Leaders in Lending
Leaders in Lending

Episode · 1 year ago

How Credit Union Leaders Are Navigating Digital Transformation

ABOUT THIS EPISODE

As community-based institutions, credit unions are well positioned to truly understand the unique needs of their members.

With digital platforms and evolving technologies transforming the landscape, credit union leaders have an opportunity to capitalize on the digital wave to grow and better meet the needs of their members - any time and any place.

Yet, navigating this new terrain can be complicated.

In this episode, Jake Darabos, Chief Financial and Administration Officer, and Chuck Eads, Chief Lending Officer, both with Abound Credit Union, join the show to discuss the digital transformation and how to deepen member relationships.

Topics covered:

- Investing in analytics and data to improve conversion

- How to drive consumer loan portfolio growth and obtain new members

- Where consultative conversations fit into a digital world

- Strategy around entering into partnerships with fintechs

Adapted from the webinar “How Credit Union Leaders are Navigating Digital Transformation: Fireside Chat” presented by NAFCU.

To hear more from Leaders in Lending, check us out on Apple Podcasts, Spotify, or on our website.

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

The abilities for our members to go online apply. We approved go all the way through the documentation and lending process without ever walking in a range. I mean, I think that's important. 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 one let's get into the show. Welcome to leaders and lending. I'm your host, Jeff Keldner. This week's episode features a recent Webinar we did with the NAFEU and a bound credit union, specifically Jake Daribo's the chief financial officer, and check heeds, the chief lending officer. I thought it was a really interesting conversation, so I wanted to share it here, despite the slightly different format. We talked with Jake and chalk a lot about their recent investments and data analytics, how they're utilizing that they did and where they see the best investments being made, how they're using customer personas to help develop products and outreach strategies, their approach to partnerships and the fintext base and to helping get off US loans back on the books. I think it's a really interesting conversation. So that further to please enjoy this discussion with Jake and Chuck from a bound Credit Union. Thank you, Jake and shut for a conversation. I look forward to hearing this was why would any of us are? Besides, so I'm like we already failed in our mission since live up to the title of the presentation, but hopefully will have. It's an interesting discussion. What do we just started off with? Throw most of these questions to both the you guys, Struck Jake and you can figure out what's the answer. But for those who are less familiar with abound predding, can you give us a little bit of the background and History of the organization? Yeah, yeah, I'll take that one and thanks for having us on today or any thanks for the intro. Appreciate the opportunity to talk a little bit about this with everybody. saffning just kind of a sixty two rundown on the history of the Kredding Union. So we were found in back in one thousand nine hundred and fifty by a group of ten civil service employees on post here at Port Knox. So we're located in Central Kentucky and we're using Radcliffe. It's near Elizabeth Town, right between Louisville and only green mass. Forward about sixty one years. It took us until two thousand and eleven to reach one billion in assets and then fast forward to today we are teetering on the two billion mark. We have eighteen branches within our primary footprint of central and southern Kentucky. Work in the largest PREDA. Some other information I think is interesting to others probably we recently went through a total rebranding opened in our name change or non federal predding to found Fredeing, and that culminated in February of two thousand and twenty and some other color report type APIS. Our current loan portfolio stands between mean one point two five billion, one point three billion. Are Concentrations. are a long portfolio. About forty five percent in real estate versus second mortgages, followed by Indirect Otto, round twenty five percent, ranch, direct auto around eleven percent and about seventeen percent for everything else. So we do commercial credit cards and so one and our average assets or networks. Average asset stands between fourteen fifteen percent right now. Very High. It's also posting a great position to continue our branch expansions investments in technology and systems at a time when many others are getting back or kind of holding things books check. But now I'm going to go off script. Already, since the questions in advanced. I'm going to ask you when that wasn't on there. But talking to a little bit about well, first of all, you tell me Fort knocks took you a long time to get to a billion. I feel like gold figure would have, had you been running the bank, would have found a way to get to do a couple billion faster than maybe the decade would have taken. A person that pops me must my kids are all that bond movies these days. But Um, tell me a little bit about the decision to rebrand and kind of your history with the Fort knocks game and kind of what why that was important to you guys. Yeah, sure, yeah, so, like I said, we were founded on board knocks by a group of civilian and poison back. Our Name change a year and a half, an hour, so wasn't actually the first name change we were. We were founded as fort knocks civilian employees, but are oprey. You knew a couple years later we changed over to Fort Knox. Yeah, most of our members now don't know that. Right. So we've had a own standing history and a tight affiliation with military, especially both here on post and other Statu lived here and moved away. But I think as we were going through that which is looking onward, looking at opportunities to maybe elimiting some of the perceptual barriers that were out there around creating union membership, we wanted to stay very close to our military roots and I think we've done a good job at that. But at the end of the day, I think it was good opportunity for us to refresh, like I said, Rebran, and that kind of leads us into some of our conversations for...

...today, right. You know some of the friendergies that we're playing right now around web based digital technology and things like that excellent. So I wouldn't ask you know. So you know, we had a conversation advanced this and one of the topics that I thought was really interesting was the investments you guys are making around analytics, on how you're using those for targeted marketing at outreaching. I thought this is a really interesting area that I think that concept of data, how do you use data, how do you make the most of data? What can you what can you really do to leverage is a really interesting and timely topic. So I wanted to give you us an opportunity to kind of talk through what you're doing in that space because it was really fascinating to me and I think you know, the other cut of user the call probably appreciate understanding where you guys are head of that space. Yeah, definitely I'll I'll kind of tackle that one and things again, Jeff and neew for having us. You know, we are really just starting to scratch the surface and terms of analytics and I think we've all read and we've heard, you know, stories about big data and how powerful it is and all the things we can do with it, and it was probably about a year, year and a half ago we decided to really just start. We've got a very small analytics team right now that that I oversee and manage, but we found some really good success and even with just minimally digging into the data. So you know some of the things we're doing. It's just internal data that we already have. We all credit unions has such a wealth of data that can tell us a lot of our members. So you know a couple of things that we started to do to help supplement some of our loan growth and some of our wealth initiatives is looking at debit and credit card transaction. So we found a really, really good correlation that if we have a we have a member who is spending on their debit or credit card at camping world or Cabellas, they are prime for some direct marketing on our beer boat bums. Maybe they recently bought one and we can help them out with the refinance. Maybe they're just in the market or an upgrade or for a new purchase. So that's really helped us to be able to just reach those members. Rather than sending marketing materials to all hundred and fifteen thousand members, now we can send it to three thousand members that are actually probably in the market for for those products. The other thing we found some really, really good success in it's just ach Tamer. We know where remembers money is going, so it is really easy for us to tell just from acch data if member is sending money out of their checking account to make what appears to be an autobone payment and a number thing, and so it's really easy for us then to use that in content them, call them, email them with offers for a refinance or just other products that we might be able to offer. So, like I said, we you know, long term we want to get into really detailed and complex ridictive analytics and things like that, but even just arching the service right now has been really, really successful. I'd love to D dive into this a little bit. So good that the deeper version of all my questions. But talk about how you like get the date in the right planet. Heard so many stories about data in a depository transaction system or credit being inaccessible except to certain kinds of people, and in a tool where you can actually do analytics on it. And how do you think about the investments you have to make or our audience to the other credit US could make that help them take advantage of that data in a real way? Because I feel like that's easier said, but I've talked to institutions to show remain nameless, that wanted to get their depository transaction data from one systems another and they use plan to do it because it couldn't actually why are their own systems together? I thought that was, you know, a pretty bad statement about it. But how do you think about where you pull that data, how you build the technology infrastructures that you're an analytics seems to actually do this kind of work and access to right data in the right sorts of tools. That feels like the kind of groundwork for any of the things you're talking and to you know, today it's it's kind of a mixed bag of tools. So we do a lot of things, a lot of like slicing and merging different data together, trying to figure out those things. You know, we're really looking now at maybe in the next boult twenty four months, it just a full data lake or data warehouse where we can compile data from all of our different systems. So similar to what I think most credit unions experiences, we have data in our debit card and our credit card systems. We have it in our loan application systems, a mortgage system, our core system. So really moving towards a data lake where all of that data is aggregated together and then we can find and...

...draw conclusions across channels. We're doing that a little man made right now. So you know, we think fully have a really, really talented analyst on our team who can query and write code that looks at multiple sources right now and kind of speak that for us. But I would see the investment in technology is really, really big and that's a big focus for us. And then having the right Allen. You know, we we brainstorm as a team, probably on a monthly basis, about what data do we think we have that we could draw some conclusions from and and I'll be honest, like some of the ideas we come up with they don't pan out. You know, we might think that shopping at at a certain store or a certain merchant tells us that somebody's ready for a new auto loan and sometimes it's not. It's so it's a lot of trial and here. But I think it's just exciting to be able to get into that data a little bit as we build the technology. Absolutely so critical just just taking the first step where you can start making those connections and doing that analysis. I know your team works with personas a little bit in terms of the targeting and the work to do. Can you tell me a little about the process of developing personas to your point like sometimes your assumptions might not work out. How do you is there a life cycle for a persona from concept to validations execution, if they're an examples of personas that you think are particularly insightful interesting, of using fund to share with the audience? Yeah, yeah, absolutely. So the personas was a really, really big piece of the brand change that chuck talked through a couple of minutes ago, and so that all went into the design of the new brands and how it's presented out in the communities. was by defining really what is the persona of the member that we're trying to train. So you think very demographic age, post pulled in and Duication, things like that all play a really big roll into what data we're looking at, how we're designing marketing material and just how we've done ourselves, though, I think you know, we gave me to the personas in our mind kind of a hitching names. So they were we remember them. So you know, one target persona we called carderful crystal. She's hartful crystal. She as she is a startled but shoes. So you know, crystals in early S. she's a professional with a college degree. Will income, household, young kids in school, but they are looking for a bigger house for their standing family, are looking for new cars, they're paying off college, and so by defining those and really figuring out, like what do they need in their financial life and then what is their personal life looks look like, how's the STRAIGHTA target a little bit closer and it's a it's just a really big joint effort between lending our retail sales through analytics and marketing and trying to pull all that together to get as targeted as we can to those persons. Yeah, I know those persons always oversimplify the market because nobody's perfect nding person, but I always find them so helpful and being able to think about a particular person of the name and we have teeth basis to them and how is this person going to react to a picture, product, an outreach it? It gives you a kind of central touchdown that you can use to think about some of the things you're doing. So I was enjoyed that you mentioned kind of finding acge payments to Laans what I would have often heard call off US laws, right as you're paying some other entity on your a stage every month when you see that, how do you think about the best ways to engage and kind of, you know, interact with that customer to drive maybe a repliance or switching of that law back into the credit and I'm kind of curious what's that's a great piece of Aal Skating. Somebody else got the loan that I wanted with my customer and I want it back. But then how do you actually take the next step in the like might get it back? Right, I will. I actually gage that customer when I see that in an AC agent and successfully bring them back into the credit union. So I'll gel kind of piggyback off when Jake said. Any it's about our you know, beginning with day analytics. I mean as great unions, generally speaking, are rains terms and products or superior to what most others around us are offering. So, in addition to just internal data mining, again looking for acage data, once you push outside of members that are making payments from our core account, looking to do things like free screens where we can identify existing members who meet our lending criteria and an auto loan, for example, with another financial institution, and the rate can be determined from the information generally within the Credit Mirror right to and we can identify members that we can save two percent or more on their autoum. And, you know, literally at that point just becomes about, like you said, engagement, right. So we use all the standard methods you would expect. I mean we start with like trifold mailers to kick off the process. We have...

...a good follow up process with those with emails or even somehow bound calling from our branch lenders, two members in a few miles of that branch, you know, for members that haven't opted out or have opted into that sort of thing, of course. And then past that, I would just say, you know, that's really when you know, as far as the digital superior process right, where the simplicity comes into play. So if the process, once we get them and make them aware that we can save them my for example, if the process of revenance in their loan is inconvenient or somewhat painful, requiring a lot of documentation and so on, or if your process requires a high level of interaction during normal business hours, and that was different member, than that's where you know your online, web based applications come into playing and your success rate can fall off pretty quickly, I would say too. I mean, because I mean kind of common sense, that if I have you on the phone, Jeff, and I say Hey, I can offer you a two percent better rate, if I can snap my fingers and magically make that happen, I think most people are on board with that right. So that's really where you experience and the Suplicity, the speed of which you can get this done for a member really all start to come into play and they really matter. Yeah, I think that's too put particularly true in this kind of refinancing world, because this, you know, unlike my first Carlo, which I have to finish the process because I want the car right, it a refly kind of product that some of the party going is got the car, I'm making the payment. I determine I could make the payment. Saving Money's Nice, but you know, there's there's not an immediacy of the problem. Basically consumers. You've got to kind of both engage them with the right material, but then you've got to make that process easy enough that the friction involved is worth that to me to go through in terms of the savings. And of course there's that kind of balance how much you're saving them how much the friction is. So I do think that's have you found anything in particular you're focused on from enhancement of digital process, like what? How do you measure if you're doing a good job in that or not? Any where? You think about, you know, maybe the low hanging fruit and improving what that process looks like and how you how you make it more seamless easier for people to go ahead and convert finish that. Yeah, so, you know, a marketing area would generally handle that from an understanding stand when I can tell you, you know, with our within our consumer along origination system, for example, we're just now to the point where we have the ability to tap into Google analytics, so we can understand at every stage along the way where potential pain points are and where members are dropping out of the application workflow right, and so, based on that information, we can identify again those pain points and then our lending folks, along with our marketing posts, can get together just kind of talk through a is there any way that we can streamline this, maybe require a little bit less information to at least get the member to the point of applying and then we can have a consultation after that. With the member once we follow lot. But you know, really that depth of understanding as your online application is really critical. I mean, yeah, look and feel matters right. I mean it's got to look like a legitimate you know lending paths. But past that it's really important industry where your members are kind of losing traction in the process. It can be amazing and when you take the grand you look at the funnel, how lots of little changes can add up to a big change when you're just through, just as if you want to hop on the high touch comment you made, and that the kind of consultative part of that, but as it be anything you've learned, look at the Google lalytics data, or that you've seen through your bottle that surprised you or that you say that was more fortune or easier with or something I didn't expect. Or is it? You know, this is just been a lot of a lot of sometimes a lot of little obvious things, but in the end you can add up to a big difference when you knows it. Yeah, I mean, I I don't really have that at the on the two of my time, but you know, I would say, you know, try and trying to shoot your way. You know, you require disposures to a minimum. I mean you certainly have to say the right things about the online process, but stuff it's long and you have to scroll through a lot of information. That can be a pain point that would cause members to drop off. I think that's where it's really the only one that comes to mind off the top. I Jeff. I mean I could says we try to keep it very simple. Again, with the consultative nature of our follow I've really kind of helps to build those gaps. But we try to keep it fitful to you know, membership, member amount your requesting what you're looking for and that kind of stuff, and that eliminates a lot of the friction that you mentioned earlier. So let's grim of the consultative. So I says, how do you think about having a seatless digital process, changing the way you have that more consultative conversation or where the human touches inserted into the process? Like, how do you melt those two things? This office have been a coming to the branch, have a discussions, been an...

...application. You're not reaching out. Brings me a digital experience and you also want to be able to get the right guys advice and assistance. How do you think about building kind of the best of both worlds when you're trying to build that experience? I think that's it's probably something that challenges the entire credit union industry. So we love the efficiency and the speed of electronic services, but but you're right, it takes that it takes that member out of our office, so they're not sitting in front of us and there's a little bit of a different part to that comp consultative approach with them. So you know, even in our call center who processes all of our online long a patients, there's follow up the calls, there's working with that member. I think you know, one of the things that probably one of the biggest things that surprised me when we started getting a little more digital and doing a little bit more analytics was just some of the information that we, that are marketing team, is able to get out of like some targeted email messaging. So we might send threezo emails for to a specific target about in auto refinance and realistically our retail sales team cannot make three thousand followers to talk to those members and see if they had questions. And so I think that's where it gets a little bit deeper and being able to prioritize where those resources go. And so one of the things we were able to do is look at the results from those email campaigns and give it a couple of weeks and we can go back in and say which members actually open if they opened it, did they click on the link in the email to go to the applications page? Did they actually start an application and did they submit the application? One of the things that really surprised me is when we did that, we went back there was one member who had opened in email like thirteen times, but they never click to the link, and so like it was really obvious to us like this member is intrigued by the offer. It's something that probably fits in their life and something that they need, but there's something stopping them. Either it's uncertainty, it's maybe they don't know if they're going to qualify. Maybe either word they can afford it, or I think what we all find is just maybe a lack of financial education, which is in the market place as a whole, and so there's there's a lack of knowledge, there's a lack of ability to really make things happen. And so when we take that data, that's what we get back. For a retail team. We say hey, don't call. Three thousand members called, these members who actually engaged with communication, this member who opened the email thirteen times. Find out what's stopping them from making the step. And a lot of times it turns into financial education. They're just not sure how it works. Chuck shared a story a while for members to realize you could actually refinance at car loan. Right. You know you can refinance a house. I just don't think about being able to shop around for your car loan after act and say some money and your interest in your payment. So so we're just thinking to put a lot of that words around financial education, not just in like the school system, before adults to and so we get a member on the phone, it's about teaching them and it's about, you know, it's teaching them that they don't have to settle for twenty two percent auto that they got from some finance because maybe their credits really good and they actually followed by five. So it's kind of teaching those members that there are other options and that really worth cons approach in yea makes sense. So it you gues have talked about the digitization and keeping to a seamless process, and one of the things I hear from instititions, whatever I talk to them about that is kind of the the decision built by partner. How do we we're going to build something or we're going to partner with somebody or we can to buy it and I'm going to use something. We have that as a model. There's some module for this linding product bringing something just in general, how do you think about the build by partner evaluation? Cite what when you're trying to get into a new product where you got a Pod, you like to improve the digital experience and how do you go through that kind of evaluation? Yeah, and Jeff, I mean I think on that generally. I mean obviously we had a high level. We look at the impact to our organizational goals in the desired time wine and the resources we need honor into research implement. We all have a ton of projects going on and when opportunities come up to bring something else online, typically you have to have the discussion of okay, let's build on this path, but let's also talk about what we're not going to be able to do because we're going to engage in this product project. So, you know, I think that's important. The implementation resources allow are really kind of standering in some cases, and so...

I think you know what we look at there as far as partnering is we also want to understand what implementation resources the partner is willing to commit, because if there's a poll on project management team, that honestly just lessons the amount of words that we have to spend keeps projects on track and those sorts of things. And so you know that that really hatch down on the the Rd and the IT resources needed to stand up a project or a platform like that for scratch. You know, we talked earlier about the advent of our updated online mobile banking platform. We did that conversion last year as well and it when live and obviously two thousand and twenty so has expected. You talked about, you know, kind of the digital revolution. We've seen a nice impact and an increase in digital banking engagement online. Users used so remote deposit casher person person account to account the money transfer and we used a partner for that obviously as well, because you know, we don't have the resources, like I said, to stand up something like that internally. So and I would say past that we are absolutely looking to augment our current it staff by looking for additional outsourcing partnerships. As we go in to two thousand and twenty two, we can get some quick wins on some smaller projects that tend to get pushed back. You know, has higher priority projects come online and you know our deep more important. So I mean you can have things working in parallel rather than in sequence and you can get a lot more done. Rank. You guys knew I was going to have to shift this at some point because you know we're here to really wanted to get your perspective this, but I'd love to understand, you know, specific the decision you went through in terms of partnering with upstart and you know kind of how you evaluated that. Those from a product and what you wanted to do and then a partner in capabilities perspective. Like, how did you to choose that that was a good route for you to go and why? Yeah, I think you know, our relationship with upstarts started from really just a discussion amongst our senior team in one of our weekly meetings, and one of the things we saw was that our volume of, you know, the smaller unsecured personal loans just wasn't where we wanted it to beat. And so we did some things internally. We did some targeted marketing. We saw a really nice increase. But as we done deeper we realize that companies like up start, they have a different model and in like Chuck said, you know, we can try to develop things in house or sometimes it's okay to step back and admit that third party might be able to do it better. And I think that was where we landed here with upstart. And in to be transparent, you know, we talked to three or four different inntext who offer a somewhat similar product. Right, so personal lending using AI technology ass processes really good user experience, and so we went through you know, probably for different companies and when we got to up start, things just kind of clicked it really well. That the product bit what we were looking to do in being able to help, you know, really more kentuckyans access affordable personal onliney. And so as we dug through that, of course, you know our our risk, compliance and legal team got really deep into it. But even even that, even our compliance team was so just impressed and happy with the structure of upstart and the way the program was structured and how we contend it to we get to make in our own and really fit what we were looking to do. Really have to push things through. So I would say, you know, how did we how did we decide to partner with upstart? I think it was it was the right mix of the right products, the right delivery channels, using technology that we really did not have the ability to create inhouse. And then I think something that we don't give enough attention to is those a good cultural fit for us. Right. So the team at upstart blended really well with our team to a certain extent during implementation it just felt like upstart was an extension of the abound team and when we can find a partner with that cultural fit, we know we can make that a longer term partnership and that we can make it successful because we're kind of looking to achieve the same things. I like to I have to give that feedback to our teams. I know I've talked to you guys a few times. It was not the key member that teams. That's always nice to hear when you get a good cultural linement and envision. Yeah, you know, Jeff, just to push a question back to you, I know I know you guys have worked with or on board in the number of credit this year. Yeah, increasing member this starts starting, but I'm kind of curious, like what do you notice starts operations? What did you guys decide to focus more on the credit? Yeah, it's a good...

...question. So let me give you a few thoughts. I mean one, I think credit user are under the same financial pressure I hear from every kind of financial institution right now, which is kind of like deposits go on this way alone, demand go on this way and like I think there's a hunger for, you know, easy implement technologies that can help you actually put deposits to work and drive lone demand. And I think there's a recognition is I think, as I think you said, Jake, that unsecure personal loans are growing category of financial product that people would like to be able to offer their members. So I think those two things are really driven a lot of interest in what we do. Is People think about what's a digital player that can help me get loan demand and serve this kind of consumer need and desire on the insecured side, credit means in particular. I feel really bad about about the fact that I kind of even though my first financial account was at a credit union related with my university. You know, we kind of overlooked credit means a little bit in our early days of partnerships and really thought about the thanks more. I think it's a big miss on our part, to be frank. It's just kind of like you know, I think we look at where the assets were allocated and where we will put our resources and we know one to man team where we can really go and we talked to but I think we really underappreciated how much more consumer oriented credit unions are and how much more consumer experience oriented credit unions are than most banking even community banks. And so you know, as we actually got on the market, say hey, you know, credit uni the same size as a small community bank will do a lot more consumer lending because they're much more interested in being a consumer organization than, you know, a bunch of commercial real estate in a little bit of mortgage. They got through some brokers and call it a day. And so I think that surprised us and the focus on really delivering for the consumer is so to your point, about cultural alignment. So aligned with kind of what we what we kind of think of as the core things, like how do we get the best product in the hands the consumer? And I think those alignments were things we just didn't fully appreciate what we got into it. So I've Fek I always post on linked in or whatever we have. Ever, how we have a new partner that we're able to announce because of course our burns have to give some support that. I feel like they've all been credit unions for the last must just keep credit uni, credit unkind of you going on board. So it's been exciting to see that momentum and it's been I we've really enjoyed seeing the kind of uptake and credit unions and of course I think what I think about what we're doing for those credit unions and how we're able to help it. And you guys can talk about this too, but it's both the addition of the technical capability to originate on secure loans. It's the capability to we we're bringing a pretty sophisticated risk understanding through aimodeling to help each oar lander's controls their risk apetype. We're helping them understand the risk of the give in credit obligation to a giving consumer very precisely, which you think is for a new asset category, hard for most institutions here. How would I underrate this and how do I actually serve the broadest range of my consumers effectively? And then in many cases it's also bringing that new customers to use. How do we help you find new members through this product and not just use it as a as an add on your current membership, but how to actually help you find new members? And we have a pretty solid flow of the nationally. Members were coming to US looking for help for personal loans and increasingly for the auto refinance product that we help our partners with as well. So that ability to booth serve your current customers flying new members and do it through kind of a first first rate interface and serve the greatest number of the possible through a high highly accurates king to say that the things we really seem to be valuable to our partners in terms of getting a program stood up that's really effective. And that answers your question, Jake, but it does. Thank you. So that's that's us in nutshell, and I will remind the audience sex. We're coming up on the end of my prepared questions and you know we'll have a humannus lot for questions at the answer a few have been submitted through the QA. Will Get to those at the end that we have throw them in there. You know, I think we had a pretty good experience getting getting up and running together and I know we're not the only Fintech partnership you guys have done. I'm kind of asked for your you know, to crediting as maybe have less experience going through the diligence process and the onboarding and implementation process. What's your advice to pretty use your thinking about working with the Finteg and how you kind of set yourself up to be ready and able to take advantage of this opportunities we decide to do it? Yeah, soges, that's a great follow up question based on the previous question. Jake kind of talked through our process and selecting up star right. So, I mean it's well documented. FTEXT are notorious for offering a superior or all experience. Automation look and feel mast easy. In many cases, like you mentioned a minute ago, they they couple that was superior, predictive or pricing analytics, artificial intelligent engines to optimize portfolio performance and so on. So I think the first for us was making sure that our members have a real positive association with the process. So we test drove it along with others, right before we even engage. We went out to your website and we said, okay, well, what is this process look like? I think Jake has like...

...twelve or thirteen insecure blanes now and so he's pretty he was pretty, pretty enthusiastic about that. But you know, being able to at some point in a grate like your brain and log into the process kind of a cobraining. So the member, at some point, for the new member, recognizes that, hey, this is a credit union that I'm going through here. And it would say, kind of administratively, because you mentioned, you know, the AI predictive analytics. Want to make sure that your bored is comfortable with a partnership like this. Right potential partner has to have a solid track record of folio performance. Then will really help you quantify the risk. And you go back to Jake's come in an indigo. Part of the reason we target, and I'm secure loans was just because, you know, sure the gross field to the net heel on those is a lot better than most products that we have in an interest margin is certainly a challenge for most creating unions right now with a mortgage rates, you know, being low, auto rates, at least two competent auto markets being so low. So want to make sure that you can put meaningful data and historical information in front of the work so you know, they understand kind of what are ry will look like on this. We also prefer to service these modes right for opportunities that where a rise down the road or our marketing team and so on. So and then, you know, getting back to kind of your policy, we're making sure that you kind of are reasonable about your expectations, you know, and setting policy limits to your overall and secured portfolio. You're in it worth and so on that make sense for your preding and you know, kind of show regulators and examiners that your mindful of making sure that you understand the risk and your kind of kind of limiting your exposure in that way at least so you can get a trying to record them. I would just recommend all the kred means. I feel like this is an area we're building the muscle for how to do this well with different partners. is going to be a real competitive advantage of the next five to ten years. It's like the stuff's coming and being good at it is probably a real advantage. So I think it's good advice to check on how to do that and I would just think about how you and your organization get ready for doing these kinds of partnerships, because it's such a nunless is with us necessarily, but I think these kinds of partnerships are going to be a poor part of doing business and so I think that's a good one to get good at. Let me ask you one last question and we'll turn it over, I think, to the QA that's here. But when you look forward, is there another area of lending that's really important to you guys that you're interested investing in? Are there changes you think are really important for you? are other credits to make to be successful the next couple of years? I'm really curious kind of and we talked about what you've done now, but what do you see is the key priorities for you over the next couple of years from a lending or digital experience point of view? That you think are going to be really important to be competitive. Yeah, so, you know, just let me you just rewind a little bit. And you know I mentioned earlier that we had completely rebuild our online and mobile banking platform. Just before that we had completely upgraded our going online application. And so, speaking from a landing standpoint, I mean certainly the ability for our members to go online, apply the approved go all the way through the documentation and finding process without ever walking in a branch. I mean I think that's important. You know, in pass forwarding to I mean with recent admancements in like promote online notary recordings, obviously these signatures. We're looking to completely digitize the process going forward on lending, and I can speak just from t plinning officer point of view, maximizing the convenience for those do it yourself self service members, which are increasing in numbers and especially after our rebraiding right. So I think all that kind of speaks towards kind of how kind of fast train that with our members. And again, you were just to be and board that. They have to understand where we're going with that, and so I think I think we've done a really good job with that. Again, but I think we've made we've made a lot of advancements over the last couple of years. I may have a lot of ground in that area, but I would say that's where we're going. As much as anything, it is just the online, in digital part of lending. Yeah, I would just I would add to that, to everything chucks said, just for the industry as a whole. So maybe not specifically lending related, but it just changes. We've seen, you know, over the last eighteen months I have definitely post some challenges for us and I think it's pushed us more, maybe a little bit faster than we otherwise would have done, into that digital channel, moving things electronic, faster, easier, more accessible, matching our members, matching their needs, so they might want to originate alone at ten pm in the evening at home on the couch, right and so being able to do those things in meeting the member where they want to be. I think looking forward,...

...digital will remain a really important aspect for all credit unions. I think being able to harness more of that big data. Like I said, we're just scratching the surface, but there's so many insights and so much we can do with all the data that all of us are collecting every single day. And then I would see one of the other things is just finding the right type of value to add to your members. Like Chuck mentioned, interest margins are really tight, so a lot of credit unions are not in a position necessarily to compete on interest strings. So I think another way to be adding that supplemental value, and maybe that, maybe the answer value is commnience, or maybe it's he's of use by being able to differentiate a little bit in that relying price for all that differentiation. I think will just become more and more like that. That's a good place, I think, to wrap up my questions. Questions all day. But I also know the audience has been submitting some pretty do I think it's a good time to tradition over and take some questions at the audience is submitted for these guys or for me whatever. So do you want to do? Want to grill us here with whatever the audience wants to ask? Can't that's like yeah, yeah, let's go ahead and dive right into that. So we do have a good handful questions here. But just to rear rate what Jeff had said, if you have any questions on the game you for today. You can so go ahead and submit that in QNA and take a look at it now. But to get US started up, question for the abound. Gentlemen, did you guys to use the research firm to Holp you develop your personas we did? We did, and you know, like truck and I were saying that the brand change which included the development of there's those personas. That was those probably a two to three year process, just really there was a lot of research. There was a lot of both member research and non member research in our areas of where we operate. But we did use we used a national marketing firm the kind of helped us to determine some of those really put it together great. Are you guys using a s rm? We are not set on your list things tanks. It probably comes out how often chuck, how many meetings are we and where we use that? We refer to a CRM. Yeah, I would saying is on our list of I mean as we look to remay of some, you know, things internal year, as far as it's our internal ticketing systems and those sorts of things, there's there's systems that can do that and more and even really pushing into the crm space. We think that would be a nice abasement. We just haven't gotten there yet. All right, so kind of at a different track here on. Do you have invise on whether the persona or the hate your style path is more successful? Who That's? That's a really, really good question. I wish one of our I wish one of our marketing folks was here, but I would say just just based on, you know, my involvement of marketing and exposure to those areas, I think a persona is much bigger picture and so I think of, you know, for some one that can drive the look and feel of marketing materials. You can drive the creation of new products, new offerings. I do think that that we ave, your based style probably works better on a one on one member interaction, so or a member service representative or a teller working with the member face to face in the branch or even over the phone. I think that behavior style probably that's better in those situations. But, as you can imagine, trying to kind of manage a marketing strategy and based on all those behaviors is probably a little bit more difficult. So I think that someone's definitely fit a little bit better at and a bigger picture like that. Yeah, you add to that? Yeah, I would just add to that that, you know, through that that discovery process, I think we might unify some new ways to market, right. I mean we're engaging in like over the top video with Netflix and Hulu, audio overs on audio and or spotify, places like that, places where younger members stand to hang out. You just looking at those demographics. But I think we've engage some new marketing platforms and strategies based on some of that information in members, member types and persotas that we want to increase the engagement going for and taste. So I'm here an interesting question for you guys. How have the pandemic accelerated digital transformation for for a found and what other divisative all I think you know, chuck mentioned this earlier. I think we were in a really unique position. You fact that we launched our brand in name change in February of two thousand and twenty, just, you know, near weeks before the pandemic really hit, and then the fact that we had our online and mobile banking conversion slated for all of two thousand and twenty put us in a bit of a different position.

I don't think most credit unions would knowingly choose to do those things during a pandemic, necessarily with just so many other things to to figure out through that process. But I do think it probably gave us some BOPs right. So those things were moving anyways and I think this probably is helping us transform things maybe a little bit faster than we otherwise might have. So Chuck mentioned, you know, e. notaries and being able to do maybe indirect lending electronically rather than using paper documents and things like that. I think the pandemic is definitely pushing some of those things and, if nothing else, it's just pushing the experience through the digital channel a little bit faster because if a much larger share of our members who are experiencing abound through digital channels today. So just thinking sure we're really focused on those and making them, you know, as smooth and user friendly as possible. Chuck, did you had anything there? You know, I mean I think you did. I think it really just forced us to, I think, take some projects that were slating for two thousand and twenty three, two thousand and twenty four, and move them up into two thousand and twenty one twenty do you mentioned, you know, in contracting through like you are, tract route one and those sorts of things, since we have a fair amount of production to come to you through our ler channel, and the dealers were pushing us on that as well. Right, I mean, as I think we're in a little bit different environment now, but as dealers were closed and or open to appointment only. It really forces the issue to add it really makes you reprioritize you immediately and you know we've been able to do that and say we have a completed those projects yet, but there's certainly cute up, you know, a lot, you know, closer in the near future than what they work for sure. Yeah, the only thing I did, I think, is are it's a great answer for about side, because I talked to lots of Crediteans and banks in my conversations and the podcast I do. One of the things it's been interesting is that the pandemic is pushed, not just the push users who we felt be slow without digital, to take up digital, like grandma and GRANP are mobile depositing checks the way that we didn't think was going to happen, and so the portion of your user base is looking for a digital interaction, particularly on transactional kinds of things. The depositing attect is a great example. Like you know, mom and dad might have used to go into the branch. That's what they did, but now that they've gotten mobile deposits set up like they're probably mobile depositing now forever in. So I think there's going to be a shift of some of these transactions there and much more broadly across the user base than you might have expected were four years ago. This is going to be more of a when the young kids come in, they'll go digital, but my current customer base is going to stay mostly how they've been. I think that's shifting really rapidly and so I think it's sports people to figure out how do I enable that digital Faston time are you guys were in a great spot. You were there, but I think it's made it a kind of have to have feature for people who weren't as far along the journey, because it's not like you're missing the newer, younger members, which I think is what many people perceived a lack of digitals. Like I can't get the young guys what I'm still making my members happy, and now it's like, nope, nope, the you know, everybody wants digital, at least for certain things, and you got to you got to get there, I think, faster than than you had not just because your branches were close, because people not expect it and they got used to it right like it, once you do something twice, becomes normal. Like you know, the first time you have Wi fied a plane, it was miraculous, and now you're pissed off the can stream Netflix. Right. I think the same thing happening here. We're like now figured out that you can do these things and now it's like that's what you have to have to be happy or even just satisfied. That expectation is changing really rapidly in this space. Yeah, do you have any doubt? And that as well. And it's kind of forces to reevaluate raging model in general. Right. I mean as less of a transactional and more as a consultative, you know, benefit to our members, where they can come in and having mortgages produced in each branch, commercial expertise in some of your branches, a few less tellers, a few more lenders and member service agents, type of set up is kind of I think we're going based on all the things that you just said right. I think that's right to I'm what I always hear is the administrative and transactional stuff is getting out of the branch and the consultative advisory stuff needs to be enhanced. That's a shift and resource. I think it's a really it's a transition that anybody can't take advantage of, but it's, I think, really the ability to increase the level of service or offering members by frank by moving out of the transaction stuff getting into the like, the higher value as. And by the way, the funniest thing to me is that they credit us and bake something. Their team members are happy because they prefer doing that stuff. So when they start it's not like you're letting people going about how you can start doing the fun, interesting value added stuff as opposed to the like, you know, basic processing and kind of transaction stuff which is actually makes not only the customers after but the team members after too. So feels like a real bid then. All Right, okay, so couple questions, maybe a little bit more targeted to you, Jeff. Can you tell them how up start works? We want to use it for our own credion site to make it available for a fifting members.

Yeah, so we really have to modes with which works. In frankly, most of our kind of US use a bit of both and those are a completely white labeled experience for work just a technology provider. We have the actually API integrations for those lenders who get into that level where we can take the information you know about a customer pre populate in the form this is your colors, your logo and where you're driving your current members to that and so we do that as a core thing that we're offering to our partners. In addition, we have what we call the upstart referral network, which allows us to take nationwide consumer demand as coming to us from consumers for personal loans and auto refi loans and present offers from our credit union partners to those consumers within the geographic book prints and membership requirements of those credit unions and allow them to basically augment their current demand from their current members with demand from non members who are eligible for membership, which helps them both increased loan portfolio size and bring new members into the credit. So typically we see credit US thinking advantage of of both. We don't want to have like just that new members coming in. We want to take that same experience and make it available, make it better, even for our current members, where we can not ask your name and where you live. We know these things. But also, you know, I think most credit unions that I talk to are saying, you know, to your point ear, they're trying to do like pose. It's up low demand down. Margins are compressed because the low interest rate environment. Being able to grow a portfolio, you know, higher net interest margin personal loans of pre attractive thing right now, and so the ability compare your own membership based marketing with flow of loans. It is a pretty tractive composition. Okay, all right. And how have loans from upstart performed through the pandemic? I'll start you tyco scorn to termin with tellerns for AI lending. The two different questions. Yeah, so we do use PYCO, although I will say minimally. We are data scientists in the pure sense and how we approach credit risk perd prediction, which is to say all data points are useful. You should never throw one out because you don't like it, but some data points are much more useful to others and any credits for is really a summary of information and the credit file, and we find the detailed information in the credit file much, much, much more useful and predicting credit risk than any three, four or five digit summary that's trying to take take nine or nine hundred thousand pieces of information about an individuals consumer history and boil it down to a three digit number just as way over simplifying. So we use spike go. Many of our lenders are actually moving to a world where they do not have a specific credit score requirement in their kind of policy. Whether they'll allow up starts and models to leverage that date of point along with all the others and make a decision about risk level that does not include credit scort must be above six, forty or whatever. I think that's a smart move that's allowing our partners to serve more customers. The second question was a how is it performed during the pandemic? And then we've got all presentations on this and you're I'm happy to send people information, but but generally speaking, up starts portfolio, while it's through all of our learning partner's credit unions, banks have performed exceptionally well during the pandemic. You know, we've seen both. Think everybody seen relatively low levels of loss, mostly because the backro economic disruption has been substantially all set by stimulus from the government. So we've seen a lot of that kind of back filled with with stimulus and various kinds of programs that have kept people afloat. But even if you look at just hardships that were requested during the pandemic, because people could make Kams with free time, where you did see a really big spike, you know, compared to other similar lenders in the space, people with similar kinds of programs, the the partner's using up starts model, saw lower levels of compairment of payments, of deferrals and and kind of parts your programs and higher levels of recovering on time payment coming out of that that other lenders, despite the fact that, because we don't have high co product or be Pres were requirements for many of our landers, that we have an average lower credits course, for portfolios that you would have fought on average or riskier snow to have less stress in them through the course of the pandemic, and I think that was always one of the questions. So we talk to me twoyears ago. Well, S A, I think seems great based on your Portfoli, but what the heck's going to happen when there's a macroeconomic stress? Is there going to fall apart? Feel more modcle like who don't know who, swiming gut till the time goes out, and they all even swimming at high tide. So like, what's going to happen? And I think this has been a pretty good first serration answer to that question that the models hold up really well and, frankly, not only predict risk and normal bacro economic conditions much better than traditional approaches, but actually predicts likely have of stress during a stress periods of from Mac I've been on the point of view more accurately as well. So that's been a put a nice answer and we got a lot of data on that that we can share. Up Start Partners with banks and credit unions to help grow their consumer loan portfolios 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 applicants 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 lending programs or you're just getting started, upstart can help. Upstart offers an Endto d solution that can help you find more credit worthy borrowers within your risk profile, with all digital underwriting, on boarding, Luan, 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 Ford Dash Banks. That's UPSTARTCOM FORWARD DASH 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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