EAST LANSING, Mich.–A credit union that created a “lab” to develop technology and allow members to test it has seen such success it has now started a CUSO to further build on that foundation.
It shared its path and many of its practices with credit unions during CUNA Mutual’s Discovery Conference.
“The Lab at MSUFCU” is described by the CU on its website as a center for innovation that brings agility, collaboration, drive, and innovation together to turn ideas into advanced financial technologies.
“The Lab at MSUFCU was established to identify, create, and execute opportunities for innovation at the Credit Union,” the site states. “By devoting resources to cultivating an entrepreneurial mindset, collaborative ideas can be generated that lead to pilots and new technology, products and services for members and employees.”
The site invites members to participate in pilot projects being backed by the credit union.
The session was led by MSUFCU CEO April Clobes, who also serves as the CU’s chief digital officer, and Ben Maxim, assistant VP digital strategy and innovation.
How it Began
Clobes took attendees of the Discover Conference all the way back to more than 20 years ago when MSUFCU, which serves Michigan State University, began its digital journey at a time when it did not offer any online banking solutions or digital tools, even though its membership was “wired and ready to go.”
That led to the launch of a department called “E-Commerce” that began exploring all options and surveying members before beginning to build out its digital assets.
Clobes noted that even at that time MSUFCU has more than a billion-dollars in assets, so it was able to make some early investments even though the technology was expensive.
“Our philosophy when we moved to the digital environment was how do we replicate to the best of our ability the interaction that a member might have with an employee but be able to do that through a digital channel,” Clobes explained. “So, when we were working to determine which vendors we might select for our digital delivery we would ask questions like, ‘If I'm a member and I really want to know the ATM closest to my location, how would I find that?’ We thought the members would be interested in learning this educational piece of information while they do their transactions.”
‘We Can Do It Ourselves’
Clobes said the credit union repeatedly heard from vendors “that isn’t possible” before it finally decided “we can probably build this ourselves.”
Despite the fact it was a “great leap of faith,” that’s precisely what MSUFCU did, she added.
“I think what this does is demonstrate a couple of things,” Clobes said. “We are interested in providing new digital services to our membership in a way that complements the way they do business with us. We wanted to be able to provide a customized experience for our members as well that would be unique to our organization. Really, for me, it's about providing executive-level support, creating the space, and creating the funding opportunity for us to be able to essentially cultivate our innovation and really be relevant to our members.”
Separate Branding
Ben Maxim, who has been with the credit union for 14 years, said the credit union created The Lab at MSUFCU in 2020 with its own branding because it believed it was important for its external members so that others in the community could also see its innovation efforts and be able to interact with that brand.
“(The lab) allows us to conduct future research and engage with members and an early stage of product development so they understand that they're testing something, they're giving feedback, they're interacting with something that may not work 100%,” said Maxim, AVP of digital strategy and innovation. “Really, the goal is to get the member involved and get their feedback. As for building versus waiting, if we spend 10 months-plus on something and we launch it out there and it's not received as well as we thought, it shouldn’t be because we didn't get that feedback.
Maxim said the credit union also views the lab as a place to kick off future growth ideas, such as AI, machine learning and virtual reality, and as a way to explore various fintech ideas.
‘Great Opportunity’
“It's also a great opportunity for us to promote our credit union, promote our innovative culture across the industry, and it also enhances employee engagement,” Maxim said. “It was a great opportunity for employees to feel more connected to the brand; a way to provide a rich and engaging experience as part of their employment beyond other day-to-day work. It’s a way to be able to share their ideas and be able to participate in the opportunities the lab provides.”
Maxim said the COVID environment of the past 18 months and the significant swing toward digital access has only enhanced interest among members in engaging in the innovation hub and the pilots being tested.
“This innovation is one part of our member experience. We combine efforts with our user research and end innovation to really drive that member experience,” he said.
To drive that innovation, Maxim said the credit union starts with research, listens to internal ideas and also monitors the broader market.
Ideas that make the most sense are piloted with members for their testing. Those ideas deemed most promising move onto the strategic project workflow stage before the CU’s IT team then fully scales it out. It then does another beta around the completed project before being launched to members (after which it is tracked to ensure it is doing for members what it is designed to do).
Accelerating Development
To accelerate development, Maxim said MSUFCU has a continuous improvement model and innovation strategies in place, and further uses partnerships with fintechs where it makes sense.
He said the five tenets of its innovation program are cultivating a logical mindset, supporting ideation, incubation, acceleration and “intrapreneurship,” with the latter sometimes referred to as corporate entrepreneurship
“Digital isn't just meant to be a replacement for our human employees,” he said. “It's really meant to be a way to augment and enhance the experience our members have with our employees, so we're really looking for ways to bring them together using technology. It’s also about improving digital as a service channel. We do have limited resources. We could staff the call center 24/7/365, but that is also really expensive. So, if there are things we can do to allow members to self-serve in digital, that's a huge focus of ours.
“It’s also about improving operational efficiency. How do we make things better for the employees so they can better serve our members and then be responsive to emerging trends? So, we are looking at things like AI and how that can support efforts in the credit union.”
Maxim said ideas are suggested every day and those go into the CU’s “opportunity pipeline”
Full Pipeline
The pipeline is busy. Maxim said that since February of 2020 MSU FCU has talked to 153 fintechs (see chart) before the funnel winnowed down that number.
“There is no shortage of opportunities,” he said. “The more we've shared about what we're doing, the more companies come and approach us to talk about what they can do to partner with us. At this point we're kind of maintaining. We’re trying to clear the slate to start up on the next set later this year.”
ROI is measured on every project, Maxim said.
As an example, Maxim said when COVID led to branch closures the credit union was able to partner with a fintech to quickly implement a video banking offering, taking what he said would normally have been a 10-month project down to five weeks.
Ninety-seven percent of members have been positive about the offering, he said, which is available Monday-Friday from 2-5 p.m.
It has quickly moved to develop a chatbot, too, he said, before outlining a number of other initiatives members will be seeing in the near future, as well.
New CUSO
Like many credit unions, Clobes said members of its executive team often have ideas for new projects, but they are busy and the ideas may not be relative to their division, so ideas would become buried in the list of other projects.
Moreover, having developed both an internal process and brought successful products in the market via the Lab at MSUFCU, the credit union saw a need to aggregate all the related work into one area of leadership, and that has led to a new CUSO called the Reseda Group.
“I guess we decided we weren't busy enough during pandemic, so we formed a CUSO,” joked Clobes.
Like other CUs, MSUFCU has also seen excess liquidity due to deposits and she said it sought to put the funds to active use by diversifying its earnings. The $6.2-billion CU plans to invest 1% of its assets in the new CUSO. It has also made other investments.
“We want to continue to ensure that were relevant to the members five, 10 and 15 years from now,” said Clobes. “Technology moves really fast and we can't always create our own products and services. This is a great way for us to partner to bring those products and services to the member.”