How Credit Unions Can Use Fintech to Create a Digital-First Organization

Home  >>  Fintech  >>  How Credit Unions Can Use Fintech to Create a Digital-First Organization

How Credit Unions Can Use Fintech to Create a Digital-First Organization

On September 21, 2022, Posted by , In Fintech, By ,, , With No Comments

When you think of a digital-first organization, you may imagine the opposite of a personalized and thoughtful experience. However, “C.U. on the Show” guest Thomas Novak shares that’s exactly what his team is creating at Visions Federal Credit Union through strategic innovation and a buy, build, or partner approach to fintech.

Tom is a 16-year financial services veteran who serves as the vice president and chief digital officer at Visions. Overseeing digital and payment strategies for the credit union, he’s responsible for digital transformation concerning member-facing technology platforms that strive to support seamless, end-to-end experiences. Visions has partnered with fintech companies and been early adopters of various products and features, such as DocuSign, for over 10 years.

In the episode, Tom explains how Visions leverages technology and partners with fintech and other companies to deliver the best value to members and augment what the credit union movement represents, from affordable pricing to altruism. He shares the various opportunities for credit unions to engage in fintech beyond automation and digital banking to ultimately propel the credit union mission of “people helping people” forward.

A Partner-Focused Approach

Citing the adage, “If you want to go fast, go alone; if you want to go far, go together,” Tom shares how Visions’ focus on continual innovation and authentic partnerships with fintech companies has made its digital approach successful. Tom also attributes the credit union’s track record in the space to rapidly attracting emerging companies to the organization. 

When forming a new relationship, Tom explains what Visions evaluates and what other credit unions should also keep in mind, such as alignment of values and how the technology can best meet the members’ needs, possibly through a buy, build, or partner scenario. This model enables the partnership to manifest in various ways that make sense to both organizations and help both entities grow, e.g., from buying equity in a fintech and developing in-house, bespoke tools and products to partnering to deliver a customized feature to members.

Special Considerations

Fintechs seem to be natural partners for credit unions as organizations focused on innovation and curious about problem-solving. However, Tom warns just because a company has a great business model or technology doesn’t mean it makes sense for your credit union; he recommends having a strategy for engaging fintech companies to avoid missteps in the future. He notes the importance of taking calculated risks, performing thorough research, and sticking to sound values and operating principles before entering a relationship.

Stream the episode to hear Tom’s insight, recommendations, and notes of caution for other credit unions establishing a digital-first organization, plus:

  • Learn about Visions’ various fintech partnerships, including Zogo, Givio, and NYDIG
  • Hear how Tom thinks credit unions can help each other in scaling their fintech partnerships and developing digital-first organizations
  • Harness the mindset Tom believes every credit union needs to be successful in innovation and strategic fintech partnerships

Hear the episode here.

Thomas Novak, Visions Federal Credit Union, and the fintech companies mentioned are not affiliated with or endorsed by ACT Advisors, LLC.


Audio Transcription (pulled from the podcast)

Doug English  (00:00)

My guest on today’s podcast is Tom Novak. Tom is a 16-year financial services veteran currently responsible for digital transformation in relation to member-facing technology platforms that strive to support seamless, end-to-end experiences. He oversees the digital strategy and payments strategy for Visions Federal Credit Union. In this episode, we discuss Visions’ build, buy, or partner approach to fintech and how its goal to become a digital-first organization focused on more personalized and thoughtful member interactions helps guide its strategic decisions.

Tom Novak, welcome to “C.U. on the Show.” I am delighted you’re with us today and especially with the fine institution that you work for. So I got to tell a story, which is that I grew up in Binghamton, New York. My father worked at IBM. And as you and I already discussed, of course, Visions Federal Credit Union was IBM Endicott Employees Federal Credit Union. And I can remember at a very young age going to the IBM employee events the credit union was at; they had a fair. I remember popcorn and candy and the credit union. And I thought, wow, I’m not sure what these folks do, but I sure do like them.

Tom Novak  (01:23)

Yeah. Thanks, Doug. I appreciate you having me on the podcast today. And you’re exactly right. We’ve got a storied history going all the way back to the founding of IBM and IBM’s heyday here in upstate New York. And it’s really exciting to be able to look back on that history. And as we move forward with innovation and trying to be our members financial partner, how do we go ahead and pay homage to that history, and what that all represented— the county fairs and these different things that we did—and translate it through all these years to today, and still innovate for our members and provide value? So it’s exciting to be in this position to help deliver that kind of value.

Doug English  (02:03) 

Let’s do that then. What got me to call you about this podcast was the innovation that Visions has been very active in, in fintech. Just walk us through it please. 

Tom Novak  (02:22)

Certainly. So the first thing I believe that makes us a little bit different, a little bit unique when it comes to fintechs is we treat them as partners. They are not vendors; our whole mindset around this is how do we actually build a team together? How do we augment what the credit union movement is meant to represent—helping people, delivering value for them, not only at great prices, but also with a hint of altruism throughout that whole value proposition? And so we’re very transparent with potential fintech partners on what we’re trying to achieve. And we point back to our track record of how we’ve done this, and how we partner in a number of different ways. So it can manifest itself in co-creating a beta opportunity for a new feature or a new offering altogether to the market. It can manifest itself in terms of case studies or reference calls. How do we create mutually beneficial environments that really help grow both entities? Because we truly believe as we grow, and they grow, we’re actually just growing the same entity. That’s what we mean by the partnership play. And so that is very refreshing for a lot of fintechs to hear that they are treated as true partners. And we want to go ahead and be very proactive, just like how fintechs grew up; they’re essentially startups, they bootstrap themselves, and they want to go out and change the world. And so we have the requisite scale and business acumen to go ahead and couple with that to bring the best of both worlds. So we start with that mindset and then we allow things to be created. So how do we go ahead and really dive into members’ moments of need, whether that be education, whether that be access to new forms of financial services, whether that be just savings and budgeting tools? It really takes many forms. And we go out there, and we’re just trying to align values—it’s essentially what we’re after. And it does also steep itself in one other concept, which I have to give credit to our CEO Ty Muse. He used to work at GE years ago. And he knew Jack Welch, former CEO of GE. And one of the big things Jack used to say that Ty has impressed upon me, especially in the digital realm, is change before you have to. And this mentality of your journey is never complete, you never reach the destination. So you have to make sure that hunger for more innovation, more value, that you bring to your members is always there. It’s ever-present. And so I think that comes through in our conversations with fintechs. And as we’ve reached a certain scale, now fintechs are starting to come to us at a clip that is greater than when we started maybe a few years ago, and we’ve created kind of this network effect that’s really exciting to be a part of.

Doug English  (05:13)

Wow. That is very impressive. So when did you first start working directly with fintechs?

Tom Novak  (05:20)

It goes all the way back when our organization decided to create a new department, almost 11 years ago, called eCommerce. And it since morphed into the department I oversee, one of the departments, which is called digital. And really over the years, we knew it back then. But we didn’t know how to articulate it. And it came down to this: digital is just synonymous with business. This is just how we can go ahead and deliver the best value to our members in our communities. So not simply digital banking, or making a manual transaction automated, it’s really about how do we put the member at the center of these decisions and then go ahead and act on those great ideas or act on that great innovative concept we might come across. And so there were cultural changes over the years and different things and a little bit of trial and error. But all the way back to 10-plus years ago we’ve had fintech partnerships; we were one of the early adopters of DocuSign. If you can remember, DocuSign back 10 to 12 years ago was a fintech. People were still struggling with is eConsent really a thing? Are eSignatures really legal? And we still have a relationship with DocuSign to this day. But back then we were partnering with those types of innovators. And that has been a through line throughout the last decade, plus to keep doing that, when we think of this mentality of build, buy, or partner, we realize those are all tools in our toolbox. And we shouldn’t just rest on one tool, even if it’s a strength. So we have some great build-related teams here when it comes to data analytics, or RPA. But that doesn’t necessarily mean we’re going to solve every problem we have or every need of our members with a build. It could be a buy scenario, because something’s been productized and is really as good as it’s going to get. Or it could be a partner opportunity, where fintechs are going to help change our mindset and augment the value we bring to our members.

Doug English  (07:16)

There’s a whole bunch there in that build by partner step. So I want to back up, though, and get a little bit tactical as far as how do you partner with them. What is the economic arrangement? 

Tom Novak  (07:27)

At this point, it’s been largely traditional contractual relationships. But we don’t just take an off the rack type of contract. So there’s a lot of bespoke components to the contracts that we negotiate. And so that’s how we bring to life some of this partnership mentality I was talking about. We have been closely researching what we believe is the next step in that journey, the next evolution, which is to start to get into environments like CURQL. So a lot of folks know of CURQL. It’s a credit union venture capital fund focused on fintechs and how they can bring that value back to credit unions and their members. So that’s the next step we’re looking at. We’ve partnered with companies in the past that help us bring that sort of model to bear. So the Best Innovation Group with John Best is one particular example. And then we’re also looking at what are our trusted trade associations doing, such as CUNA and CMFG Ventures. So we use those as kind of guideposts and mile markers. And as we’re trying to evolve to the point where I truly believe we’re going to start to invest dollars and cents into fintechs to help them drive their roadmaps. We’re not quite there yet, but that is on our agenda.

Doug English  (08:48)

Hopefully, you are listening to “C.U. on the Show” regularly. And you heard the episode with Brian Kass from CUNA Mutual Financial Group Ventures we recently recorded. We talked about CUNA Mutual’s version; they’re actually taking equity stakes in these companies that they think can make a difference for credit unions and credit union members. So at Visions, it’s a custom contract design, creating as much alignment with contractual structure but not actually equity alignment yet, right?

Tom Novak  (09:23)

Absolutely. They’re really doing a great job. I mean, our CEO is very much aligned with what CUNA Mutual and CMFG Ventures are doing. And it really helps as we go through various critical thinking processes and decision-making processes that we’ve partnered with a lot of the fintechs that get added to the CMFG stable of fintechs or CURQL stable of fintechs. Whether it’s somebody like Eltropy for enterprise text messaging, and you see that they’re on an acquisition tear with POPi/o and Marsview.ai and all these great things to create this larger ecosystem. Or it’s CuneXus, right? How do we get to this perpetual pre-approval state for our members so they don’t even really have to do anything except click a button? These are the types of value propositions that we can leverage great technology because there’s a need. First, there’s a need for our members, whether it’s better financing or more intuitive communications. And it’s nice to see that those entities are kind of evolving as we evolve as a credit union. And we’re very much aligned in our objectives.

Doug English  10:27

Let’s go into the build, buy, or partner. And I’m interested in how Visions figures out which one of those to do. Have you guys bought any fintechs yet? Has that actually happened? 

Tom Novak  (10:39)

We haven’t bought any fintechs. But we have had those conversations. And partly where that is kind of organically evolved from is when we strike an early adopter type of fintech partnership. So a good example is Zogo, which is a financial literacy fintech. They’ve done some really amazing things when it comes to a little bit of gamifying. I know that’s a buzzword out there. But they’ve just made financial education and the importance of understanding how to handle these financial concepts in your day-to-day lives very fun and engaging. And so we were a very early adopter of Zogo; our SVP of member experience, Tracey Wheeler, really led the charge on creating that partnership. And since then, we’ve been co-creating. So we’re one of the first to integrate into our digital banking platform, Q2, was Zogo. And now we’re looking at other ways to go ahead and expand the partnerships, such as incentivizing members; Zogo calls it pineapples, but think of it like points, that as you acquire more pineapples, you can convert those into rewards—whether it’s gift cards or any other things like that. And so the next evolution in that partnership is how we incentivize people to use the Visions Federal Credit Union debit card, which is a great budgeting tool in and of itself, and we’re going to reward you with pineapples or points, and give you that gamified financial education as well. So those types of fintechs were early adopters. Those are the closest that we’ve come to saying, Oh, how do we get more of a seat at the table? And this roadmap or decision-making can really help propel or turbocharge their mission and vision. So we haven’t done that yet. But those are the types of conversations when we have a relationship like Zogo, where our minds are headed.

Doug English  (12:27)

So that’s when you might buy it hasn’t happened yet. But when do you build it versus partner? What differentiates that choice?

Tom Novak  (12:35)

One of the big things is there’s a lot of tactical decisions, but it comes down to our operating principles. So we talk about growth, member experience, employee experience, financial impact, and community impact. How do these in a very procedural way, how do these rank on a spreadsheet, on a formula-based spreadsheet? And how’s that going to move our business forward? So how does it align with this vision to become a digital-first organization, empowering people toward financial independence? So Doug, when we started the podcast here, you told me about your history growing up in Binghamton, and how you didn’t even know about the credit union, but they were offering this great county fair, and great popcorn and all these things, that it’s not simply about financial services and financial products. It’s truly about being a community partner and giving back in a multitude of different ways. So to do that, we believe the best way is to become digital first, which doesn’t mean less human interaction. It just means more personalized and more thoughtful interactions. Moving away from simply being a transactional partner, or transactional hub, to a thoughtful partner, a thoughtful guide or Sherpa throughout your life, which finance is really embedded into so many things we do. And so with that we are growing our appetite for when can we bring in talent that is aligned with that mission? When can we create the right type of strategy? And if those two forces we feel confident can align, many times we’ll go into a build type of decision. Great example of that is what we’ve done with robot process automation. We felt very strongly we needed to have that type of expertise in-house. Another type of expertise was data analytics, and how we can be a data shop, and really not necessarily be dependent on other entities to guide our data journey. So those are two examples where we looked at the talent landscape, we looked at our mission and our objectives to become digital first. And we felt that really needed to be two areas that helped propel us forward, and we didn’t want to be beholden to anyone else but ourselves. 

Doug English  (14:42)

They were core to the overall corporate strategy is what I’m taking. 

Tom Novak  (14:46)

Yeah, fell into that build category.

Doug English  (14:49)

And then give a couple of examples of the partner category where you looked at build but you’ve decided to partner. Does anything immediately come up for that? 

Tom Novak  (14:57)

Yes, several things. And partner isn’t just exclusively with fintechs, although that tends to be something I personally focus on. Because they’re cutting edge in a lot of ways. And they want to figure out ways to solve problems. They’re not so worried about let’s fit it into this specific box because they’ve productized it; they’re open to new ideas and making adjustments to their plan, which is so encouraging to see. But from a partnership perspective, there’s a few things. One that comes to mind is Experian. So Experian is not considered a fintech. But we are one of the first credit unions in the nation to roll out its ID Notify solution fully embedded within our digital banking experience. And not only that, giving it to our members at no cost. So something our members would have to normally go to the market and pay anywhere from $15 a month to $30 a month for free identity theft protection and credit monitoring, we gave them that at no charge. So Experian, and Q2 in that case, were the types of partners that wanted to make that offering bespoke to Visions. And were able to do that. Another great example is a true fintech in Givio. And Givio as a fintech is focused on charitable giving. And that very much aligns with that community impact operating principle I mentioned earlier. And we’re going to go ahead and offer that to our members, connecting them to over 1.6 million 501(c)(3) charities that are registered with the IRS. And as we go ahead and roll that out to our members, we’re keeping a very altruistic tone in that. So the way the model works today is it tends to be a typical revenue share play, where the credit union processes a $100 deposit and there’s a total 4% fee. Now the member doesn’t pay that, the credit union doesn’t necessarily pay that, the charity pays that. But once we first approached Givio with this, we said that’s not really what aligns with our mission and vision. That’s not how we want to give back to the community; we want to go ahead and subsidize those fees—we don’t want to take it off the top from the charities. So that charge, we’re going to absorb that on behalf of our members and our charities we give to. And that’s how we make Visions matter. That’s the way we can move things forward and truly create a partnership. So Givio was open to that slight change in their model there. And that’s what we’re excited to bring to the market.

Doug English  (17:24)

Wow. So you just named two embedded fintechs, is that right? That you’ve got embedded into the Visions system. Very interesting. Are there others you can share with our listeners?

Tom Novak  (17:37)

Absolutely. So another big one that we’ve focused on and we launched earlier this year is Nydig. Nydig focuses on Bitcoin today. But really not just Bitcoin. That’s just the gateway. It’s really about how do we help our members realize that this other form of financial services, in this case digital assets, is a store of value. And we want to be very pragmatic about what we bring to the market. And although there’s a lot of hype when it comes to cryptocurrency or digital assets, they are coming to Visions because we’re their trusted financial advisor. We want to bring to them services where they can continue to build trust with an entity that is altruistic in nature and truly wants to help them learn and grow in their financial lives. And so we partnered with Nydig, we’re one of the first financial institutions, bank or credit union, in the nation to bring that to our members in January of this year. So we were really thrilled to have that opportunity. It was really a multi-tiered partnership between Nydig, Q2, and ourselves, and actually a big shout out to our regulator NCUA because if not for its forward-thinking mentality, we would not have the confidence to make that kind of decision. So folks like Kyle Hoffman, the vice chairman of NCUA, really forward-thinking, and I think we as credit unions should be very proud that our governing body NCUA was quite literally the first governmental agency—so not the OCC, not the FDIC—to come out in the affirmative that credit unions can go ahead and enter into these partnerships. So that really gave us the runway to do some great things on behalf of our members.

Doug English  (19:20)

Tom, in the episode we’ve done we’ve covered a lot of different things. That is the first NCUA shout out so congratulations, Visions Credit Union continues to lead. 

Tom Novak  (19:31)

The more we go into this, Doug, it’s really exciting. We are not successful simply because we’re Visions; we’re successful because of a lot of other entities that play really important roles in our growth. And they play really important roles. And how do we keep propelling this mission forward? And it’s not hyperbole; it’s really truly an authentic way that we lead a financial services firm, in this case, a credit union, to be better and more prosperous for everyone involved. So we have to give credence to NCUA, they do a lot of great things; we have to give credence to our fintech partnerships—they’re the ones really taking the biggest risk and starting up a company and trying to procure funds, whether it’s from credit unions or others. So we’re only successful because of our partners. And there’s this old adage, and you’ve probably heard it, Doug, so I might be butchering it to a degree, but I really believe it. And it’s how we lead our partnership mentality, which is, if we want to go fast, well, we could do that alone. But if we want to go far, we have to go together. And that’s been very much baked into our ethos here at Visions that we take the ego out of it now. It’s not about how smart we are, or how great we are at balancing the budget; it’s really about how do we put ourselves in a position to best serve our members. And that’s one of the best things about being a part of a credit union.

Doug English  (20:53)

It is, and the people helping people mentality. Obviously, you see that in a lot of different ways. And that was going to be the next question I was going to ask you, are there opportunities for other credit unions to partner with Visions on any of this activity? Sometimes you see indirect lending sort of shared through the CUSO structure. Do you have an opportunity for credit unions to partner with you in any of this digital activity?

Tom Novak  (21:21)

There isn’t any formalized forum or structure I know of today, other than if we participate in events or funds like CURQL and things like that. But the best thing is probably the most basic thing that I can advise other credit unions to do. Simply reach out; we are about helping each other. And one of the best things when I entered the credit union industry—I came from the banking industry, I worked at PNC Bank and M&T Bank before coming over to Visions—is how open to sharing insights and information the credit union industry is. So the first step is the most basic: simply reach out. If you email me and have just a basic question, I will respond back or I’ll hop on a call and I want to devote that time to you. But to really scale this, which I think is where your question is going, we need to create forums that actually get results. So I’ll use an internal group, we call it the payment strategy forum. And it’s just a group of executive leaders and some payment-focused individuals who have that in their job today here at Visions. And we’ve been able to say, well, our mantra is about pragmatic action-based decisions; we don’t just simply want to research things like buy now pay later, we want to figure out if this is the right thing to do, and go ahead and implement our version of buy now pay later. And so with that group, and that mandate, we have implemented about six different payment innovations. So that’s the type of thing you can scale to other credit unions, and start to make sure we’re all aligning our mission and vision. We do that ad hoc right now with some credit unions who are maybe Q2 clients, so we have that similarity, or they’re Symitar clients, or they’re Visa DPS for their card processing. But I would say this to really be the spark to light the fire to anyone who is interested, be proactive with your partners and start to treat them as if they are a true partner as opposed to we have a vendor-client relationship. And just that simple tweak and mentality is tremendously impactful; it starts to open up doors that you would never think are possible. And you get the opportunity to co-create things that truly matter to the credit union industry and to members overall.

Doug English  (23:38)

Have you had a situation where you’ve had to unplug from something where you built a partnership and that partnership was not going the way you anticipated? Maybe the technology changed, or whatever it was, and you had to unwind? So the first question is, if that has happened, can you tell us a little bit about how that might have worked? And then the second is, when I talked to Brian from CUNA Mutual Ventures, he had mentioned, sort of a caution to credit unions to not just go right out and take equity stakes in fintech, to be a little careful about that because there can be some problems. So anything you can tell our listeners about maybe what not to do. 

Tom Novak  (24:58)

Yeah, I would agree with his sentiments that fintech is not a buzzword, it’s not a trend. It is really a way of operating your business in fintech partnerships and bringing in some of the strategic thinking and to use a cliche, the out-of-the-box thinking. But at the end of the day, we can’t forget our values, we can’t forget why we are credit unions, that’s actually our superpower. And it’s when we start to forget about those types of things, that we just think we’re going to be able to put a Bandaid solution on something because it’s the hot new thing. Buy now pay later is probably a perfect example. There’s a lot of flavors of buy now pay later that are actually the antithesis of what we should be doing as a credit unit. And we have to stay away from those types of things. But the good news is if we do our homework, and we stick to a sound strategy and core values, we can find solutions, especially in the fintech space, for problems like buy now pay later. So I would give a shout out to the folks over at equipifi on the buy now pay later front; they are very plugged in to credit union missions and values, and can start to help us address those needs for members. So just because the fintech has built a great technology, or they might even have a phenomenal business model, doesn’t necessarily mean it makes sense for your credit union. So I’ll kind of close out that answer with this comment: We as a credit union industry, I think need to be very good. We have to build our competency around calculated risk taking. And in the past, we’ve been very risk averse. It’s just our nature, right? We have to worry about balancing the budget and reporting things to NCUA and protecting our members’ money. All of which is still as relevant if not more today than it was in the past. But the best way now to go ahead and be stewards of our members’ money and their trust is to be really great at calculated risk taking. So there’s this concept that we talked about here at Visions called asymmetric risk reward. If we’re really doing our homework, if we’re really students of our craft, we can start to see in the research scenarios where the chance of success is at least five times greater than the chance of failure. We haven’t completely removed failure from the equation. But if we start to think that way, and we go through this hard work, this critical thinking work, we can set ourselves up for long-term success. And that’s at the heart of what fintech partnerships are about. There’s fintech partners that don’t align with your mission and values. There’s fintech partners that may be a little bit too early stage and they haven’t really figured out how they bring value to the market. That’s not necessarily going to help you as a credit union. But there’s others that have done that. And as you go through a lot of that iteration, you can align asymmetric risk-reward and start to do some phenomenal things.

Doug English  (27:15)

Tom Novak, thank you so much for this content. This was a phenomenal thing, in my opinion. And listeners, I’m going to attempt to get Tom to come back on another episode where we’re going to dig into the process of getting cryptocurrency into them—an option for the members of Visions Credit Union—and how that information could help the rest of the credit union movement. So Tom, any final thoughts for our listeners today?

Tom Novak  (27:43)

I just want to say thank you, Doug, for having me on the podcast. And then overall to any of the listeners out there. If you’re interested in fintech partnerships, innovation, punching above your weight class in terms of credit unions competing against other entities that are out there, please reach out. This is really about how we can help people in general, not exclusively just members. So I’m really fortunate to be in a position like I am to go ahead and help others. So I’m looking forward to doing that. And don’t stop innovating, right. Keep asking good questions. That’s really at the heart of what all this is.

Doug English  (28:15)

Thanks so much, Tom.

Tom Novak  (28:16)

Yeah, my pleasure. Thank you.


Keep listening on the following platforms:

Spotify: https://open.spotify.com/show/0uhvzbA6Ye6qexq3a7AH8E

Anchor: https://anchor.fm/c-u-on-the-show

Google Podcasts: https://www.google.com/podcasts?feed=aHR0cHM6Ly9hbmNob3IuZm0vcy81MzFkZmI0OC9wb2RjYXN0L3Jzcw==

Breaker: https://www.breaker.audio/cu-on-the-show

Pocket Cast: https://pca.st/1tlilc8z

RadioPublic: https://radiopublic.com/cu-on-the-show-Wwe3Mg

YouTube: https://youtu.be/rXBbbB2m8k4

Comments are closed.