Credit Unions

Why Credit Unions Should Take Comfort in Risk

As the saying goes, no risk no reward. For the credit union market, the message is clear in terms of innovation: Put on your wingsuit and take a chance or risk getting stuck on stodgy. For August’s PYMNTS Credit Union Tracker™, powered by CO-OP Financial Services, First Tech Federal Credit Union director of payments Brian Ziff-Levine, discusses the innovation attitude his CU has adopted from catering to Silicon Valley giants. Plus, all the latest CU news, inside the Tracker.

Everyone stumbles before successfully learning to walk, let alone run. In the credit union (CU) world, the same lesson applies to adoption of new solutions for meeting changing consumer demands.

For credit unions, however, bearing the risk of failure is often more frightening than it would be for a for-profit bank. After all, the non-profit model of CUs leaves little cushion to absorb losses, and it’s the members that bear the financial cost.

While the risk-averse attitude of credit unions is understandable, being overly wary of taking risks carries its own peril, says Brian Ziff-Levine, senior director of cards and payments at First Tech Federal Credit Union.

With a membership that is deeply integrated into the tech community, investing in new financial innovation has been the key for the Mountain View, California-based credit union to stay competitive, said Ziff-Levine. He recently spoke with PYMNTS about First Tech’s philosophy for embracing modern financial tools and its need to avoid falling behind the innovation curve.

Innovate often and early

When it comes to innovation and improving offerings, it pays dividends to listen to what customers want — a key lesson which Ziff-Levine believes is crucial for CUs to stay competitive. This has been especially true for First Tech, whose more than 400,000-strong membership base largely encompasses the tech community in Silicon Valley.

With the speed at which new innovations are adopted across Silicon Valley, staying competitive has meant innovating early and constantly testing new ideas without the fear of failure, Ziff-Levine explained. The credit union has taken a step-by-step approach toward staying innovative and agile.

First Tech began by offering its members a wider range of financial services through the credit union’s mobile app, Ziff-Levine said. This was followed by collecting and understanding customer feedback, using that information to shape the development of products that mattered most to the CU’s customers.

The CU stepped up its efforts to bring features like bill pay, remote check deposit, financial management tools and peer-to-peer (P2P) services through its participation in Early Warning’s Zelle Network, he said.

One of the key findings the CU inferred from collecting customer feedback was the desire for enhanced security. To that end, First Tech partnered with Mastercard on some notable initiatives. In 2015, the credit union became an early adopter of EMV chip technology adding the feature to its credit and debit card portfolio in 2015. The same year, First Tech also partnered with Mastercard on a “selfie pay” pilot program, which uses facial recognition and fingerprint biometrics to authenticate member information.

“Those types of technology and security developments are certainly things that CUs ought to do sooner, rather than waiting for the market to mature and eclipse how we get recognized for those improvements in the marketplace,” Ziff-Levine said.

Don’t be afraid of failure

Being located in the Silicon Valley certainly has more pros than cons. For First Tech, it has meant serving a community that is more open to experimenting with new products and services, Ziff-Levine said.

“We know we’re never going to get dinged for trying new things [by] our customers,” he added. “They want us to innovate and try new things.”

However, for First Tech, being audacious has not meant overlooking the fact that it is ultimately the CU’s members which are impacted by failure and loss, he noted.

“For us, we often see ourselves as operating without a net because the money we spend to innovate is our members’ money,” Ziff-Levine said.

In the broader credit union market, this fact can make innovation — and the inherent risk of failure — too scary to pursue, according to Ziff-Levine. Part of the problem, he said, is that the immediate rewards of the innovation are not always instantly clear.

“Occasionally, credit unions can be a little overly risk-averse when it comes to spending to innovate, [and that’s] because it’s seen as not spending directly for the members’ benefit via lower rates or higher dividends or eliminating fees,” he said.

Ziff-Levine believes credit unions that don’t invest in innovation because of the risk involved are actually taking a bigger risk. By failing to innovate, he said, they are in jeopardy of becoming irrelevant and creating the impression that the credit union market is outdated.

“I think we’re going to very swiftly see our position and our reputation pass an irretrievable point of irrelevance if we don’t make those investments and be okay with a little bit of failure in service of innovation,” Ziff-Levine said.

Giving CUs a facelift

Compared to competitors in the FinTech and banking sector, CUs are often seen as falling behind-the-times in terms of their technological offerings — and they aren’t fully to blame. While banks often have the deep pockets to invest in advertising and technology, credit unions don’t always have the budget to get a leg up on the competition.

To compete for relevance, credit unions need to reprioritize their investments and focus more on tech innovations that can help deliver better service to their members, Ziff-Levine advised.

“We need [to] get away from the perception of credit unions, of all kinds, being a ‘mom and pop’ shop,” Ziff-Levine said.

Step one of shedding that image, he noted, is upgrading their most public-facing asset: their websites — a problem which First Tech had as recently as four years ago.

“Taking a good hard look at your public-facing website, and your online banking experience from the get-go, and your mobile banking experience after that, is a good strategy to stay relevant and to fight the misconception that credit unions are behind the times,” Ziff-Levine said.

Credit unions turn to video to serve members

Fortunately, there are signs the credit union market is getting the message, fast-embracing innovative technology to better serve its members and avoid falling into financial irrelevance.

For example, a recent Vidyo survey found credit unions are rushing to adopt video teller services with 83 percent planning to offer video banking features in the future. Some CUs, like Baxter Credit Union of Vernon Hills, Illinois, plan to launch video-only branches later this year. Meanwhile, Consumers Credit Union in Kalamazoo, Michigan, offers interactive video services in its lobby and drive-thru teller lanes.

Offering services like these, as well as P2P transfers and “selfie pay” authentication tools, will help credit unions in the market shed the image of outdated financial institutions, said Ziff-Levine. But first, that market must be willing to take a risk on innovation.

The bottom line, according to Ziff-Levine, is there is no reward for CUs that avoid risk. In order to truly serve their members with the most efficient financial tools, CUs must be willing to take those bold first steps, no matter how great the risk of stumbling.

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About the Tracker 

The PYMNTS Credit Union Tracker™, powered by CO-OP Financial Services, serves as a bimonthly resource for staying up-to-date on the most significant trends and developments in the credit union market.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.