Leaders in Lending
Leaders in Lending

Episode · 4 months ago

Entering a Digital World Through Partnerships


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.

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I think this is across all platforms:Credit Unions, banks, no matter of the scope of size, coid actually helpeddigitizes bank digitize everything you are listening to leaders andlending from upstart a podcast dedicated to helping consumer lenders,grow their programs and improve their product offerings each week. Herdecision makers in the finance industry offer insights into the future of thelending industry, Best Practices around digital transformation and more, let'sget into the show, welcome to leaders in lending I'm yourhost Jeff Keltner. This week we have a conversation with drew megree. Theformer CEO of the Ohio Team Stars Credit Union, full disclosure drew, isnow an upstart employee, but when this conversation we really just delve intohis time running a credit union. This was a bit of a unique conversation.Bohio team sers is a much smaller institution by asset size and most ofthe people we talked to here, and I think that really gave drew aninteresting perspective on a new approaches to digitization theimportance of fintech partnerships. I also think the Ohio teamsters creditunion, as is kind of stated in the name, has a slightly more traditional userbase than what many institutions are targeting looking at millennials ormore Texasy folks, and so I think that really gave a different perspective onwhat the importance of branches and person experience and how you marrythat with digitization, so really interesting, set of perspectives alittle different in some ways than other guests we've had and I'll alsoput out. This is, I think, part of a trend for getting a little bit morediverse perspectives, both from types of institutions, whether they be actuallenders or FINTAC and different kinds of role. So, if you've got othersuggestions for topics guests or areas we can delve into, please do send themover to me, find me on Linkedin or I'm Jaffa, upstarched, and would love tohave your suggestion. So we can get you guys. The guests and topics you want tocover and without further do please enjoy the conversation with true truethanks for join us and welcome to the podcast. I appreciate your making thetime thanks, Jeff happy to be here yeah, so you know I kind of wanted to start.I've talked to quite a few financial institutions now in this podcast, andI'm pretty sure you guys will rate. As you know, Hio teamsters crediting isone of the smaller institutions, but at least by asset size, but I'd love tounderstand a little bit about the nature of the institution, the the typeof membership. Or are these the team stars, I'm thinking of from the fromthe movies? And what not like this is that's the membership base. You guyshave. These are the the Jimmy Hafa guys. You know severe go yeah, so the teamstirs for those of you don't know. Is it's your service industry, so peoplethat drive trucks all across the United States, whether that be ups, Milk Beer?What have you that there, their blue collar workers with with the old schoolmindset, so I do find it very unique that in some of the executives thatyou've spoken to in the past on the podcast art, you know like you alreadyalliterated to is: Is there their mass scale from it from an asset size andwhere I came from, was a smaller asset size and with that there are in lookingat digital ways now that that that's just not a thing that they're veryinterested in and it's more of a branch, a branch access as opposed to usingtheir phones yeah. But it's computers, things like that, but just just a briefrecap of a Hio team trip, Credit Union, small area, small market in Cleveland,Ohio, and it is for the service industry drivers at that, our teamstirs. You know: Team, stews, local individuals and, like I said, very,very blue collar, very small scale and yeah that that there it is there. It is. I thinkit's a really interesting and a bit unique perspective, so I want to diginto to two parts of that. In this conversation, the first thing you kindof alluded to a little more branch oriented. So talk to me about, I knoweverybody's I can't talk to a bank executive without the digitizationconversation coming up is maybe the most critical thing they're doing insome way, and it feels like you may have had a different experience withyour members in terms of their orientation to the branch talk file bitabout that was. It was this still...

...primarily branch led where you seeing adesire or a push towards digitization I'd love to dig into you know for aslightly different customer base. What that transition looked like and may behow it different from what we've heard from other guests yeah. So I thinkwhere the real offset comes from is our membership base was very, you know,lets one hound. I T I E to n a s style, so there wasn't any any backlash from adigital standpoint. It was just a matter of from the scope of Arsi CreditUnion. Were we able to budget to implement a more digital approach toour membership and then, on the back end of that, I think our membershipalso really like that touchy field. You know where credit unions differ fromthat of banks. Is there's, there's a very, very close knit communityrelationship, your for your members and with that relationship. Those thoseindividuals are consumers that that do bank with the credit unions so t theywant that a personal touch they want to come, see somebody and that might befrom an informational standpoint. I want to know about rates. I want toknow about your deposit accounts, what have you but from there once you havethose conversations in that in that relationship deepens. They continuouslywant that. It's not that they're afraid of digital, not that they oppose ofdigital. It's just that community feel really makes them feel better being infront of somebody than to just press button yeah. I still feel like a lot ofpeople, particularly those who are maybe less savvy financially or not asfamiliar with different instruments and issues appreciate the trust. I'vealways loved the phrase, members that the credit unions use to describe theirmembership where either's ve only talked to one bank that I actually usesthat that word to describe their their customer base, and I think that degreeof trust you get from an in person, interaction and a consultative onewhere you can help somebody make the right financial decision and- and let'sbe honest, even even as a savvy consumer, it can be very hard tounderstand different kinds of mortgages or different kinds of loans anddifferent durations. And is this a good idea or a bad idea? And I think thatdegree of trust is critical. I course where you seeing drop off and I of hotcompany banks are closing branches because nobody's coming in and they'reempty or they're. Just too many, and we don't have the traffic to support them.Were you seeing similar drop offs or were you still seeing? People come inand utilize the branch at at similar rates over time, so we're a wine priorto Ovid, because coved kind of threw a monkey wrench and all that right. Govanscrewed up everything, but I'm hurric I tranio pre coved, the branch trafficwas, I would have quite to heavy. So so you know just real quick. Before I cameinto the Credit Union space I was in the banking space and, as you you know,to bank banks are very digital and- and let's do everything fast now and theirconsumers have definitely grasped that concept, whereas on the Credit Unionspace with you know having that relationship, I feel that the thebranch is still very heavily oriented through their traffic, and I think thatjust goes back to what we were just talking point on. Is You know they havethat relationship feel that okay yeah I'm going to go in and see teller abecause I really like our weekly chats when I take my money out for my directdeposit or I really like banker a because I you know I just want to havea chit chat with him, her. What have you and from there the just thoserelationships that evolved continuously, brings members back into the branchesas opposed to. I just want to click a buttons things of that. Not You're Ffrom a higher scale, credit union, you know with asset size, yeah, there'sthere's still that relationship feel. Definitely you know they're able tobudget 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 CreditUnion side that the the amount of foot traffic has stayed steady within thecredit union, even with a Dinia age. Less and now tell me how coved impactedthat, because that feels like in some...

...ways, coved is a larger disruption forwhich, in some ways perhaps the cree was less prepared. I mean at banks hadbeen shipped in to digital. The investments were made that was kind ofwhere they were in many ways trying to push consumers yeah some of more Readin,some of whom weren't and you weren't as much pushing that direction. Then allof a sudden ovid comes and throws a monkey ranch and and the branch plan.How did that play out? You know in that context? Yes, so so fast forward, youknow during Ovid, I think myself and and everybody in this in the financialservice space was kind of scrambling. You know what do we do? Con contingecyfun bumming plans here. What what are we going to do and that helped digitizestuff? From a certain standpoint, I would say, especially with you know,signatures of documents being done electronically. People now going moretowards okay, I'm going to have to check my accounts online rather thanyou know, make that phone call transfers doing achs and stuff thatthey didn't really participate in prior to that, and then you know from thescope that I came from, they were knocking on the door like. Why are youguys not open? We have our masks on. We Miss. We miss you guys, but no. Ireally think that the membership from where I came from- and I and I thinkthis is across all platforms- credit unions, banks, no matter of the scopeof size, coid, actually helped digitizes Bankin digitize everythingyou can buy a car now from your couch. You can pull into the grocery store and noteven get out of your car, and they give you your groceries. So from that end ofthe spectrum, I think that it gave membership at least where I came fromit gave our membership. A sense of this is where things are going to go. Wewe're going to adopt it and they did and moving forward, there's a lot moreusage of digital platforms within within the scope of things, but theystill want that interactive feel. So so, for just to give you an example, let'ssay someone walks in you know their longtime member of the Credit Unionlooking to get an automobile alone checking rates. What have you, okay,cool? We had that touchy, feel experience and now we're going torewind and I'm going to go, apply on line, and I don't want to come back. Iwant to send everything to you digitally through you know throughemail, what have you and then, when we found it and do loan closing. I justwant to sign some electronic documents. I don't want to have that that backoffice for lack of better term garbage that Ican just click a few buttons, and I'm done. I wanted to have that personalexperience to start it, and then I want to finish it digitally and I think oviddefinitely helped our credit union advance into that that world I've gottwo questions of fop. On that one. Did you see changes in the way the skillset or the activities of the team members in the branch, and I ask thatbecause it feels like what you're talking about is some of theconsultative stuff? Is there some of the processing review, like actual takethe application, fill it out with like kind of goes away? Is that something atrend you saw where there were there changes and the kinds of skills peopleneeded or the kinds of activities they were taking part in in the brand,because that's an interesting trend that kind of what that front line teammember needs to do is kind of shifting, I think, is not going away, but you'reactually shifting an activity from maybe more of an administrativeprocessing. I'm your loan officer filling out, give me the paper work andI go photocopy your ID and all the fun stuff to hey. Let me help you make achoice about a financial product and evaluate your choices. That's aninteresting shift. You know it shifted, very rapid and I think you know inplanning during Ovid you had to make that shift and in training your staffto say you know we have to go digital. We still have to make money right. Wecan't we can't open the doors. We don't know what's about to happen with this,this Covic thing, so so in planning and being prepared to tell your membershiplook. This is where we got to go right. We know that you don't fully like that,but we don't either by the way we was...

...like to be in the office too yeah. Wewant to see you, but we have to make money and we want to give you money fora loan or deposit. What have you, but I think that that that change definitelyhappened rapidly and we did a very good job and I think a lot of people in theentire space of the financial service industry has done a great job and justletting their membership know that this is the way of the world right now andit's kind of just evolved. Naturally, would you agree with that? I think it'sjust it's the way of the world now I think it's actually. I don't know itfeels to me a bit like you know the what they say about the intelligenceservices. Just like you never get credit for doing a good job and I feellike this could have felt like such a massive disruption and the fact that itfelt natural and relatively seamless to the to most consumers to shift to analmost entirely digital world, making it's kind of a huge credit to thefinancial services industry that that that transition happened withoutmassive disruption and it kind of like it wasn't noticed or credited, but likeyeah kind of because it just worked and that's kind of remarkable to me in someways I think you're right that it it did feel natural ands. I think about it,a go kind of unbelievable that you can take a ten year transformation, roadbap, do it in one and nobody thinks of it as a big thing and it kind of justworks like it's, not how most ten your technology projects. So so now we havea you know. Moving forward, it's got to do at a rabbit pace. Is You got you canget this done in a year and a half? We don't need ten years right. Do youthink that the investments you know as a credit union, that's looking at amembership that still likes coming into the branch it still like? The firstconnection: Does that shift where you make digital investments- and I reallythink of kind of the difference between front office and back off is the thingswhere I'm not trying to force you to do everything through the phone, but I'mtrying to simplify what has to go on behind the scenes, because I'minvesting in technology the kind of automates processing and back officeelements as opposed to here's, the mobile of there's, no teller anymore.Good Luck, branches close! Do you think that's different for a credit unionlike teams hers, Ohio Than It is, for you know, JP Morgan Chase the where youthink of the digitization happening, or am I just making that up in my head? No,I think the digital wave that has come for for a bank the size of chase isdefinitely something that the scope of of the size of credit unow that I camefrom cannot afford. You know in an IT budget, right yeah. So so, there'sreally an offset there. It's tough to plan and move forward in the space togive to your membership. However, through I don't know how many peoplehave heard of a Q, so credit union service organization, what those CreditUnion Service Organization to do is they are actually like a back andprofit money, pull right and and what they do is so, for instance, the scaleof the Credit Union that I came from being small to play in the market ofthat of the chases and wells and what have you or even larger size, creditunions? They can then take their expertisee and then give it to asmaller based Credit Union and in turn that could allow that smaller basecredit union to get more into the it stuff and digitizing stuff and thenbeing able also within that? U So not just you know not just being theirexpertise, so we can also that c. o can also do the marketing material for thatCredit Union at a certain fee. Or what have you? So it's really this. You knowyou don't see that in a bank you see that in a credit union know- and Ithink what's interesting- is within that cardite union space. Everyone isso 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 creditunit organization or a Q, so you know those partnerships there are going tocontinue to evolve and just allow smaller sized community banks andcredit unions to enter that world. With that added cost. It's interestingbecause it I mean, if, if credit unions...

...in general are more community based totheir their membership, it feels like they're, more community based among oneanother. Two in terms of you know pooling resources and expertise to tokind of enter into markets and given their size. I guess that's a required,but that Kuso structure is a really interesting way of joining forces. Ifyou will, with with multiple institutions in a in a way that, toyour point, I think feels different than what the banking side of the housewould do joining forces as opposed to just kind of competing yeah. It'sdefinitely an interesting feel. You know coming from the bank side of stufftoo, it's just there's, there's a real relationship among credit union leaders,whether it's you know your sea sweet or even you know if the teller is talkingto another teller through the form of these partnerships that credit unionshave such, as you know, tuna, mutual or from where I come from the Ohio CreditUnion League and there's also the small Credit Union initiative, there's somany different communities built inside of these communities that you can turnto for help, whether it's in how do I go digital? How do I ramp up myconsumer lending portfolio, and it's just amazing to me that in that spacethat they're willing to share some of their poems and procedures? And it's areally cool experience to have been a part of that's really interesting? Iimagine you also as a smaller institution at me to your point. Someof the big banks have you know it budgets that are orders of magnitudelarger than than your asset base. You know they're investing in a way thatyou can't- and I think it's I mentioned being the sharp end of the spirit andpart of that is, I think, it kind of forces you towards a partnership modelboth among credit unions, but also with fin tax or digital players. Where youjust you know, I think many banks feel like they can build or should buildsome of the stuff in house, particularly if you get let's say overa hundred billion assets or fifty billion in assets, I just go: Hey we'vegot an ITT. We want to own that as a core competency and obviously you knowin a smaller scale. You just you can't have that belief about yourself. So I'mcurious what you think of that. I mean it feels o me like in some way smallcredit unions or are going to lead the way in terms of partnerships. How didyou think about? You know how you build a digestion or a technology road map?In the vein of I really don't, have an IT budget of any scale or side, so I'vegot to go out and partner. How did that change your approach to figuring outwhat kind of technologies are players you work with and how you build thatRed Mouth Yeah? You you hit the nail on the head, so so it just to wind fromfrom from a cost standpoint that is a smaller, smaller based Credit Union.They cannot afford that it budget that at that chase, can right. We've talkedabout yeah a little bit, so so that's where you you almost have to partnerand as we fast forward into this digital age, it's going to be the normand credit unions are having to adapt and credit unions. You know no matterof 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, wehave a lot of liquidity and I think, through partnership, you know from froman it standpoint, marketing standpoint and all those fun things that we cankind of put through a Cusi which we, but you talked about a little bit. Itwill help those smaller sized credit unions enter into the space ofsomething that they can't take that on they can't so through throughpartnerships and through the Qisas that will allow. You know a credit union ofa smaller size to to start playing in that fintech world, which is definitelygoing to be a thing of the future. It's rapidly growing, we know, and fromthere 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 onthe back end of it and that's some stuff that we would have to, of course,sort out internally as a credit union, an upstart but have you, but I thinkthere is a hugemarket potential there...

...and I think, through partnershipsthrough the through the QUESO programs. You know there's leaps and bounds thatwe can make and moving forward, but- and it really sounds like what you're,what your message is, at least to small credit unions out there in medium sizes,like building the muscle of effective partnership, both with a fin techplayer and with other credit unions in the form of Cussos or other jointstructures yeah, it's kind of a critical muscle to build to becompetitive, yeah future, because those are the things that that give you theadvantages of scale that you don't have from. You know a membership sizer assetbase 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 isgoing to be something that I said it's going to be a thing of the future. It'sgoing to be a never changing thing of the future and being open to what thiscould become at an early stage of it could make that that partnership, thatmuch easier from from a Noun Dan point right, very good. was there anythingyou were hoping or fearing that I would ask you today that I didn't get to no,not off the top of my one. We covered it all right, that's good! I sometimesask at the end well, as you know, drew I ask everybody the same threequestions to end our podcast, so I'm gonna I'm Goin to hop there now,because I think we covered all the things you and I had talked about sokind of rapid fire bode 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 actuallyrefer back to know as an adolescent into my early Tis. I confided in myfather, often when you good bad and deaf freaking and at the at the timeyou know. As I was an adolescent, my dad was battling cancer and you know Iwould come to him for problems issues. What have you- and he would always justlook at me and say these three words embrace the opportunity, and you knowthat really didn't stick with me at a young age of course, but as I grewolder and really understood the concept of what he was saying, you know I kindof took that true and true into my career and I come from you- can seehere: Cleveland Ohio, Blue Collar. You have to work hard to achieve your holes,I'm sure everybody knows that about the you know the Midwest, but you know intaking that comment that my dad said to me at such a young age and putting itinto my career focus. I wanted to be successful and we know that therereally is no road map to success correct. So I thought of it as this.Taking those three words of embraced the opportunity you got to climb thesteps to success, you can't take the elevator ride and I did that and I worked hard and I took those thosethree words and I embraced the suck right. So if you embrace the suckyou're going to then embrace the opportunity and then organically yoursuccess, illit 'll come true. True, I love that embrace the opportunity I dofeel like you know. I was reading this today and it reminds me that too manypeople have long term career plans and I think having ambitions is one thing,but you got to be open to the opportunities that come and sometimestake Rio. People are people going hey that wasn't what was in my five yearplan like wet, 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, a great mentalityand message to take for I, like that. Okay, three: Three words of wisdom fromdad embrace the opportunity on Brit. The embrace suck is like the Marines orsomething right: Don't they don't they use a so embrace. The suck is a termthat that I actually stole from a not many people know this about me at leastwith an upstart some due I'm a mass of Clemson Tigers, Fan and Dabo sweeniejust has a way with words and a devil. Debo sweeny always says embrace thesuck. I like it embrace the suck you gotta got to be willing to put in thework and yes kind of it. Some ways enjoy enjoy the work if you want toenjoy the destination. I so like a question: What's the best piece ofadvice about consumer banking or consumer lending, you've ever gotten, Idon't believe I've ever really been given any advice. Ye just learned itall the hard way, yeah a little heart,...

...yeah, brace the opportunity right now,but you know I will. I will actually give a piece of advice all right, I Idon't got to work for us and what I'm going to say in my advices to theconsumer and into the consumer. I think really, where there's an offset isconsumers need to be open to change? We are rapidly changing the way that thatconsumer lending is being done and we talked about earlier on the call youknow you can buy a car from your couch. No, you could probably buy a house fromyour couch now, whereas, if you re, if you reline ten fifteen years ago, wewere 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 paysand all that funds to direct deposit was fairly new to some people, that's just ten to fifteen short yearsago. So what I would say, advice wise to consumers is be open to change as wego through this rapid, changing market of a banking consumer lending just beopen to the change and yeah I mean that's, that's really all I can say andjust embrace it. The open to the change sounds a lot like embrace theopportunity. We have theme theme going here through your advice, definitehistory well see if it continues to my third question, which is what is a boldprediction you have about the future and you got to do better than our cofounder Paul who couldn't come with answer, so I'm going to give you I'mgoing to give you two bold predictions to bull, but you going to make up forpast we get M. my back are prediction. I like my first bold prediction istotally off to topic, but I'm going to say Clemson Tiger Football, twothousand and twenty one national Chams, it's all right, Clemson, climpse,Nashville Chap that doesn't feel that bold I mean they are usually pretty prewell receive they'll, be they'll, be there they'll, be there? Second, boldprediction: Don't hold me to it. I don't know the time frame that thiswill 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 fiveyears down the road from now. I don't know if that's ten years down the roadfrom now but you're already starting to see some form of that, and I reallythink in fast forwarding, let's say fifteen years from now, things aregoing to be so digital, which kind of scares me a little bit because there'snot going to be so much interaction from a person to person standpoint, butI think the majority of things that we do in our life will be in a digitalformat. I sealed software is even the world from from Mark Andres on and asit Arthur S, Clark always said, like we always overestimate technology in theshort run and underestimated in the long run and right, I think, you'reright that the coming wave is is kind of inevitable, but it'll be, I guessthe question now is what do you do about it and what does that yeah? Howdo you make smart decisions given that reality? If you take that as a given,what do you? What do you do? Ah, that's, I think a topic for another anotherpodcast yeah, the other episode. Well, do I appreciate your joiners today?This was a really fun conversation and appreciate you make of the time. Iappreciate it as well. Jeff good good talking with you up star partners, withthanks and credit unions to help grow their consumer loan port molios anddeliver a modern all digital lending experience. As the average consumerbecomes more digitally savvy. It only makes sense that their bank does toupstarts a islanding platform, uses sophisticated machine learning modelsto more accurately identify risk and approve more applicants thantraditional kind of models which broad rates near zero upstarts. All digitalexperience produces manual processing for banks and offers a simple andconvenient experience for consumers. Whether you're looking to grow andenhance your existing personal and Ottolini programs or you're justgetting started up star can help upstart offers an into in solution thatcan help you find more credit worthy borrowers within your risk profile withall digital underwriting on boarding loan closing and servicing. It's allpossible upstart in your quarter, learn more about finding you borrowers,enhancing your credit decision, ing process in growing your business byvisiting upstart com for dash banks,...

...that's upstart for dash banks, use them.Listening to leaders and lending from upstars make sure you never miss anepisode subscribe to leaders and lending in your favorite podcast playerusing apple podcast leave us a quick rating by tapping the number of stars.You think the show deserves thanks for listening. That's the next time theviews and opinions expressed by the host and guests on the leaders andlending podcast are their own, and their participation in this podcastdoes not imply an endorsement of such views by their organization orthemselves. The content provided is for informational purposes only, and thediscussion between the host and guests should not be taken as financial adviceby companies or individuals to.

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