Deepening the Connection Between Fintechs and Their Members, TRANSCRIPTION

 

WEBINAR TRANSCRIPT

“Deepening the Connection Between Fintechs and Their Members:

An Entrepreneurial Journey”

Recorded August 23, 2024

 

Featuring

Guest: Joseph Gracia, from Nickels

Host: Brett Wooden, from Buildable

 

Brett: But we're really excited to talk about deepening the connection between Fintechs and their members and talk about Joseph's experience and what he does and how he got into it. And so I'm really excited. My name is Brett Wooden. I'm the host or facilitator of today's webinar. I have about 25 years in credit union experience. I've done everything in a credit union, except accounting and finance.

Really my friends in the credit union space say that I like to spend the money, not manage it. And so that's why I've kind of stayed away from that.

 My last position, I was a COO as well as a CEO of a CUSO that we started. So really, it's some exciting things we had done. And I had met Joseph during that time through George Hofheimer. And George is kind of like, I guess the credit union industry's Kevin Bacon. That's the best way I can describe him. He's connected to somebody, somewhere, somehow. And I'm really excited to introduce Joseph. Joseph is the founder and CEO of Nickels. And so welcome, Joseph.

 

Joseph: Thank you very much for having me. And it is six degrees of George Hofheimer in the credit union world.

 

Brett: Yes, very much so. In fact, I'm going to have to send him this video after just to say we talked about him. But we're really excited to have you. So Joseph, kind of tell us – we’re going to kind of pepper you with questions today – but tell us what would you like us to get out of the webinar today?

 

Joseph: Sure. So I've spent my background, quick background on me. I started in strategy consulting first in the U.K. and then in the U.S., mainly working in clean tech in financial spaces, then went to a company called Opower. So if you've ever received a home energy report in the mail from your utility, comparing your electric or gas usage to your neighbors, you have me in part to thank or complain to, depending on how you feel. Those are an incredibly successful combination of behavioral science plus software to help people change behavior at scale. Helped enough people save enough energy to take all the homes in a city like Boston off the grid for ten years. Then went to WHOOP and built out their product team, their wearables. So helping people better understand their bodies and how to optimize athletes’ training.

And then when my wife and I moved from Boston at that point to Michigan, it was basically an opportunity for me to find a new thing to do. And so that's where I partnered with ideas42, a nonprofit behavioral design lab, to look for an opportunity where we thought behavioral science plus software could build a mission aligned business. And so that's why I'm here today as the founder and CEO of Nickels. Sorry, I didn't totally answer your question, but that was just background on me.

 

Brett: Yeah, no, that's good. It's funny, I forgot to say what I do. So I'm a software strategist at Buildable. So really, my goal is to help financial institutions with their interest in developing software or working on a product. I can help with that. So now, Joseph, tell us, what do you want us to get from this webinar?

 

Joseph: Yeah. And so we are a credit union service organization. We raised a seed round in 2022 in the summer. MSUFCU (Michigan State University Federal Credit Union), Reseda Group, co-led the round along with Community Choice Credit Union. And so we've had a number of years of experience working with credit unions specifically. And so I'm really excited to share from the fintech perspective, what we've seen work in those credit union alignments and how fintechs and credit unions can work better together, I think, to serve all of the members and yet-to-be members in our communities.

 

Brett: Nice. So let's kind of kick it off. And so what inspired you to start Nickels and what key challenges are you aiming at solving in the financial space?

 

Joseph: Sure. So we actually started in 2019 trying to help credit unions help their members with federal student loan payments. Little did I know, we were like five months away from a global pandemic that would change a lot of things. One of the things that changed is for the first time ever, the government froze nearly all federal student loan payments. And that payment freeze was in place for three and a half years. I think great for student borrowers, not good for a fintech working to help with those payments.

And so we pretty quickly kind of pivoted to helping credit unions on credit card debt. And the reason being, I mean, what the data shows today is, first off, about half of the country, half of the cardholders in this country sometimes carry a balance on their credit cards. The term revolvers, it means they don't pay their statement balance off in full. And if you look at the data for this half of the cardholders in the country, at a macro level, in any given year, they earn about $11 billion in rewards and get charged about $122 billion in interest and fees on those credit cards. Taken to an individual level, that's $42 in rewards earned and $456 in interest and fees. They are on the wrong credit cards.

Credit unions, as we know, are capped at 18% if they're NCUA, federally chartered – to cap at 18% with their credit card offerings. And so the opportunity, the challenge, we're going after is, why is it that credit unions have a better credit card for half the country, yet only have an 8% market share in the credit card space? And so what we're trying to do with our latest product, CardFit, is actually build NerdWallet for credit union credit cards – show the people that are revolvers sometimes carrying a balance in their community, factoring in rewards, fees, and interest and charges, that there's actually a better credit card for them that's going to be financially better for them, offered by a local credit union down the street. They get a better financial product and the credit union gets a new member.

 

“What we are trying to do with our latest product, CardFit, is actually build

NerdWallet for credit union credit cards.”

-Joseph Gracia

 

Brett: Oh, nice. That's awesome. Yeah, I like that, the NerdWallet for the credit union space. That's pretty cool. So when you look at your journey as an entrepreneur, tell us a little bit about that and what led you. You mentioned a little bit about your journey, but what led you to the fintech industry?

 

Joseph: Yeah, so as I mentioned, at Opower, we were working in cleantech. I'd worked with a few utilities prior to that as a strategy consultant, but Opower is what really opened my eyes to the power of behavioral science. And I think like a lot of different trends, it's had its peaks, it's had its troughs, and things like that. But what was always fascinating to me, I mean, in some ways, I've always been a financial nerd. I was a roofer in my junior and senior years of high school, which was not an easy job, definitely not the value of an education. But I believed in the Warren Buffett, maybe Albert Einstein, the quote gets attributed to a lot of different people, but compound interest is the eighth wonder of the world.

And so I literally took my summer savings, portioned out how much I thought I would need for the next year, and then opened up an IRA and started saving for retirement.

Because I knew I didn't have a lot of money at that point, but I knew I had a lot of time. And so I've always been interested in the financial space. And then the work at Opower and even at WHOOP. And I'm a quasi-behavioral scientist if even that; I've read the books - I'm not an academic on it by any chance.

But what really fascinates me and interests me is why do people take actions and make decisions in ways that ultimately aren't in their best [interests]? And how can we use framing and other nudges, if you will, along the way to help them to make better decisions? And so at Opower, it was how are people using energy consumption and how do we shift that? People spend on average less per Accenture, like less than six minutes a year thinking about their energy consumption. So how do we get in front of them in those six minutes and help them to just make slight changes that they probably hopefully won't notice in their lifestyle, but can have a massive impact? At WHOOP it was how do we use data we're collecting on the human body to help optimize athletes’ performance? And interestingly, with elite athletes, it's not about training harder. It's actually about recovery and oftentimes getting more sleep.

A lot of elite athletes are actually over-training. And so with that background, I wanted to then go back to a personal area of interest, which was finances and start to look at, in this example, why is it that half the country is on the wrong credit cards? And what are the factors that's getting us all going after those aspirational rewards, miles, points, et cetera, and not realizing that there are better products for us that are just in our best interest to be on?

 

“Why is it that half the country is on the wrong credit cards?”

-Joseph Gracia

  

Brett: Yeah, it's interesting, too. I'm curious, going back to the athlete conversation, too. Would you ever see a connection between steps? Essentially, everybody's wearing wearables nowadays and closing your rings and all that, connecting that to the finance side of, hey, if they are more healthy and have more steps, we'll connect it and they get better interest rates or they pay their credit card off. Does that ever…?

 

Joseph: I haven't gone that far. I don't know, are we inventing a new product as we talk?

 

Brett: I think so. I know Fitbit has APIs and things, so that'd be kind of fun. But I don't know. That's what I thought about. But the recovery thing, I don't know. Going back to that, too, I'm a huge fan of the quarterback show on Netflix and Mahomes. They show his training. And you're right. It's all recovery that they talk about. And so that's really cool.

 

Joseph: Yeah, to get to that thought exercise, though, the one thing that I do see is kind of like flipped on the inverse, the relationship with financial stress, personal financial stress, and health. I'm not going to make a big plug for WHOOP, but we were moving beyond steps to actually measure heart rate variability, which is a window into your anatomic nervous system. I may have messed that up. It's been a few years since I worked... But I could easily see if I was on a bender, you know, out drinking alcohol, that my recovery was just absolutely floored the next morning.

But what also was very clear at times was like moments when I had stress – and oftentimes financial stress can really have a direct impact on your health. And so I know that's not the point you were entirely making, but that is a very strong connection between financial stability and personal health.

 

“There is a strong connection between financial

stability and personal health.”

-Joseph Gracia

 

Brett: Yeah, and I could even see like being on the wrong credit card, right? The amount of interest, all that stuff would keep you up at night, the debt you have and all that, too.

But let's go to the Nickels’ side. What makes Nickels different from other fintech companies in the market today?

 

Joseph: Yeah. It's interesting, like if I were to use broad brushstrokes to paint it, like it seems for a while – maybe this is back in like the tens, the teens – it was like fintechs are absolutely going to destroy credit unions. Right? And then it became like, oh, fintechs need to start working on like partnering with credit unions, because if you look at the rising interest costs and the rising inflations, like there are a number of fintechs – I won't name off on my fingers – that were raising tens of millions, if not hundreds of millions of dollars last year that have all crashed and burned. And so I think that there is now like a shift into how can fintechs and credit unions actually work together to create that net-net win?

And so with Nickels, we're only serving credit unions. That is all we will serve because we believe and are trying to live by that mission alignment and that credit union mission of actually helping people in their communities. And we've always been – as part of that – trying to figure out how can we elevate the relationship between credit unions and their members or credit unions and their prospective members in a way where we don't really get into the way. And so I think we're kind of unique in that we're 100% focused on serving credit unions.

We're 100% focused on if we're succeeding, it means actually the credit unions are succeeding and we're not trying to get in between that relationship with their members. And then we're 100% focused on credit cards and credit card health. And so I don't know if that then gets us down into too much of a niche, but like that's the lane that we're playing in and we don't see that many other people playing specifically in that space in this market.

 

“If we’re succeeding it means actually, the credit union is succeeding.”

-Joseph Gracia

 

Brett: Yeah. And so is Nickels a CUSO?

 

Joseph: Yes. Sorry. We are a credit union service organization. Michigan State University Federal Credit Union through their investment arm Reseda Group co-led our seed round back in July of 22. And then Community Choice Credit Union here in Michigan as well also participated in that round.

 

Brett: Oh, nice. That's really cool. Yeah. I love CUSOs. I was back in my past life, I was part of a CUSO. So, you had mentioned a little bit about in your intro, how Nickels changed since its inception, but tell us a little bit about how has it changed? What are some of the major milestones that you've hit in the company? What has it achieved so far?

 

Joseph: Sure. So as I mentioned, we started in federal student debt. I was literally in San Francisco meeting with VCs trying to raise our seed round at that point when like there was talk about this COVID, then that week South by Southwest got canceled. It was like Wednesday, all the rest of my meetings on Thursday and Friday got canceled.

I flew home early and had no clue that like one of the first acts the government did was pause payments. So when we pivoted to trying to help credit unions around credit card debt, our first product, which we still have and work with credit unions on today is actually a checking account analysis. So we can take credit unions, checking account data, the data that they have on their members, you know, paying bills and whatnot, and analyze that data to understand how their members are behaving on competitor credit cards.

And so, for example, we can identify payments to Capital One and then through those payment patterns, just by seeing the payment patterns, we don't know what's going on in the Capital One balances or anything like that, but just by looking at those payment patterns can infer how that member is behaving on their Capital One card. Meaning, are they a transactor paying their statement balance off in full every month? Are they a revolver? And if they're revolving, are they a heavy revolver month after month carrying a balance or a sporadic revolver usually paying their statement balance and often in full, but sometimes revolving. And through that, we've been able to then help credit unions better market – typically it's email marketing – to their current members.

So, we then give the credit unions email marketing campaigns to send heavy revolvers, you should be going after refinancing that competitor card debt, refinancing that Chase Capital One Discover revolving credit card debt into a personal loan, into a balance transfer, etc. Light revolvers, those are great segments to either cross sell your credit card to, a win for you, a win for them, or if they already have your card, shift spend. What most people don't realize is that if they're carrying a balance, if they didn't pay their statement balance off in full on a Capital One card, they've actually lost their grace period.

So, every time they swipe that card, they're getting hit with another 25%, whatever their API is immediately. They're basically giving very generous tips on every purchase they're making thereafter. And those emails really work because most people don't know this, right? Like who's reading the T's and C's [terms and conditions] of their credit card contract? And so, that's a great opportunity to shift spending to the credit union card.

And what we found last year, where deposits were a big topic for most credit unions is identifying high volume transactors, those that have an Amex card and are paying off more than a few thousand every month. They're showing you through their behavior, they either have a lot of savings or a high enough income where they can cover that discretionary credit card spending. So, that's the segment of the population to be targeting with deposit growth campaigns. So, that's what we've been doing.

And we helped MSUFCU last year refinance over $25 million in competitor card debt, whether that was balance transfers into personal loans, new cards, new credit limits, etc. I know I'm talking for a while, so I'll take a breath here.

 

Brett: No, that's good.

 

Joseph: But that was kind of like the initial impetus and where we were after going from student debt into helping credit unions with credit card debt with their current members. And what we saw was that actually credit unions oftentimes struggled to be able to market their lower rate cards because marketing on rate is just really hard. The human mind wasn't designed to understand APRs.

And so, especially like when you're saying on a credit card, oh, it could be between – for a big bank card – 18% and 32%, and you're not going to know until we actually get the card. And then trying to calculate, what does that mean for a $6,000 balance, etc., etc. And so, that's where we started to try to help credit unions through our checking analysis to build more effective marketing campaigns to cross-sell their own cards. And that was where the idea for CardFit and NerdWallet for credit union cards grew out of.

Because once we saw that by providing simple dollar-based comparisons that factor in annual fees, rewards, and interest costs were effective, we realized that we could take what we were doing to cross-sell the card members and make it an entirely new play for acquiring net new members in credit union communities. Sorry, that was way too long of an answer, but that was a bit of the history.

 

“And what we saw was that actually credit unions oftentimes struggled to be able to market their lower-rate cards.”

-Joseph Gracia

 

Brett: Yeah, you kind of went into the next question a little bit as like the core products and services that Nickels offers. We're talking about the deposits and the checking account analysis and all that stuff, I actually attended a workshop on Monday, and there was a big conversation about junk fees, the whole movement on junk fees and all that. What are your thoughts around, especially specifically around your product credit cards, that thing? How do you feel about the junk fee movement and things?

 

Joseph: Yeah, I wish I had a go-to response to this. I don't know that I do. In some respects, I think it's a little bit of like an accounting challenge. Like whether it comes up in junk fees or whether it comes up in interest rates or et cetera. I think that my perspective is that the money is just going to get shuffled around a little bit so that people that are offering credit cards are going to end up getting paid one way or another.

That's my personal opinion. I think that – like I know that there's litigation around like the rulings and if it's going to go through or not. I think what you're potentially going to be seeing if the junk fees get lowered is that they're going to make up that spread in interest, in like what they're charging above prime.

And that's actually like what you've seen – I forget, I apologize to whoever put out this report, I don't remember – but like what you've seen over the last ten to 15 years is the increase in credit card APRs is not just about rising inflation.

The major banks have actually been taking a larger and larger spread on top of that prime rate in what they're charging for interest, which basically just means they're taking more and more profit off of these credit card holders every year. And so my personal perspective is that like whether junk fees go through or not, I think the big banks are going to figure out how they're going to get paid one way or another.

 

“People that are offering credit cards are going to get paid one way or another.”

-Joseph Gracia

 

Brett: Yeah, I agree. And that's kind of what even came out of some of that session that I was at. But it was pretty fascinating. And what other – you had mentioned a couple – do you have any other core products or services you want to talk about with Nickels?

 

Joseph: Yeah, so we have the checking account analysis that we've been doing for a few years now and we're continuing to do with credit unions, where our main focus is now is with CardFit – that NerdWallet for credit union credit cards. And so what we do is if you go to cardfit.us, you can check it out. I'm not going to make this a big sales pitch.

But what we realized is that on average over the last five years, about 25% of all credit card applications are coming through third-party credit card comparison sites. Think NerdWallet. Think Bankrate. Think WalletHub, etc. And by and large, credit unions can't really play on those sites because they all have a national coverage. And so if you're a credit union in Michigan that's focused on Michigan, or maybe even focused on a few counties in Michigan, being on NerdWallet doesn't really help you because acquiring a member in California just doesn't work.

And so one of the things that's different with CardFit is, as soon as you get to the site, we can identify where you're located and then drive you to a local credit union partner, so that we're showing you that there's a local credit union that actually has a better credit card for you. Because CardFit is different than NerdWallet in that it doesn't actually assume that everyone's a transactor. And this kind of goes back to that behavioral lens that we view the world in. In some respects those third-party comparison sites are amazingly effective.

But if you look at them, a lot of them don't even talk about APR, which is kind of baffling because it's a major component of credit cards and comparison credit cards. But they're just comparing rewards around travel versus cashback, versus this or that, completely missing the most important factor. And so they assume that everyone's a transactor because that's how the rewards look better.

But what we do is we set up as the top line variable, what is your payment behavior? Because mathematically, that's the most important variable in picking a credit card that's going to be best for you. And then we factor in defaulted to typical cardholder behavior, like what kind of balance are you carrying? What roughly is your credit score? How much are you charging on your cards? And through that can then give you a personalized analysis in simple dollar terms, factoring in rewards, annual fees and interest charges and costs. What is the credit card that's going to be best for you? And so that's our version of NerdWallet.

But then what we do is take it a step further, where if the user can check their eligibility, put their first name, last name, and phone number, we send them a text so they can validate that it's actually them and pull a soft credit pull to give the user – not impacting their credit score - give the user a pretty instant idea of if it looks like they're likely to get approved for that credit union credit card or not, based on credit bands [credit rating] the credit union has given us behind the scenes. And then if they are, we can then streamline that application process by passing that data in via APIs into the credit union's LOS (Cloud Loan Origination). So the credit union now has a new member and the person within their field of membership is now a member of the credit union with a card that's going to be financially better for them. So that's the product, CardFit, that we're really excited about.

 

“We set up as the top-line variable, what is your payment behavior, because mathematically that is the most important variable in picking a credit card.”

-Joseph Gracia

 

Brett: No, that's really cool. So with your current credit unions that you've got, do you have any success stories that you've seen so far?

 

Joseph: Yeah, overall, we're seeing about one and a half to 2% of all users that are coming through our system actually qualifying and clicking in to apply for the credit union card.

This is a product that we just launched in spring of this year. So it hasn't even been out for more than six months. You know, it's still a relatively new product, but we're now lighting up different parts. You know, we started in Michigan. That's where our base is. We're now on the west coast. We're now in the southeast. We'll soon be up in your woods in the northwest and are starting to see that like each region we're going to, we're able to identify and attract the half of the population that sometimes carries a balance, get them into the funnel. About a third of the people that come into the funnel actually start to check their eligibility and over half of them actually share a soft credit pull to become eligible.

So we're really happy with what the metrics are and are now just trying to work with as many credit unions as we can. Our goal this year is so that anyone in the U.S. that comes to CardFit is going to find a local credit union partner that potentially has better credit cards for them.

 

Brett: Nice. That's really cool. We've kind of talked about the successes. Now let's talk about what were some of the – as a startup - what are some of the biggest challenges that you've experienced? You had mentioned kind of the whole COVID and focusing on student loans and then having to pivot, but tell us a little more. What are some of the biggest challenges you face?

 

Joseph: Yeah, and I'd love to focus specifically on the challenges of working with credit unions because in some respects, like it's just two different animals, right? Credit unions have been around for decades, and decades, and decades and they're like stable and there is value in, I mean, it was like when we worked in the utilities, right? Like people don't recognize the 99.5% of the time that their electricity is on; they notice that 5% of the time when it's not working.

And so you have to build a culture and a company that literally works perfectly 100% of the time. And I think that plays into credit unions a bit as well. Like no one wants you messing around with their money. You can't be a fly-by-night startup that's like gonna either explode or then crash and burn. You have to be stable. But what it means is you have these startups that have so many months of runway and are trying to move quick and are trying to get things done, be innovative, working with these institutions that have been around for decades, will hopefully be around for another set of decades, and just have like an entirely different culture because of who they are and how they work.

Yeah. And so that's introduced like a number of unique challenges of how you mesh the two to be able to hopefully get the best out of both. And so how can we help bring innovation to credit unions and also lean into the infrastructure and the stability and the reputations that they've built that are very positive? And so one of the things, I mean, it's not been easy, I've stubbed my toe a number of times.

I think one of the things that's been really helpful, though, is we're up at MSUFCU typically about once a month because we've just found it super helpful to actually be in the building, be in the walls, be running into people at the water cooler or the coffee maker and stuff like that. And better understand how credit unions work because that allows us to then better fit it in with what we're doing. But that's one of, like all startups have challenges and things like that. But that's one of the unique things that I found really fascinating at trying to like unlock and make work better.

 

“People don’t recognize the 99.5% of the time that their electricity is on; they notice the 5% of the time when it’s not working.”

-Joseph Gracia

 

Brett: Oh, yeah. You know, in fact, that's honestly part of the reason why I've gone back every now and then to credit unions is I feel like you immerse yourself and you learn more, understand the pain that's being faced, ways that you can help solve those pains and stuff.

But you do have a question, too. We got a question of how do you take into account credit union membership requirements when showing users their options?

 

Joseph: Sure. So I'll attempt to answer the question and then please, whoever asked, let me know if I didn't hit it. To be just blunt, the credit unions that we work with most successfully today have geographically based fields of membership. And so what we're able to do is target their geographies with paid digital ads for card fit so that we know that you're living, working, or worshipping, or you're physically within that geography to be able to then very likely be eligible for that credit union membership and that credit union product. The other thing we can do is we can actually just drop a pin on every one of the credit union's branches and target a 15-mile radius around each pin.

So the likelihood that the person is going to be able to qualify for membership with that credit union is very high. And from that soft credit poll, we get their address or at least their address in their credit report that we can use as a quick validation that, yes, you'll qualify for this field of membership. Do you think I got the question, Brett? Or did I misunderstand it?

 

Brett: Yes. And it says that is a good strategy and makes sense. Thank you.

 

Joseph: Awesome. Thank you.

 

“I think you’re now starting to see that type of collaboration happen on the digital-technical side in ways that could become pretty compelling.”

-Joseph Gracia

 

Brett: Yeah. Yeah, it's funny, you know, when I had worked for a seg-based credit union, we had to do specific things of targeting within like the x amount, how far away did they live from work, and you know those types of things – to target for specific products. But that’s really cool.

 

Joseph: And not to totally put you on the spot Brett, but I’ve been talking a lot. I’m curious, Brett, you’ve been on both sides of the fence now, a couple different times. How are you seeing that fintech/credit union relationship evolve? I’d like to think that we are both getting better at doing it, but what is your perspective?

 

Brett: I think, you know, the big thing is you've got some big things coming down there, but like open banking is a big one that's coming, you know. The CFPB (Consumer Financial Protection Bureau) released, I think a couple of months ago, that the standards are going to be put in place in October, where consumers will soon own their own data. And, you know, we'll be able to have those APIs and things. But I think you're going to see credit unions move more towards partnering even more with fintechs, you're seeing CUSO startups more, investing in fintechs. And I think that's the reason, if individuals can see their financials, they can transfer, You've got outside fintechs looking at getting access to members' data. You're going to see more of a need to be competitive outside of your current products and services offerings.

And so I think with a fintech partnership, you've got fintechs like yours, you have this niche, right? But that's something, like at a credit union, there's a lot going on there, you know, so having a partner that is a fintech that's focusing on one specific thing can truly offer something – I think awesome – that typically a credit union can't, they don't have time to do.

 

“You’ve got some big things coming – like open banking.”

-Brett Wooden

 

Joseph: Exactly. It comes to build versus buy. Credit unions just don't have the time or the money to build everything that they could potentially offer. And so can you bring in fintech partnerships? And the one thing on that, that I've seen, that's been very successful, the credit unions that I've seen that have had more success in this space, from my perspective, are those that are able to dedicate a person, a person's time, a or at least like a chunk of a couple people to actually managing those partnerships because many times what I see is it sort of like falls to marketing or falls to lending and they're now managing that relationship, but then they also have all these other things that they're doing and these other fintech partnerships that they're working on.

And that's where things become tough. Those credit unions that are able to say like, look, this is a fintech partner that we're going to have, and we want you to work with them to figure out who in the org they should be working with, how it should be working with them, and getting that relationship right. I've seen these have much more success.

 

Brett: Yeah. And it's funny because one of the things, I mean, especially working in the credit union space, I used to always say, is you're like a victim of your vendors, right? It's like, what are they charging? What are their barriers that they, and that's where I do like CUSOs a lot because you've got another credit union that's kind of vetted out that fintech and partnered with them, invested in them. And we got another question, I think. 

 

“You’re like a victim of your vendors.”

-Brett Wooden

 

Joseph: Before you answer that question, that's where I'm also seeing some pretty interesting stuff happen. We've had a couple of different times, credit unions say to us, hey, you're doing this piece, we have this other fintech working on this piece. You guys need to talk together and figure out how you can get your solutions working together better for both of us.

And that's very helpful because now we're serving that credit union better. But then we realized, hey, we can take what we're doing at this credit union and actually now go and offer it at a bunch of other credit unions because our piece and their piece work together really well to create a sum that's greater than the parts. And that's the thing that I hadn't seen a few years ago that I'm starting to see and I think starts to work really well.

MSUFCU has a little bit of an unfair advantage, if you will, in this space, because they have the portfolio of dozens and dozens of fintechs that they've now invested in so that they can kind of nudge some of those things together. But that cross-fintech collaboration to get our niche solution around LOS and things like that working together. And the way that credit unions are starting to push – yeah, they're victims of their vendors, but they're also now starting to like, I don't know if you said that exactly, but they're also starting to get some of these fintechs to work together in ways that's actually creating even better results.

 

Brett: Yeah, so very much so. Yeah and it's amazing too. And I think this is going to be needed because with you having Apple big tech coming in to the space, it's not going to be how good is our service anymore or where are our locations, it's going to be, the innovative products and solutions that you're giving to your members to better their financial experience and their financial wellbeing.

But yeah, I'm glad we got off on this tangent because at that conference, that's literally what I talked about was emerging tech and how can you compete? And what are some things that you should be prepared for? And I just think the more that credit unions can educate themselves, the more they can partner with individuals that specifically focus on these things and create a partnership and cross-partnerships, across credit unions, across other CUSOs, I think that's a really big, big deal in these coming years.

 

Joseph: Yes and to improv that credit unions have been historically great in collaboration in a lot of different ways. Like you see, CUSOs have been around forever, right? Like mortgage servicing and armored trucks and ATMs and all these other things, and I think you're now starting to see that type of collaboration happen on the digital technical side in ways that could become pretty compelling. I mean, that's what we're literally trying to do with CardFit, build a competitor to NerdWallet that actually competes through a patchwork of hundreds of credit unions all around the country.

 

Brett: Yeah. And it is funny. I would say a majority of the projects that we have individuals come to us to build are not just one credit union saying, hey, can you build this for us? It's multiple coming together saying, we've got this idea. We all want to go in on it and build it. I mean it's pretty a cool thing.

 

“That’s what we’re literally trying to do with NerdWallet – build a competitor through a patchwork of hundreds of credit unions all around the country.”

-Joseph Gracia

  

Joseph: And then does a CUSO form out of that or do they all have like an ownership stake or how does that work?

 

Brett: That's kind of the discovery process, right? It's typically, they are talking about a CUSO. And it is funny. We've seen ones that are serving a specific community. Some of the new movement we're seeing too, if you haven't taken a look, there's an application out there called Majority, and it's an application that serves the immigrant, Hispanic community, essentially the black and brown community as well. And it is an app that has a phone system built into it. It has account money management and a card. It's like a Venmo. It's like a, you know, cash app, all those. Another one is ROGER and that's for the military community.

So you've seen these institutions get together to build these. And that's some of what we're seeing with the credit union space. Now, as they're coming together, we have this specific community under a bank that we're trying to serve. We want to create this product. And so that's where it's been really interesting to just see kind of the evolution with all that.

Well, with our last, like we've got about, gosh, five minutes. I usually try and keep these to be about 45 minutes. But what are some of the case studies or highlights that you see, you mentioned some of the success stories, but is there anything else you want to add to that?

 

Joseph: Yeah, I think I threw out, you know, with the checking account analysis, what we had done with MSUSU, with CardFit, you know, we're six months in it and we're not yet publishing case studies with some of our clients.

I think the thing that's interesting to me that I would want to add is, what we're seeing is that CardFit is actually starting to serve as just like a really good community engagement tool. So for example, I mentioned that like one and a half to 2% are actually coming through and qualifying. That gives you about another 20% that care enough that they're in your community and are sharing their credit score. But for whatever reason, they're – let’s call it – in that like 500 to 620 [credit] range or something like that, and they are probably not going to be approved for a credit card.

But what gets really interesting is how do you actually engage and support that member of your community, not yet a member of a credit union. And in a way that becomes a win-win. And so we're starting to look at, are there secured card offerings that the credit union has that will work for you?

Or a lot of credit unions we're seeing have financial wellness tools, have financial wellness programs, have partnerships with a green path. Or with others where we're saying, look, let's take that portion that's coming through. We're not going to qualify for a card, but how do we route them into the resources that you're already offering and that you have already available in a digital, more effective way so that we're driving more traffic – not just through into your cards program and memorizing them that way, but actually helping you achieve your mission of having a positive impact on your local community.

So that's an area that I don't have stats that I can point to yet, but I think it potentially is going to be an amazing byproduct of CardFit, not just to drive new member acquisition through credit cards, but actually be a community engagement tool that can drive more through-put into the financial wellness resources that a lot of credit unions have built out that I think can really help communities.

 

“What we’re seeing is that CardFit is actually starting to serve as just a really good community engagement tool.”

-Joseph Gracia

 

Brett: Yes, that's awesome. That's amazing. Well, we've got about three minutes left and we've got the chat, so if anyone has any questions, we'll give it about a minute and we'll let you enter in those questions in the chat. And if we don't have any questions, I just want to thank you so much for joining today. Thank you everyone that joined the line. It looks like Travis is typing right now. But we will be sending out this recording. The recording will be on LinkedIn. Oh, here we go. This is Travis' question. What is the long-term vision for Nickels?

 

Joseph: That's a great question. I don't know that we've necessarily bought ourselves the right to think five to 10 years in advance. I would say the short to medium term vision that we have for Nickels is for CardFit to be up there like NerdWallet, where people are realizing that they have a resource to help them find a credit card that's probably going to be a better fit for them, tying them in with a local credit union resource and allowing them to become members of a local credit union. I think if we can succeed in that, that gives us a number of different vectors to then grow into.

And it was a board discussion at our last board meeting. I'm not trying to dodge the question, but I don't fully know where we then go to. I think we have our short- to medium-term vision established, and I think that that then leaves optionality for us, but we haven't quite earned our right to have those optionalities because we're not there, not there yet.

Travis is typing again, is going to come back. [He says,] so I don't want to give away my next big idea. Fair enough. No, it's not that I'm holding something back. It's that we fundamentally don't know. Like we see a real opportunity in front of us to help communities save money on high, big bank, high interest credit card debt, and we're just trying to execute on that, and if we can do that, there's a bunch of things that are percolating, but nothing far enough along where if I said it today, it wouldn't potentially change two weeks from now. So not that I'm not giving away, just literally don't have the ‘what’ to share. Yeah.

But this was great, Brett. Thank you very much.

 

“The short- to medium-term vision that we have for Nickels is for CardFit to be the new NerdWallet.”

-Joseph Gracia

 

Brett: Yeah, thank you. And we'll continue to do this webinar series. One a month is our goal that we've had. So really appreciate all of you joining. Joseph, appreciate you joining and look forward to talking to you more in the future. We'll check back in a couple of months from now with you. So thank you, everybody.

 

Joseph: That sounds great. Thank you, Brett. Thank you everybody.

 

Brett: Thank you.

 

End Interview

 

Thank you for joining us!