing your business by visiting UPSTARTCOM forward banks. That's upstartcom forward banks. You've been...

...listening to leaders and lending from upstart. Make sure you never miss an episode. Subscribe to leaders and lending in your favorite podcast player using apple podcast. Leave as a quick rating by tapping the number of stars you think the show deserves. Thanks for listening. Until next time. The views and opinions expressed by the host and guests on the leaders and lending podcast are their own and their participation in this podcast does not imply an endorsement of such views by their organization or themselves. The content provided is for informational purposes only and the discussion between the host and guests should not be taken as financial advice by companies or individuals.

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