America's Credit Unions

Sponsored: Digital-first financial health

• America's Credit Unions

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Credit unions have a renewed focus on fostering member’s financial health and, increasingly, those efforts are digital and mobile-first, says Nicole Harper, director of corporate strategy at Jack Henry.

In this episode of the podcast, sponsored by Jack Henry, Harper examines credit unions’ role in fostering financial health, financial wellness trends, available mobile-first resources, challenges to promoting financial wellness, success stories, and more.

Yeekeng: For nearly 50 years, Jack Henry has prioritized you and the individuals you serve in our technology modernization efforts, placing you at the center of our innovation. This commitment drives us to provide cutting edge technology that accelerates your innovation, sets you apart strategically, and positions you for successful competition.

 Our goal is to better serve you so you can better serve your members. Learn more at Jack Henry. com  at Jack Henry. We're here to serve you with people inspire technology so you can strengthen the connections between your credit union and the members you proudly serve. 

We're committed to supporting your efforts of service and putting members and communities first. To learn more, visit jackhenry. com. 

Welcome back to the podcast powered by America's credit unions. I'm Yeekeng Yang, digital media design specialist at America's credit unions. On this episode, I am joined by Nicole Harper, director of corporate strategy at Jack Henry.  April is financial literacy month. So naturally our conversation leaned heavily on financial health.

Nicole covers topics, including market trends, utilizing AI, what credit unions can do to improve their members, financial health, and more.


Yeekeng: Hi Nicole, welcome to the podcast. We're very happy to have you on. Before we get into the questions here, why don't we do just a quick little intro on yourself and what you do over at Jack Henry.

Nicole: You bet. Thank you, Yeekeng. Really happy to be here. April is Financial Literacy Month, so we're really celebrating you know, just all of the good works that happen within that. So, I'm Nicole Harper, Director of Corporate Strategy with Jack Henry. I have the pleasure and passion for leading a research team.

So, we're constantly tracking industry and market trends uh, looking fintech ecosystem and navigating uh, buy, build and partner decisions. But it's important that uh, I think your, your audience knows that I do have a credit union background. And I think once you, you know, experience the movement, it's hard to really get it out of your heart.

So I've held uh, several executive leadership roles at a variety of different credit unions with different fields of membership. And uh, worked at some leading software companies in a tax preparation and identity theft protection. So it's a really cool intersection of technology driving human and business outcomes for good.

Yeekeng: Great. Thanks for the intro there. I'm looking forward to our our conversation on financial health here. So first question, what role do credit unions play in supporting financial health within the communities they serve?

Nicole: Well, we do know that credit unions, their operating philosophy is around people helping people. And we know it's embedded in the movements that Cooperative Principles. So specifically the principle around education, training, and information. So, that is creating a priority, you know, from, from the credit union movement's DNA around financial education and health.

Other principles include concern for community and then D, E, and I. So, I think that there's really a great position and credit unions are well positioned to drive the financial health of their membership and their communities. Also think That just the structure being nonprofit, you know, credit unions typically do prioritize member needs over profit.

So therefore they're returning all the profits back to the benefit of their broader membership and engaging in community development and really just trying to foster economic growth and stability for America.

Yeekeng: And what are some recent trends or developments in the credit union industry in terms of financial health, such as shifts in member preferences, digital approach, governance, things like that?

Nicole: Yes, there's there's a lot going on. When is it that you know, it's a it's a very dynamic time in our state. space. And I think that there really is a renewed focus on first understanding and defining what is financial health in the context of financial fragmentation. So for example, the financial health network uh, we view them as the leading authority on consumer financial health in the U S their latest research tells us that 71%.

So the majority of Americans are either financially coping or financially vulnerable. So that really does set the backdrop of the importance for driving improvement in financial health. And if we think about the challenge before credit units today around financial fragmentation, if we look at the average consumer, they likely will have 15 to 20 relationships with different financial services providers.

Some might be traditional and some might be, you know, NEOs or even big techs. Right. We also, you know, if you look at our phones, multiple apps and upwards of 14 apps. So it's very difficult to have as a consumer a good, clear 360 view of your financial picture all in one place. And that's where I think credit unions have an opportunity to step up and deliver that.

I think a couple other examples really around around the accelerated digital transformation. We know coming out of the pandemic, you know, that that really did drive digital adoption. But now the focus is on digital engagement. And I think there's great opportunities for credit units to leverage financial health tools and resources to drive that.

We also know And actually, I could cite a study that we just completed. So we have an annual strategy benchmark study. So this year we surveyed 127 credit union and bank CEOs, and there is a renewed prioritization on financial health and wellness. So it did stack as the top three type of FinTech capability that our CEOs are planning to embed in their digital experience over a two year timeframe.

So I think there's really a lot of you know, just focus, renewed focus and maybe getting a little more deliberate in the approach to financial health and wellness.

Yeekeng: That's great. And what kind of financial planning resources, technology and services should credit unions be investing in this year?

Nicole: Well, it's really hard to be prescriptive, but I can share that there are several opportunities and so I invite listeners to be thinking about digital banking, even preferred mobile first thinking and how they will deliver financial health tools and resources. The intent is to move a bit from analog means which, which are still great.

So I'll use this as an example, financial counseling services or credit counseling. While those are great, you know, we know we need to meet members where they are and their time of need. So digital, preferably even mobile first investment in tools. I think also, you know, the variety of financial health tools that are available and especially in thanks to the ecosystem, that's very vibrant with FinTechs, you know, a credit union is not burdened with having to develop.

Everything, right? They can choose what they want to own and develop themselves. And then uh, through partnerships uh, deploy solutions that might be helping manage debt, you know, credit you know, cashflow analysis, helping, helping members understand their, their net worth you know, having solutions that help them maybe even engage in the stock market if they're very new to those types of investments with fractional shares.

So there's just a wide variety of solutions. And I think the other the other investment, you know, there's always a barrier to data. So we talked a bit about financial fragmentation and how hard it is to get that clear picture. But through open banking and specifically leveraging integrations, direct, hopefully, integrations with the leading data aggregators, that will give credit unions visibility into the future.

Third party relationships that their members have, and therefore, they can be much more prescriptive and leverages analytics to arrive at whether it's product and service development, discovering insights or getting ahead of circumstances. If there's maybe a problem with cash flow and be presenting solutions at the time of need.

And if we look at how open banking. And data aggregation can benefit members. It's then giving them that nirvana of that clear clear picture into their finances. So they can identify ways of where they can improve.

Yeekeng: How can credit unions prioritize financial inclusion and accessibility for underserved low income or minority communities?

Nicole: So I think that leveraging the ecosystem, you know, through partnerships and collaboration, I don't feel like, you know, you need to go at it alone. There are so many. So many best practices. So some examples obviously are America's credit unions and maybe relationships with organizations like the Financial Health Network.

So I think through collaborative you know, sourcing of best practices and sharing learnings of what's working can help drive impact. I also think there's going to be a renewed focus around. digital accessibility. And so we can think of that from from the lens of A. D. A. Compliance, right? Screen to text, for example.

You know, how do you make screens and U. I. S. Readable? But I think there's also now movement towards inclusive product design practices. So how are we developing? And this might be again through an ecosystem partnership. So maybe it's a FinTech. Maybe it's a provider like, you know, Jack Henry, right, and others, ensuring that products are designed in a way that is really enhancing accessibility for those who have disabilities and limited access.

I think also leveraging technology that might be, and it's, it's dependent on accrediting and strategy, but let's say ITMs or ATMs, even maybe smaller branches. in areas that are underserved. That's a really great way to expand. And, and I think something that's already in credit unions, a sweet spot is affordable solutions, right?

How, how did, how do we develop and provide solutions that mitigate the predatory practices of others, right? So really good, fair deals and continued education, right? So all of this is really just in the wheelhouse of credit unions. I think the challenge is how to leverage data, right? Maybe you arrive at those insights.

Using maybe artificial intelligence and AI and, and doing that in a very safe way, right, to protect data, data privacy protection.

Yeekeng: How can credit union members build and maintain a positive credit score to access better financial opportunities? How do credit unions help?

Nicole: Well, we know, we know drivers of traditional credit scores, you know some examples might be around, you know, paying your bills on time. managing the utilization of credit, right? Not having too much debt monitoring credit reports to look for accuracies or inaccuracies, right? And track that. So I think we know what the practices are, but if you think of, you know, how, how you can help as a credit union deliver education so your members understand.

What makes up a credit score? Uh, What is the implication? And maybe it's, that's where we get into the proactive, right? Kind of the GPS guidance is if you were to do this, what might be the impact on your credit score? And if you, you are credit challenged, ways that you can improve that. So delivering those insights and advice and guidance.

I think through a digital first mindset, but then also having the opportunity to deliver those insights and guidance through personal service, right? Which again is a differentiator for credit unions today.

Yeekeng: What collaborative initiatives can credit unions undertake both within the industry and with external partners to strengthen their impact and advocacy efforts?

Nicole: So I think we talked a lot about, I think there's a broader theme in the conversation around the ecosystem and really collaborations within the industry. So if we look at associations, we look at organizations that really are well versed in financial health and best practices in solution providers, right?

that are really focusing in that capability. I think there's also an opportunity for credit unions, not that they don't do this, but, you know, to be thinking about how to activate, maybe engaging even more fully with government agencies and policymakers, trying to influence policies. that promote financial health, promote financial inclusion, but in a way that is friendly also to credit unions, right?

To allow them to achieve and move the needle, right? In, in those works. I think also the benefit of FinTech partnership. It really is getting a lot easier. There's a lot of choice. And I think if you have an open platform with your, your, you know, key services provider, it's going to enable credit units to select from a variety of options.

And it takes away the total cost of ownership and de risk selection because maybe something doesn't really resonate with the membership. You're able to kind of, you know, move away from that and transition into another solution. So I think those are a few, a few examples.

Yeekeng: Nice. And are there common challenges faced by credit unions in terms of accessing and promoting financial wellness?

Nicole: Absolutely. And I think One that I hear a lot, you know, from my perspective and working as a solution provider into the movement is helping credit unions really identify the business case, you know, if you think of the the multiple competing priorities, you know, I, I made reference to that, that benchmark study, right.

That CEO has responded into, we know that there are priorities around growing deposits. growing loans, right? How to navigate net interest you know, income compression, right? NIM compression, and then how to operate with more efficiency. So in light of all of those very big conflicting priorities, you know, how do you then create an opportunity to prioritize financial health in a sustainable way?

And I do think that there is a direct line and it will look different for every credit union. But If you think of financially healthy account holders, and I would even, you know, recommend think of associates and employees, right? That's that's a wonderful audience to if members and employees are healthy, they're going to contribute to more stability and profitability of the of the broader institution.

So more reliable deposits, perhaps less drain on efficiency if you're dealing with any, any credit losses or collections and recovery more cross sell opportunities and ultimately fostering a longterm loyal membership relationship. This is all gonna really, you know, have a direct line to reducing operational overhead and expense.

Yeekeng: And you may have answered part of this next question what strategies can credit unions employ to address these challenges since you touched on it before, is there anything else you want to add on top of that?

Nicole: Well, I think, I think prioritizing we know that it is, you know, embedded in the credit union movement. So that makes it really truly the right thing to do. And it's, you know, in accordance with the cooperative principles and philosophy, but I think it really does require. going to be sustainable and if it's going to be prioritized to drive for impact, I think it has to start at the top.

So I would recommend that it really just be an enterprise priority. Thinking about ways to, if we look at the pillars of financial health around saving, spending, borrowing and planning, you know, what are the solutions? You know, think of like a road map. You know, if credit unions can road map what they're doing to help enable and support members improvement in those pillars, that really is going to paint the picture and potentially demonstrate some, some gaps, right.

And that can really represent some opportunities and focus. I think also leveraging the ecosystem, whether that be, you know, your, your primary solution provider or the fintech ecosystem. There's just so much innovation out there. I think also through collaboration, right? Those are those are three just leveraging the ecosystem.

I think with an invitation to to be thinking about investing in digital delivery again, we hit on the rationale for mobile first, because that's really where we see you know, members engaging and consumers engaging in the day to day. And then all that said, when we talk about, you know, achieving those proactive insights and leveraging data on members.

You're really going to be burdened without having data integration. So you just need more data to arrive at those analytics and be able to leverage modern tooling like, like AI.

Yeekeng: And with all that said, can you share some examples of successful community development initiatives led by credit unions that have driven measurable improvements in financial health?

Nicole: Yeah. So there's a, there's a wide variety here. And I think that the, you know, some of these are going to expand. Um, And I think it's really important to think about how do we expand beyond even digital and really kind of be an analog. But if we look at financial education, so topics around, maybe it's savings and budgeting and how to get members ready for a home purchase, which we know is becoming much more challenging, right?

There's a lack of inventory, rising interest rate environment. So I think financial education programs, but kind of thinking then, you know, how do you modernize, right? Still need the analog way, but you know, having a digital first and digital forward approach to that. I think also microfinance and, and a focus on small business lending, you know, so how, how are you able to from a consumer standpoint, Provide credit during a challenge, you know, to bridge the need, right?

And it may not necessarily be a significant loan dollar amount, but it might be something that needs to be accessible quickly and delivered fast and, and it de risks, right? Because it is a smaller financial opportunity. And then if we think of small businesses again, our study, our benchmark study, 78 percent of CEOs are planning to So if we think of the wide variety of small businesses, they're made up of consumers that likely need financial health themselves, but if the health of the business and specifically quick access to credit and the ability to invoice and get paid quickly to maintain cash flow, that's going to create jobs in local communities and really strengthen, strengthen the credit unions opportunity for additional cross sell opportunities.

But the list can go on. I think, you know, affordable housing, we hit on that. And then community revitalization efforts. I think there's also a movement around alternative financial solutions. So we talked a little bit about maybe smaller micro loans. I think the opportunity to, to while we do, you know, leverage traditional credit scoring, you know, it is coming to light that there are some opportunities to maybe look at alternative data.

Maybe it is presence of utility payments on time or rental, you know, payments made on time to be a driver of assessing credit worthiness for those that maybe don't have a very strong traditional credit score.

Yeekeng: Great. Well, before we wrap up here, is there anything I haven't asked that you want, that you may want to share?

Nicole: Well, I think some credit unions, you know, might be at different points, right, in the maturity of their financial health strategy. So if you were to ask, what, what does a financial health strategy look like? I think that there are some, some characteristics and traits that would be relevant depending on where, where credit unions are in their journey.

I think beginning with the tech sector, stack, an open tech stack that is going to unlock the ability for a credit union to source innovation right through either their solution provider or fintechs and try and test and see what resonates right with, with again, de risking and not having the total cost of ownership and honestly really addressing the speed to market.

Right. That is so important in light of the competitive climate. I think also thinking like a platform. So rather than having separate disparate, you know, payment solutions or digital delivery or access to lending and credit, you know, explore journey mapping and how everything fits in holistically.

And that's going to source some opportunities of, of ways to remove friction in the experience, right. Through those key touch points. I think we spoke a lot about leveraging data, leveraging open banking and having that, that 360 view uh, with ultimately the aim to be the primary financial hub. You know, we often talk about PFI, Preferred Financial Institution.

I think the modern PFI is really, you know, P. F. A. Right. What is the primary financial app? You know, what are you using at the time you need it to serve a specific point or like a purpose? And I think if credit unions really, you know, embrace the strategy, they have an opportunity to be that primary hug or primary app experience.

And I think we talked about the financial health network and how, how the definition of the four pillars of financial health. You know, save, spend, borrow, plan. That's a really good focus to look for gaps and understand where you might be able to plug those gaps through your own solutions or identify an opportunity where you might be looking for a partnership through FinTech.

So those are some, those are some opportunities that I think through all of that credit unions will be a better leverage to unlock their data and be able to really understand at a, at a one to one level with their membership uh, what are the opportunities to help improve the, the state of financial health at a member level.