Over the next decade, technological innovations will influence consumer behavior and expectations, changing how financial services operate to meet new demands. That was the topic during Thursday morning’s general session during REACH 2022 in Palm Desert, CA, which brought together four experts on a Future of Financial Services panel.

(View/download conference and event photos from the REACH 2022 Photo Gallery)

Lamont Black (cryptocurrency expert and associate professor of finance DePaul University), Mike de Vere (CEO of artificial intelligence lending automation firm Zest AI), John Janclaes (president of digital banking consultant Nymbus), and Larry Palochik (executive vice president of the California and Nevada Credit Union Leagues) explored questions on how to leverage technology to modernize and optimize delivery channels at credit unions — for members, as well as growing niche markets.

How do credit union leaders harness the power of artificial intelligence to create a more equitable financial system without adding risk?  And what role will cryptocurrency and blockchain play in financial services and digital payments?

During the California and Nevada Credit Union Leagues’ annual conference, this panel took attendees on a “live” question-and-answer journey with the audience to explore these questions and provide thoughtful insights regarding key trends shaping and influencing financial services today — and into the future.

• Lamont Black: Black discussed the relationship between blockchain, cryptocurrency, and forms of technology. “Technology is neither good nor bad — it’s just neutral; it’s a tool. Can we use it for good? is the question. Can you use it to serve your members? Fintech is technology that is both a threat and a partner. And cryptocurrency is a fintech, with crypto and blockchain being fintech 2.0. These have the potential to transform the nature of what you do as a credit union. Credit unions should assess the adoption of crypto and blockchain using “MAP for Cryptocurrency” — crypto as Money, crypto as Asset, and crypto as a Platform. Technology is a platform we use for everything where you build applications. What’s the next platform? Blockchain, I think, is the next platform. If you can understand this, then you can understand how people are building applications on blockchain and how it’s moving your direction — to a decentralized platform. Also, Web3 is related to all of this, so keep looking for it and keep learning. But if you understand the MAP, then you can think about your credit union and all the different directions you can go. It’s not just one application — it’s a whole ecosystem.”
• John Janclaes: Janclaes talked about “niche banking” and challenger banks. “Niche banking is: who’s showing up on your radar as a competitor? Some of you are taking action on that. But across the board, all of you are telling us that credit union members are getting really comfortable with doing business with other folks such as Robinhood, GPay (Google Pay), Venmo, Starbucks, Acorns, Coinbase, and many others. Challenger banks and fintechs are capturing credit union members’ attention. What you need to do is: think like a brand, not a bank. During COVID, we lost ground with brand trust as a category. When we talked to members in every age demographic, look who they were saying are more trusted brands than credit unions? It was the niche banks and challenger banks. Some credit unions say they aren’t ready for a world that is becoming digitally native, and the tech stack they have today doesn’t let them quickly move into these niche brands. But we want to move you from ‘current state’ to ‘future state’ to launch new brands with open platforms and to low-code. The problem is, that ‘current state’ takes all your resources and time to run a credit union. Instead, we build whatever idea you want and launch it in parallel with your existing credit union structure. In parallel, we stand up a niche brand, using people, process, and technology, and launch it in your local branches. Over time, your people learn how to work with that tech stack — with that new brand. And when the time comes, you can run it yourself. But when you do a niche brand, it’s gotta have hooks in it. And these hooks are things that really resonate when you’re solving a problem for your members.”
• Mike de Vere: De Vere said the current credit system is failing America. “There’s a reason when you look at the disparity on a FICO score for female borrowers versus male borrowers today. The system we use today is from the 1950s. But there’s a better way, and it comes with automating your lending process. About 98 percent of you are looking to leverage artificial intelligence (AI) and machine learning for your credit union. And when we polled credit union members across the nation, we found 8-out-of-10 members want to see something different. They want to see technology brought into your organization — but the challenge is, it’s not easy to do. You need to not only build that model but explain the model, especially for regulators. This comes with challenges. However, leveraging automation to broaden the pool of lending access to your members, overall, is the first goal. There are 20 variables on each consumer within the current credit system. The challenge is, one-out-of-five members don’t fit this. They are left out of the credit system; they have a thin file or no file at all. But our system uses more consumer data on those members and applies much better math. We can still give a credit score, and that matters to America. Are you living your mission? AI can solve that, and you can get scores on 98 percent of your members. Additionally, expanding access to credit is huge; it’s a top propriety for all credit union members. Credit unions and financial institutions usually take the credit box and — unfortunately — shrink it during difficult times. Now, what’s really cool is, credit union members love their credit. And they look to you for help. They’re saying, ‘I need you to broaden access to credit.’ We do that through an automating underwriting process that’s powered through AI. And we do it with data that you already have on your members — raw data. In fact, we pick up on 70 – 80 variables versus FICO’s roughly 20 variables on borrowers. It’s a more accurate, precise, creditworthiness decision — and it’s available within seconds. It’s efficiency and speed combined together.”
  
  

Stay Engaged During REACH
Attendees and League staff will be sharing photos, comments and memories through Twitter (@CUatREACH), LinkedIn (#CUatREACH), and the REACH 2022 Photo Gallery. 

REACH is one of the credit union industry’s premier annual events, attracting leaders and system partners from across California, Nevada and the United States. This year it’s held from Nov. 1 – 4 at the JW Marriott Desert Springs Resort and Spa in Palm Desert, CA!

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