Stop Thinking Like a Credit Union and Start Taking Risks
Credit unions often remain stuck in traditional ways of thinking, slowing down their ability to innovate and keep up with modern financial expectations. Credit unions need to break away from old habits and start thinking like modern, agile organizations to better serve their members in today's fast-paced financial landscape. Is it time to stop thinking like credit unions and shift into a different mindset entirely?
In this episode of Grow Your Credit Union, host Joshua Barclay and guest co-host Mike McWethy, EVP, Texans Credit Union talk with Nolan Waltman, EVP/COO, First Service Credit Union about why the key to credit union growth is to start operating like a FinTech.
PLUS:
We talk about how you can identify and create better offerings for your most valuable members.
We get tips on how to create commercials that go beyond boring and deliver a memorable message.
A HUGE thanks to our sponsor, InvestiFi
InvestiFi is the only InvestTech solution built to allow for trading to and from deposit accounts, enabling Credit Unions to retain more assets and attract new members. Help your members navigate the complexities of financial markets with ease from within their current online banking experience with InvestiFi.
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FULL TRANSCRIPT
Joshua Barclay:
Welcome credit union leaders. Today we're going to talk about how to identify your most valuable members, how to create a memorable credit union commercial, and how you can stop. Yes, I said stop thinking like a credit union and start thinking like a FinTech.
Welcome to Grow Your Credit Union, the place where credit union leaders gather, learn, and grow. I am your host Joshua Barclay, and today we have a special guest co-host, which is not Becky Reed. Becky Reed is out and about, so I brought in another Texan that you all know and love, the EVP at Texans Credit Union, my man Mike McWethy.
Mike, thank you for co-hosting today.
Mike McWethy:
Hey buddy, glad to be here. Happy to be back on your program.
Joshua Barclay:
All right, Mike, it's awesome to have you back. Before we begin today, I want to mention our brand new sponsor, InvestiFi, the only self-directed investing platform that allows members to buy, sell, and trade directly from their checking account within their online banking portal.
A huge thanks to InvestiFi for sponsoring this episode, and you'll learn a little bit more about them later in the show. Mike, we have another Texan in the house. He's our guest on today's show. I'm talking about the Executive Vice President and COO of First Service Credit Union, Nolan Waltman.
Nolan, welcome to Grow Your Credit Union.
Nolan Waltman:
Thanks for having me. Super excited to be here and share some things that we're doing and give some additional insight that some credit unions could take advantage of.
Segment 1
Joshua Barclay:
As business leaders realize they can't be everything to everyone, personalization is a key objective for most organizations. A Twilio segment report stated that 89 percent of decision-makers see personalization as crucial to their success in the next three years.
Nolan, your credit union identified three key member segments, and you focused on tailoring products and services to those three segments, meaning you shape your branches around those three segments—your websites, your products, perks, benefits.
That's what I call personalized member service. Can you please share the process that helped First Service Credit Union identify those three key member segments?
Nolan Waltman:
Yeah, absolutely. Being in Houston with seven million people in the city, it dawned on us that we can't be all things to all people, especially when you're talking about personalization. And so we made the decision to embark on identifying three key segments.
We tailored everything that we're doing specifically to those three segments. So, we partnered up with Claritas, and they have cycle codes—a segmentation system that evaluates consumers using key demographic factors that have the greatest effect on their financial behaviors.
These factors include income, age, presence of children, and home ownership. Within the cycle codes, there are different categories for each household, broken down into 12 different life stages and 60 segments. We evaluated our current member base and the demographics of Houston.
We chose three different segments: the Fiscal Fledglings, Upscale Earners, and Wealthy Achievers. It starts with people at a very young age, and we're going to design our products to follow them through their entire life—buying a house, having children, even into their mature years.
We are starting to tailor everything around those individuals.
Joshua Barclay:
Mike, what do you think about what Nolan said in terms of really starting to tailor your products around your most valuable members? Because I know some people... well, it sounds to me like you're starting to forget about the other people that are outside of those three key segments.
So my question for you, Mike, is are you doing the same kind of thing at Texans, where you're starting to identify which members are really bringing in the money? I mean, if this is a cooperative, if I bring 1 to the table, I should not be treated like a guy who brought in hundreds of thousands of dollars.
What is your philosophy around this kind of segmentation and tailoring idea?
Mike McWethy:
Well, if you look at the credit union landscape, it is alarming to know that the percentage of credit union members are baby boomers, and that tends to be growing. And why is that relevant? That means we are failing at our ability to gain market share of Gen Zers, Millennials—the people that have been told their entire life that they're super special, right?
We need to have them feel like they are special, right? That they want to be a part of a movement that's worth something valuable to them, but they also want to make sure that they know that they are special and things are customized for them.
And so, as time goes on, okay, yeah, the big depositors are the older generation right now. But if we're going to have a sustainable business model that's going to be here 20-30 years from now, what is our investment today in making sure that we're acquiring those relationships?
Gen Z may not want the exact same thing that baby boomers want. And so, if we're going to buck the trend of who's growing market share for Gen Z and Millennials right now, well, we've got to invest in personalization. And I applaud what Nolan's doing there.
The real issue in the credit union market space is where do I start, right? And so we've got to decide how do we start aggregating the data, the consumers, to then be able to be proactive or reactive, to be able to help them feel specialized.
For us, we've invested in some personalization experiences. So when you're onboard, you get a specialized email that's customized with your information, and you get to pick and choose some things. We're in our infancy of it, but we know that this is a real big category for our future success—maybe not today, but it'll pay off in a decade from now.
Nolan Waltman:
Yeah. And there's a lot of huge corporations that have already embarked on journeys like this. This is not necessarily a new concept, right? I mean, when you look at, let's just say, Walmart, right? They're providing reliable, low-cost products, ease of use.
But then Amazon, they're on the more customer intimacy side, right? They like the loyal customers. They're innovative at a customer level. But then you have companies like Tesla that are more of a product leadership. If you're looking at the value discipline model, they have the best product innovation, and R&D is dominant.
There are just different segments that people tend to lean towards and get excited about. And so we decided to do the same, but in a financial sense.
Joshua Barclay:
So Nolan, talk to me about the execution side of this in terms of, okay, you went through the research process, you identified those three key segments, then what do you do once you've identified them? How does that inform the products? The branch experience?
Nolan Waltman:
We had focus groups, both members and non-members. And so we did anonymous focus groups, so even our members didn't know it was us holding the focus group. And it was quite interesting, actually. During the focus groups, we were able to chime in and listen and watch.
It was all on screen, and they didn't know we were there. And so it was interesting to watch a lot of these questions unfold, but even with the three different segments that we have, each segment wants different things, right? So like our Fiscal Fledglings, which is our youngest group, the not-for-profit model resonates with 60-70 percent of those individuals.
However, if you look at the Wealthy Achievers who are in their mature years, that's hovering around 20 percent. And so just between the different generations, they have different things that resonate with them. And so just trying to have a balancing act that those three segments that we chose, that we can properly cater to them and their needs.
Mike McWethy:
I think another thing that is going to be important for credit unions is putting in the effort in order to ask the questions, right? We want to talk about aggregating the data for a database to be able to be reactive or to target individuals.
Well, if you're going to create an experience that's customized for them, you have to know what they want. And so you're either going to partner with a third party to get that information, or you might have to ask that information yourself. What do you prefer?
How do you like things from both a financial realm and a non-financial realm just to get to know them so that you can be reactive in the future to that, to get to know them?
Segment 2
Joshua Barclay:
Credit union commercials, they're sterile, they're boring. The worst thing about them, right, is they fail to convey the unique value that the credit union movement has to offer. But some credit unions get it right.
Nolan, I watched First Service Credit Union's latest commercials, and I got to say they're fun. They're creative. They tell a story about the movement. You said you have a list of things credit union commercials should have to be effective. So can you tell us what are the ingredients of an effective credit union commercial in your opinion?
Nolan Waltman:
Well, during our age growing up, it was always commercials, right? We didn't have the luxury of Netflix and skipping, right? So we sat there and watched these commercials, and the commercials that always stood out to me, even to this day, had humor in it.
Whether it's Macho Man Randy Savage and Snap Into A Slim Jim or The Three Frogs—Bud, Wise, Er, right? So there's like these certain commercials that just humor has always resonated with me, and those are the commercials that tend to stick out.
When I decided to break the mold—and I say break the mold because I've seen other credit union commercials, and they seem to be very conservative in nature—I really wanted something that stood out. I gave an idea to our marketing group of a vision of what to expect.
I gave them, honestly, a script that I just drew up myself, and I acted it out. I went through the whole motions. And they took that and partnered up with a group of individuals that helped us put those together. They even flew to Burbank to record the airport commercial where the lady gets tased, which is hilarious by the way—I watched that commercial 50 times.
They took it, made it their own, and yeah, I think they turned out great. And I think it's going to stick out, I think, in the marketplace.
Joshua Barclay:
A couple of things before I shoot over to you, Mike. Number one, some people may say commercials are outdated. I would say commercials are not outdated. If you look at connected televisions like Apple TV and devices like that, that will be the new ecosystem that these types of video content will live in.
So when I say commercial, I know television is starting to phase out in popularity, but the video aspect will remain on a different platform regardless of what year it is.
And two, Mike, I want to move away from the commercial idea and think about it from a messaging standpoint—just strictly a marketing standpoint—that credit unions can stand on. In your opinion, Mike, what should credit unions be doing right now to convey the unique value?
Because if you look at most kids out there, younger people today especially, they have no idea what a credit union is.
Mike McWethy:
Yeah. You've got a real problem in the fact that we have basically 10 percent of the market share. And a lot of times that has come from referrals or through indirect programs, or somebody just happens to be close to a branch, and they open their account, and they knew.
So that's the real struggle—credit unions have a real headwind as it relates to market awareness of what a credit union is. But a lot of studies have shown that a lot of the younger demographics really are wanting to have relationships with institutions or whoever they do business with that have a purpose or a meaning, right?
They care less about whether or not you've been around since 1946; they care more about what is your purpose, what is your value, how do you help me? So I feel like we've struggled as an industry for a long time in trying to bear the responsibility of helping everybody understand the difference between a bank and a credit union.
There's a lot of good efforts that have been there, but I really think that everything is so easily accessible on the Internet in order to learn at your pace, at your convenient time, that I don't think we need to carry that responsibility.
I think what we need to do is lean into, this is what we stand for, this is our purpose, we have a real value proposition, and being a not-for-profit that's here to serve our communities and our members, I think resonates with a lot of people. And we likely should lean into that.
Now, having said that, I don't know what that is that's going to have people pay attention to your commercial or your ad or even decide to listen to the message that you're a not-for-profit.
I think Nolan's probably onto something—humor absolutely resonates with me, and I'll pay attention a little bit more. I mean, look at all the people on TikTok and watching reels and all those things.
I think he's onto something, leveraging humor but also getting the point across that we have a value proposition, that there is a difference between banks and credit unions, but maybe we don't have to compare the two anymore. Maybe we could just be focused on us—this is what we stand for, and this is who we are.
Joshua Barclay:
Yeah. In a previous episode, Becky Reed made the comment that the marketing in the credit union space is weak, meaning that we don't articulate our unique value prop. And I think, Nolan, while your commercials are funny, I think the reason why they resonated with me is because they spoke to the credit union movement—the idea that you're a co-owner, that there's ownership, that you're coming into a cooperative.
So they were funny, but the theme tied around the movement in a unique way.
And I'm wondering, Nolan, do you think that more credit unions need to market around the unique value prop and less around "7 percent APR, here's a new credit card, auto loans at seven and a half percent"?
There's a lot of product marketing, if you will—financial products—but there's not a lot of "this is what makes us unique." Should we be doing more from the marketing side to get that message out?
Nolan Waltman:
These commercials actually spun out of our focus groups. We realized that there just weren't a lot of people that actually know who we were, and sometimes including our own members, which was a little painful.
And so those commercials—you'll notice that it doesn't talk about any products. It's just awareness of who we are. And luckily, we have a fun tagline: "Bank like you own the place," right? Because a member actually does, and I think that is what really makes us special compared to a bank.
I think a lot of people would correlate a credit union with just being small and in the community, but I think what makes a credit union is the structure of the credit union. The board of directors are all volunteers. Some of our boards have been there for 20-30 years, and so they are the member advocates.
They're advocating for the member and leading us in the right direction, compared to a for-profit bank where the CEO is morally obligated to maximize income for their investors and their shareholders. Well, the credit union doesn't have that obligation, and so I think that's really what's unique and can potentially resonate with young people that are driven by purpose.
The problem is they don't understand or know the structure of a credit union, and I think when they realize that it is a cooperative and we're not obligated to maximize income, I think that could also help separate us.
Joshua Barclay:
Mike, anything to add?
Mike McWethy:
Well, if you look at what Gen Z and Millennials are doing from their choices of their financial relationships—FinTechs and banks are winning. And when it comes to who they are deciding to open up their memberships or their accounts with for their financial services, credit unions have a responsibility to do something more and do something different in order to buck the trend of what we're seeing.
And so, competing on rate—everyone has a checking account, right? We all are selling the same services and products. We need to lean into the fact that we're purpose-driven as an organization. And the hope is that we can find a way in order to break through all of the noise and help people understand our genuine purpose is our differentiator.
And so, how do we explain that? And I applaud Nolan and any credit union that's really investing in trying to be innovative and breaking through that noise. So, great job.
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Segment 3
Joshua Barclay:
Nolan, in the pre-show interview, you told me that credit unions need to stop thinking like credit unions, but how should they be thinking? Should they be thinking like a janitor? Should they be thinking like a basketball coach? What do you mean by "credit unions need to stop thinking like credit unions?"
Nolan Waltman:
Well, historically, credit unions are very slow-moving; they're fast followers, they're slow to adopt new technology. And that can mean a lot of different things, right? It could just be that they don't have the scale to produce widgets as quickly as a larger credit union does.
And our competitors aren't really the FinTechs, if you ask me. Chime, Dave, Sofi—I mean, if you go through the Chime account opening process, you can get your account opened with your debit card in your digital wallet in a matter of two to three minutes, right?
And so, if you're not able to do that, you're going to struggle. And to me, at this point in time, those are table stakes. You need to be able to offer those types of things because people want instant gratification. I think TikTok, second reels, have just shaped our culture now that we just need stuff quickly and conveniently.
And so, a lot of credit unions—a member tries to open an account on Sunday evening, well, they're closed. They're not going to get any correspondence or the account approved until Monday, until a human comes in, and they're manually looking at credit reports and check systems.
Time is of the essence, and so, you know, having tools to where you can be able to open those accounts without any human interaction, I think is key.
Joshua Barclay:
Mike, do you agree with Nolan's statement that we need to stop thinking like credit unions? And I think, just as importantly, are you doing anything right now at Texans that sort of fits that philosophy?
Mike McWethy:
Yeah. I think he's touching on something that... I don't know if I would be as provocative in the wording as he was, but I would say that we definitely need to think differently in how we approach our business.
And so, if you look at a FinTech he's referring to, they will come in, and they'll decide that they need this program or they need these fleet of developers to create this experience, and they will invest in it knowing that it's going to be a loss for some X amount of months in order to invest in the future experience.
Well, honestly, I've been in a few credit unions. A lot of times they say, "Well, how do we justify this headcount in order to potentially improve service?" Right? A lot of leaders coming up through the credit union industry are getting told no a lot.
And it's usually about budgetary constraints. It's usually about a failure in order to inspire the top leader to get out of the way in order to enable the ability to create elevated experiences or improved service or whatever.
And I feel like fundamentally, we need to change and start thinking, in some ways, as though we have sufficient business acumen to be running a FinTech, which invests in it.
For example, for us, we've created additional departments and roles that you don't often see. We were outsourcing our mortgage department, and instead of saying, "Hey, well, let's go in, get a mortgage originator to then be able to start tiptoeing our way into being able to provide in-house mortgages to sell into the secondary market," we said, "No, we're not going to tiptoe our way like typical credit unions would do, where they are just piecemealing it one at a time and justifying each headcount expense.
We said we're going to create an entire department full of all of the specializations and go out and hire them, meaning we're going to take a loss on that business avenue for likely a year, maybe more, but at the end of it, we will have a fully developed department that can flex and do what we want it to do."
We're doing that from relationship-type positions. We're doing it from outbound sales. We're doing... instead of one person at a time trying to fumble our way into creating a modicum of success to justify the second person, which is a typical credit union way of handling things, we reject that notion.
And we know that if we're going to be like FinTechs, as Nolan was referring to, we have to think differently. We cannot be like our grandparents' credit union.
Joshua Barclay:
Nolan, I think Mike just slammed down the gavel. He gave me some specific examples of how he's not thinking like a credit union. Can you give me a few examples of how that's shaping what you do right now at your credit union?
Nolan Waltman:
Yes. Just three weeks ago, if you were opening an account with First Service Credit Union, you were presented with three different checking accounts. And so, you're having a member sit there without any employee there guiding them, right? They're at their house on a Sunday evening, and they're struggling with which account they want to pick.
"Well, I want high yield with free ATMs, but I also like the idea of accumulating reward points that I can redeem. But then there's this other checking account where I can get cell phone protection and credit monitoring and dark web monitoring and all these other cool features."
And they're sitting there trying to figure out which one they want. And they're... at the end of the day, if they like a couple of them, whatever they choose, they're going to be sacrificing something that they're not going to get because it's not in the checking account that they chose.
So what we did was we blew it all up, recreated a free checking account. So when a member comes online, you're only presented with one checking account. And this one checking account basically offers all the benefits of all three checking accounts we were offering anyway.
So now a member's not having to pick and choose what they want to sacrifice as a benefit. They're going to be able to accomplish whatever their goals are.
Joshua Barclay:
Love it.
Mike McWethy:
I think Nolan's onto something—that it's the struggle. We just talked about personalization, and we talked about customization for individuals, but then you also have a counterpoint to "keep it simple, stupid."
So how do you bridge those two things with your product selection? And so it's very difficult to be leading right now in the credit union industry, but you've got to really put the end consumer at the forefront of the decision-making that you're doing—not your budgets, not your competitors.
And I really love what Nolan said about that. I mean, you need to stop looking at the credit union next door. They have a different business model, they have a different set of demographics, a different product set. Who is it that you're going to serve, and how are you going to serve them so that they feel specialized?
What are you doing in order to incorporate what they want and need and what they expect for you to deliver on that, rather than looking over your shoulder at everyone else?
Closing
Joshua Barclay:
Beautiful. That brings us to the end of the show. Nolan, what are your final thoughts? And let the listeners know how they can reach out to you.
Nolan Waltman:
My final thoughts are don't be afraid to take risks. Fortune favors the bold, right? And so, don't be fearful of making that jump. I think it's important to stand out and be different than what other people are doing in the industry.
Joshua Barclay:
And how can listeners get a hold of you if they're listening and they're like, "I got to talk to this guy. He's onto something."
Nolan Waltman:
On LinkedIn. You can also email me at nwaltman@fscu.com. I'd be happy to talk to anybody. Thanks, Josh.
Joshua Barclay:
Thank you. Mike, final thoughts?
Mike McWethy:
I think we need to lean into being a credit union and having the relationships with our members and what our purpose is, and think differently. And I think there's a lot of good comments and theoretical applications that we need to lean into as credit union leaders.
And I think those that are telling these stories and are thinking differently are going to be the ones to win and thrive.
Joshua Barclay:
And how can listeners reach out to you if they're liking what you're putting down?
Mike McWethy:
Mike_McWethy@texanscu.org.
Joshua Barclay:
All right. I want to thank Mike. I want to thank Nolan. I want to thank InvestiFi for sponsoring this episode. Remember, they give your members the ability to buy, sell, and trade directly from their checking account from the online banking portal, making it easy to invest.
Go check them out at investifi.co to learn more.
And a special thanks to you, our listeners, for continuing to support and listen to Grow Your Credit Union. Remember, if you like the show, please follow us on your podcast player of choice and share an episode with someone who would benefit from listening.
If you want to be a guest or you would like to talk about sponsoring the show, head to growyourcreditunion.com to learn more. Thank you for listening, and we will see you next time. Take care. Bye-bye.