By Robert McGarvey
One message came through loudly at the recent CO-OP Think18 conference in Phoenix: this is not your father’s CO-OP.
“We are in a revolution inside CO-OP,” said Todd Clark, who has logged two years as CEO of the nation’s largest CUSO.
“We are sprinting towards change. We are driving this hard,” said Samantha Paxson, CO-OP’s chief marketing and experience officer.
“We are positioning CO-OP to move forward,” agreed Nick Calcanes, CO-OP’s chief information officer who just may be the busiest CO-OP executive because so much of what is planned is in the digital arena, an area where CO-OP had proceeded cautiously in much of this century, a time when big banks – and at least some big credit unions – had already doubled down on digital.
It was about time for CO-OP to take the digital plunge. And now executive after executive at Think18 sang from the same hymnal: CO-OP is in the midst of a digital transformation, driven by the perception that the credit union movement needs this, that it needs a leader that draws on the sharing and communal culture that distinguishes credit unions from their for profit brethren banks.
That leader, said CO-OP, will be it. “Our goal is to be a world class technology company,” said Calcanes.
These changes won’t happen with the snap of the fingers. “Digital transformation is a continuous process. You don’t just wake up one morning and go ‘We did it! We’re transformed,’” warned James Wester, research director for IDC Financial Insights, a Think18 mainstage speaker. His message was aimed at the audience – executives from some 400 credit unions – as they contemplate their own organization’s transformation but it could just as well be an invocation to look at CO-OP’s transformation with a measure of patience.
Just what is going on at CO-OP which most in the credit union universe know for its 30,000+ fee-free ATM network and its shared branching network which consists of 5600 credit union branches where members at a participating credit union can walk into another credit union’s branch and do many of the transactions they can do at their home credit union? Many experts have cited these cooperative ventures as a credit union secret sauce that gives members access to a bigger ATM fleet (twice the size of Bank of America’s and Chase’s) and a branch system second only to Wells Fargo’s 6000+.
Count them as great achievements. But – realistically – it is the tech frontier where the financial services wars will be fought and won or lost.
“The future of banking will be mobile,” said futurist Thomas Frey, another mainstage speaker. He added that “over 20% of branches will disappear by 2022. We are now closing three branches every day. That number will go up.”
CO-OP, under Clark, knows this. And it has taken some bold steps — for instance, the acquisition of all of The Members Group from the Iowa Credit Union League for $100 million in 2017. (CO-OP had been a minority owner.) That instantly gave CO-OP significant digital payments credibility. It also triggered big changes inside CO-OP because Clark’s aim with TMG has been to integrate it into CO-OP, to meld the TMG culture in with the more traditional CO-OP culture. In the acquisition press release, he said: “We are creating a new CO-OP that embraces technology and best-in-class service delivery to create a seamless, secure and personalized experience for our clients and their members, however they choose to interact with their credit union using a CO-OP product.”
Specifics about that vision have been scant, however – until Think18 where CO-OP’s leadership got busy communicating significant substance about the CUSO’s way forward. Understand: the CO-OP reinvention is a work in progress. But a takeaway from Think18 is that CO-OP’s leadership is promising that the $424 million in revenues CUSO is thinking big – and about what will be needed for credit unions to thrive tomorrow.
Already there is big news about a new fraud initiative from CO-OP – as well as good news about Zelle, the p2p payment tool that last year processed a staggering $75 billion, twice what fintech darling Venmo moved.
Ab0ut Zelle – which already has a handful of credit unions in its go live queue – Clark said the company is eager to enroll credit unions but it wants all but the biggest to go through a third party. Enter CO-OP. “CO-OP will be an intermediary for credit unions,” said Clark.
The industry understands this from Apple Pay. Few credit unions – possibly only Navy Federal – worked directly with Apple. Others went through third parties such as TMG, CO-OP, Fiserv, and First Data. Expect similar with Zelle but, stressed Clark, Zelle is a no brainer. “P2p is an important engagement channel,” he stressed and with its mushrooming name recognition, Zelle is becoming a tool digitally aware credit unions want to offer members.
Bigger, more tangible news from CO-OP revolves around what it calls COOPER which CO-OP described this way in a press statement: “COOPER is CO-OP’s largest technology initiative, in which the company is investing millions of dollars to provide state-of-the-art machine learning and artificial intelligence to its client credit unions across the CO-OP ecosystem.”
Clark added: “COOPER is a major piece in our strategy to bring greater security throughout our products and services, while providing the most seamless experience to credit union members. COOPER will allow us to constantly improve upon the fight against fraud by enabling the understanding of huge amounts of data and detecting complex patterns rapidly.”
COOPER is built around what’s called machine learning which means it’s a smart system that keeps on learning. It’s based on technology developed by machine learning company Feedzai, which has focused on fighting fraud in financial services and which counts First Data among its clients.
Clark said COOPER will be rolled out to the shared branching system in June. Wider roll outs follow.
“Credit unions are waiting for what we are doing to make a difference for them,” said Clark – and he clearly is betting that COOPER will be an answer to the worried prayers of many credit union executives who increasingly face armies of very smart, very skilled fraudsters.
Fotis Konstantinidis, a senior vice president at CO-OP charged with overseeing fraud products, elaborated: “Effective fraud prevention is a competitive issue for FIs. Our ultimate goal is to democratize AI and give credit unions the technology to compete with big banks.”
Another CO-OP initiative – still taking shape – was hinted at by Clark. He wants to put CO-OP to work monetizing the huge data lakes, as he called them, that CO-OP and many credit unions already have. Said Clark: “The data we have can give you a real picture of what your member is doing if you use the data correctly.”
The initial steps are using data to attack fraud (a la Cooper).
Then it may get a lot more interesting.
“The power of this data is amazing,” said Clark.
This kind of data is how Netflix knows what you want to watch before you do. It’s how Amazon knows what you need to buy before you do. Trust this: big banks have been all over this for at least five years. They are getting very good at knowing more about end-users than they may in fact know about themselves.
Credit unions – the vast majority – are not on this bus. Many don’t even know it’s out there.
Your future may hinge on getting smart about the data you have. The answers you need already are there, if you know where to look.
CO-OP believes it is in a position to be the credit union wagon master on the trail through this digital wilderness of big data. In this bargain, what CO-OP has, via its partner credit unions, is lots of info about what we spend on, how much money we have, what our interests are, that’s a good place to be.
“We can use data to optimize member engagement, to anticipate their needs and deliver what they want before they know they want it,” said Paxson.
CO-OP has big dreams about how to monetize those data lakes so watch this space. The big data play may be the most transformative initiative at CO-OP.
There’s more percolating at CO-OP. Matt Maguire, chief data officer, noted that what credit unions members want – want all of us want – is what he called “a GAFA experience.”
He suggested that CO-OP wants to play a lead role in helping credit unions rise to the excellence of GAFA.
Because that just may be the bare necessity needed for a financial institution to thrive in the coming years of the 21st century.
Don’t know what GAFA is? Look it up. Because just that is a perfectly 21st century gambit, and not bothering is just so 20th century.
Back at CO-OP chief marketer Samantha Paxson noted, “Amazon is our muse. It’s critical that we behave like Amazon.”
What’s the credit union response to CO-OP’s plans? Maybe the most succinct view belonged to Chuck Purvis, CEO of Coastal Federal in North Carolina, who said: “CO-OP has scale and reach that will entice fintechs to work with them.”
That’s key because, frankly, outside help – for instance, from companies like Feedzai in machine learning – will be needed. And CO-OP is getting that help. The new CO-OP plainly has signaled that it will reach out to leaders and experts in order to better meet the needs of CO-OP members and their members.
It’s also moving faster. And that now is critical.
Warned Purvis: “If we don’t develop urgency about change we won’t be around. We need to embrace change.”
The clock is ticking, it ticks for you.