Credit Union’s Key To Survival: Listen, Learn, Repeat

For humans, the key to a longer life involves a healthy diet, exercise and a commitment to healthy living. For credit unions, the formula seems to be slightly different, although there’s still a decidedly human element to staying in business and helping members maintain financial health. It all starts with listening.

While it may not be the oldest credit union around, the Boeing Employees Credit Union (BECU) of Tukwila, Washington, has been in business since the days of the Great Depression. Founded in 1935, BECU began as a credit union for employees of the Boeing Company aircraft manufacturing firm. Today, at 82 years old, BECU is looking pretty fit for its age. It currently holds more than $17.2 billion in assets and services more than 1 million members, placing it in among the top five U.S. credit unions for cash assets — and that’s without a steady diet of kale and spinach smoothies.

But, a common element with which older financial institutions must contend is new players arriving on the scene and throwing older players’ relevance into question. Over the years, non-profit business model credit unions have faced heavy competition from larger, for-profit banks. BECU and other credit unions have also had to address the emergence of new FinTech companies, firms which are disrupting financial services by offering consumers innovative new options for managing their money.

The rise of FinTech companies has made the financial services industry more cutthroat as both credit unions and traditional banks are being forced to consider how to respond to these new providers. Should older institutions treat these younger upstarts as rivals or as potential partners?

Doug Marshall, BECU’s senior vice president of retail, recently told PYMNTS that BECU has chosen the latter approach. Marshall discussed how BECU sees the rise of the FinTech movement as a chance to gain deeper insights into customer expectations, and learn how to offer the types of products its members want from their financial services provider.

FinTechs: ‘A wonderful threat and opportunity’

While it’s tempting for old-timers to grumble, complain or even panic about younger generations, Marshall said BECU prefers to see what the FinTech community can teach credit unions about staying active and engaged in the financial health of its members.

As Marshall outlined, there are four primary motivations members have for conducting business with a credit union: financial saving, borrowing, spending and planning. To better address those needs, Marshall advocates credit unions work with FinTechs as partners rather than rivals to upgrade these member-facing services. According to Marshall, the credit union market will be better served by embracing the FinTech movement and seeing which opportunities exist for older and newer players to collaborate, thus offering members and customers more efficient services across the four verticals.

BECU has approached approximately 60 organizations in the FinTech space to explore opportunities for collaboration, Marshall said. Among the companies approached is Even, a supply-side marketplace lending company. An official partnership has not yet been established, but BECU turned to the company to explore innovations for the credit union’s own lending habits and to help members “smooth their cash flow.”

Having these conversations just makes sense, Marshall said.

“Rather than say, ‘Gee, if that’s successful, that’s a threat to us,’ we … can talk to Even and see if there’s a partnership there for a white label opportunity,” he explained. “Or, if there isn’t, we [can explore what] we need to do to — what arrows do we have in our quiver — that allows us to deliver that same product or service and build it ourselves.”

The approach of partnering in response to the new offerings from FinTechs could help the credit union tap into new capabilities to serve its members, Marshall explained. BECU recently took its first steps into the wearables market by launching a feature enabling members to make Mastercard payments from their Garmin and Fitbit devices. BECU is also enabling its Mastercard debit and Visa credit cards to be added to mobile wallet service payment applications like Apple Pay, Android Pay, Microsoft Wallet and Samsung Pay.

“FinTech is a wonderful threat and opportunity,” Marshall said. “We love it because it’s making us think broader and having us get bigger and better.”

Learn from failure, listen to members

Marshall also pointed out not all FinTech collaborations have gone smoothly for BECU. A few years ago, BECU launched an updated mobile app in partnership with MX, a technology solutions provider for financial services companies. Ahead of the app’s launch, he said, the company conducted research into members’ preferences for mobile experience. BECU and MX designed the new app in 2015 based on the research, offering additional financial services such as personal finance management and aggregation tools which went beyond checking balances and making transfers. Marshall said BECU was excited to see how members would embrace the newly-launched app. When it went live, however, it became clear they weren’t thrilled.

The updated app wasn’t well received at first, but there were key takeaways, he noted.

“We did quite [a lot] of research before we deployed,” Marshall said. “But, in some ways, we didn’t ask one of the most fundamental questions.”

That question, he explained, entailed learning which functions BECU members actually wanted the app to perform. Based on feedback received after the app’s initial rollout, while members liked the availability of the new financial management tools, they were seen as a distraction from the services they needed most, namely services to perform “basic” financial tasks.

“Lesson one was never assume,” he noted.

According to Marshall, after the stumble of the initial rollout, the company gleaned insights from the feedback and set out to improve the app — with actual member preferences in mind this time around.

“Lesson two was listen carefully,” he explained. “We got very clear feedback within two days of launching.”

Marshall said BECU and MX gathered the feedback and launched an upgrade to the app that included the improvements its members wanted, and all within two days of the rollout. This fast response highlighted the benefits of working closely with FinTechs on new services, he added.

“Lesson three is pivot quickly,” Marshall said. “That’s the magic of a FinTech partnership. We were able to respond and [quickly] deploy a fix.”

The approach has helped BECU turn feedback into results. In a late 2016 data analysis from iTunes and Google Play, the BECU app saw an overall improvement rating of 58 percent, the highest of any credit union-specific app available through Apple or Google’s platforms that year.

Additionally, Marshall said, the experience has helped inform the way BECU develops its mobile and other digital offerings. BECU now listens carefully to feedback it gathers from members and from speech analytics gathered from its contact center, using that data to inform future improvements to its product offerings.

Create a road map

According to Marshall, one of the important lessons that younger FinTechs can teach older credit unions about staying relevant is to not be afraid to fail. One company  credit unions can learn a lot from as they move forward with innovation is electric carmaker Tesla, he said, a company which experienced stumbles of its own in its early days of innovation.

Marshall noted that before Tesla shook up the automotive industry with its all-electric vehicle (EV) lineup, the company started small by focusing on vehicles like the Roadster. While the Roadster only sold 2,400 units between 2008 and 2012, Marshall noted CEO Elon Musk used the Roadster’s release to build up awareness and interest in electric vehicle technology. Since the days of the Roadster, Tesla has emerged as a powerful player and innovator in the automotive space with several other EVs in its lineup, including sedans and an SUV.

“Tesla started with a very niche product,” Marshall said. “They didn’t start thinking they were going to end with just that little Roadster. They had a road map.”

The lesson from Tesla’s origins is that credit unions should start small but think big. While the prospect of taking risks might instill anxiety in some credit unions, Marshall said, the important thing is to react out of “concern” instead of “fear.”

“Fear implies inaction, [while] concern implies attention and focus,” he said.

For credit unions to remain relevant to their members and assist them with their financial needs, the institutions will need to focus attention on the best opportunities to serve members. Expanding partnerships with newer FinTech players, Marshall noted, is one of the best opportunities for older credit unions to stay relevant and help members live financially healthy lives.

For other, non-financial health needs, it’s still probably better to reach for another spinach and kale smoothie. Consult your physician on that, though.

. . . . . . . . . . . . . . . . 

TO DOWNLOAD THE SEPTEMBER EDITION OF THE PYMNTS CREDIT UNION TRACKER™, POWERED BY CO-OP FINANCIAL SERVICES, CLICK THE BUTTON BELOW.

About the Tracker 

The PYMNTS Credit Union Tracker™, powered by CO-OP Financial Services, serves as a bimonthly resource for staying up-to-date on the most significant trends and developments across the credit union market.