By Ray Birch
LEBANON, Ind.—How serious was one credit union about going completely virtual? It took baseball bats to its office printers, smashing them to pieces to emphasize the importance of ditching its bricks-and-mortar ways.
Durning the past few years NorthPark Community Credit Union has made many other unconventional moves, which it contends outline a path small CUs can follow to continue to grow and win in the fight against much larger players.
The $47-million NorthPark Community has gone completely virtual, closing its three branches in favor of e-services and ATMs and having its entire team work from home—and that was before the pandemic struck.
The unconventional decisions have driven strong results results for the CU, including:
- Netting $100,000 in operational savings annually
- Giving back a $65,000 dividend to its 5,000-plus members this year
- Growing net worth from 5% to 11.39%
- Moving from negative ROAA to 2.09%
- Growing net income to $720,250 through September of 2021, from a loss of $40,239 in 2017
A Clear Path
CEO Carma Parrish said the decision to go completely digital was the clear path forward well before the pandemic struck, adding its decision looks even smarter today.
She agreed all of the analysts who have been stressing the evolution in consumer service changing from in-person to digital, as she does with the fact small CUs face a dilemma in struggling to find the money for sophisticated, slick and seamless mobile apps that consumers now demand, which often leaves them further behind the fintechs and deep-pocketed banks that are excelling in digital delivery and even more unable to make the investments needed.
But there a potential upside: Parrish believes if a small credit union can do digital well, its physical size—limited branches and service—no longer become a hurdle and consumers can view a small credit union much as they do a big bank.
“That’s why we are putting more money into our digital delivery, because we see this shift to digital as an opportunity for a small credit unions like NorthPark,” stated Parrish, who added the CU has extended its hours with staff working from home.
Management by Default
NorthPark was in severe trouble in 2015 when Parrish, now 42, arrived at North Park.
“I came to this credit union as VP of marketing and two months later I got all senior management responsibility by default,” said Parrish of her short road to the CEO’s role. “I inherited a mess. Capital was at 5% and 76% of our loans were participations.”
Parrish said she knew she had to shrink the organization to get the capital ratio higher.
“I started doing an analysis of all of the inventory—of hardware and everything that was outdated,” she explained. “I mean, there was literally duct tape on the phone system in the back room. I just decided right there that the credit union would begin to move in the direction of becoming a virtual CU. I decided then anything that I bought I was going to make sure it was virtual friendly.”
As NorthPark Community worked to shrink the organization, both in employee size, operating expenses, branch presence, deposits and more, Parrish knew it wouldn’t be enough—the credit union would also need to move quickly to start growing
“I kept telling my team, ‘You know, when we get to a point we're going to have to turn the faucet on and grow, because we're going to shrink to a point that's not really safe,’” Parrish explained.
At one point NorthPark’s headcount was 25; today, it’s 11.
“We’re just getting more and more efficient,” Parrish said.
A Line in the Sand
As the credit union began shifting more towards a digital banking model, in 2018 Parrish finally seen enough. She recalled standing in her main office and noticing staff were standing around, waiting for members to come in.
“I realized that at the end of the day many of my frontline resources are doing nothing for hours a day,” recalled Parrish, who went to her board and pitched a vision of becoming a completely virtual. “I thought if I could just shift them all to do more income-generating activities, that is what we needed. And I knew the way to do that was to go completely virtual. I had to get my staff off the line.”
Parrish put systems in place such as video chat and a better mobile app to ensure every transaction a member used to do in-branch could be conducted virtually.
While technology gets the attention, Parish said the real key to the credit union’s success as it transitioned to a digital banking model was to get strong buy-in from employees.
The CEO promoted each team member and created career paths.
“So many credit unions have such a flat hierarchy, especially the small ones,” Parrish said. “You almost have to wait for someone to die to get their chair.”
New Training for Staff & Members
NorthPark backed up the new career structure with weekly training.
“Every Tuesday morning we come to work an hour early and open one hour late to get in two hours of training,” Parrish explained.
All of that staff training led to strong skills that staff could in turn use to train members on how they could perform transactions remotely, and by the end of 2019 traffic into the CU’s three offices had dropped dramatically.
Having already shuttered its one location in one of its SEGs, NorthPark Community CU made the bold decision to close the rest of its offices when the pandemic struck in early 2020.
“It only made sense. Our foot traffic was way down, our digital services were way up, and people were afraid to come into businesses,” said Parrish. “I went to the board and told them, ‘We’re pulling the plug.’ And we went virtual. It was March 17th of 2020. It was Saint Patrick's Day and I told the team we're going to shut down our offices.”
The remaining two locations will transition to become community centers. NorthPark is a community development financial institution and many of its low-income members need a place to meet, the CEO explained.
A Lesson from Office Space
Operating expenses, Parrish said, have been significantly reduced by eliminating brick and mortar management and related energy costs, in addition to moving away from an “expensive” AT&T phone system to one now that is cloud-based, and by going paperless.
“You would be amazed how much you spend on paper and toner for printers, even on Post-It notes,” said Parrish. “When we went paperless and left the offices for good, I gave my team baseball bats and we smashed up all of our old printers, just like they did in the movie Office Space. It was hilarious. And then there are savings from not having to do branch upkeep, order supplies, updating equipment…”
A video of employees smashing the equipment can be found here.
Parrish said the CU’s lower staffing costs are not included in the $100,000 in savings.
All of the decisions Parrish, her board and her team made starting in 2016 were aimed at turning the small credit union around in a time in which credit unions were still beating banks in service, according to a highly respected national consumer satisfaction survey.
As CUToday.info was first to report, for the third year in a row the nation’s credit unions have not only again fallen behind banks but also hit another “historic low” when it comes to consumer “satisfaction” with their financial institutions in the 2021 American Consumer Satisfaction Index (ACSI).
A Changed World
But the world has changed, agreed Parrish, who believes her CU is now better positioned to meet the challenge of changes in consumer expectations.
“We're reallocating much of our savings into improving our e-services because we know our members now want smooth transactions,” she said. “Yes, they still like face-to-face, and we give them that through video chat. But if you ask them which would you prefer, a friendly face in person or a smooth digital transaction, they are going to choose the digital transaction almost every time. So, we are investing heavily here.”
Parrish said she believes this is an advantage for her small organization in going head-to-head with larger financial services players. She emphasized that by going virtual and netting big operational savings, that money will allow NorthPark Community to play bigger in the e-space today and tomorrow.
“I believe what we have done at NorthPark is a solution to this problem,” Parrish said.
Out-Chiming Chime
NorthPark also believes it also has a strategy for one-upping the big banks and especially the fintechs, such as Chime, which have been capturing increasing share.
“We know our members still like personal service,” noted Parrish. “We are hiring what's called a roadrunner, who will bring things directly to members when they need them, For example, we’re starting instant-issue debit credit cards. When you order your debit card we're going to deliver your card right to you, at home or at work. You can have all the fancy apps, which you must have today, but when people want something, they want something. They still want some personal service. You have to have both.”