Using Data for Credit Management and Financial Wellness

Jim Marous (00:10):

Welcome to a special eight-part series of the Banking Transformed Podcast recorded at MeridianLink LIVE in Nashville, Tennessee. I'm your host, Jim Marous. During this series of episodes, we dive deep into the world of digital transformation in the financial services industry.

Jim Marous (00:26):

We speak with executives from a diverse range of financial institutions, each of whom has embarked on a unique digital transformation journey to become more future ready and responsive to the changing needs of their customers.

Jim Marous (00:39):

We explore the strategies, challenges, and lessons learned by these forward-thinking organizations as they navigate the complex landscape of digital transformation.

Jim Marous (00:50):

Whether you're a financial services professional, a fintech entrepreneur, or simply interested in the future of banking, this series provides you with valuable insights and inspiration as we explore the cutting edge of digital transformation in the banking industry. We hope you enjoyed these candid conversations with organizations of all sizes.

Jim Marous (01:11):

This is Jim Marous from the Banking Transformed Podcast coming to you from MeridianLink LIVE in Nashville, Tennessee. A big event, over a thousand people. I think 1,700 people who are coming here as clients and prospects, learning what is going on in the marketplace in lending, deposits, and digital transformation.

Jim Marous (01:32):

Today, I'm with David Park from the Franklin Mint Federal Credit Union right outside of Philadelphia. I'm saying it the right way with you now. So, David, number one, can you tell us a little bit about your career path, what you do at your organization, and a little bit about Franklin Mint Federal Credit Union?

David Park (01:49):

Certainly, I've been at Franklin Mint Federal Credit Union for 15 years. Started with them just on the other side of the mortgage meltdown. Spent two and a half years at a much larger Philadelphia area commercial bank. And when their parent company was nationalized, they received a memo from the other side of the ocean and they said, "You need to lay some people off."

David Park (02:18):

And so, Franklin Mint Federal Credit Union was the only financial institution, I think one of 18 where I lived to actually reply to my application for employment. They brought me in as a temp to open mail. And now, 15 years later, have the opportunity to serve the organization as the Vice President and Director of Loan Operations.

Jim Marous (02:41):

That's pretty damn cool.

David Park (02:43):

Yeah. Lots of other details in the story, but the first 10 years was its state financial network. It's a wholly owned credit union service organization that provides the opportunity for lots of credit unions and community banks to manage their balance sheet, move loans into the secondary market. And then the credit union service organization retains the servicing rights.

David Park (03:08):

So, we're able to help credit unions grow in ways that banks grow and provide credit union service to members, whether they're mortgages owned by a credit union or owned by an agency.

David Park (03:20):

So, I did that for 10 years, and then for five years I've been at Franklin Mint Federal Credit Union, helping to grow and develop and expand the consumer loan space with home equity, vehicle loans and unsecured loans and lines of credit.

Jim Marous (03:35):

So, what has been the biggest change you've seen in the last, let's just take a small segment, in the last five years, because that gets us over COVID and now the financial economics uncertainty that's in the marketplace. What's the biggest change you've seen in the way you are delivering services to the members and how they're taking up those services?

David Park (03:54):

We have a variety of ways that members receive service from the credit union. We've added ITMs into our branch network. Our digital banking continues to evolve and change in the collection space using MeridianLink Collect, has given the folks who reach out to members and invite them to pay their debt back.

David Park (04:18):

It's given them confidence that when they're making a phone call, they're making a phone call that is worthwhile making. They're organized and they're able to feel good about their day, that they're not chasing outcomes that probably aren't going to happen.

David Park (04:38):

And so, building up a record where we know that people feel engaged and confident doing their work, and they're prepared to have a great conversation with the member on the other side. That evolution of we actually changed to the department that manages non-performing loans, we retitled that department from credit solutions to member solutions.

David Park (05:05):

Because the desired outcome, the goal of the people who are working on what we're providing for members, we even split it into separate teams. Some of the folks are pursuing payments. Other folks are pursuing offering workouts to members. We have a whole designated team.

Jim Marous (05:23):

We even made payment space, even people are-

David Park (05:24):

Payment space, yes.

Jim Marous (05:26):

It's interesting because we just had a podcast with somebody else that said that collections is a wellness solution not a adversarial relationship. And that takes training. That takes data. And you reference that a little bit that your platform allows you so that you really have a democratization of data within the organization where it's not just held by IT and it's not just a flat line solution. "Oh, this person's behind by this much." There's more data transferred.

Jim Marous (05:56):

So, makes it so you really can turn this in from what a consumer, a member may think is going to be an adversarial conversation to immediately shifting it to completely different field which we've all had some credit problems in our past, somewhere in our past.

Jim Marous (06:12):

When you find somebody that's out there trying to help as opposed to, in many cases, drive you down further, it makes a big difference. Now, it's not just the collections that have been somewhat innovative. You have some products that's somewhat innovative in the credit area as well.

David Park (06:28):

Yeah. I guess many folks probably wouldn't refer to it as being innovative, but it is uncommon where you're able to borrow money from the credit union, unsecured, without plastic in your wallet, or putting anything into a digital wallet. It's a traditional unsecured line of credit.

David Park (06:46):

And there are a lot of members who really like having the opportunity to transfer money back and forth within our digital banking from a line of credit to a checking account or a savings account.

Jim Marous (06:57):

It becomes a financial relationship as opposed to a checking or savings account. And does it happen automatically or do the member actually have to instigate the transfer?

David Park (07:09):

So, it can be both. The member can decide to use their personal line of credit for their overdraft protection. The member can choose to not use the personal line of credit for overdraft protection, totally up to them.

David Park (07:20):

And if they choose not to use it for overdraft protection, they still have access to do advances from that line of credit within our online banking and then to go right back in and make payments against the balance.

Jim Marous (07:30):

So, the unsecured line of credit is interesting because that really was something that really happened quite a bit in the days when I started the banking. And yet in fact, that was in my case, a primary form of credit, but as a separate loan, it was term loan, it wasn't something that was variable. What percentage roughly of your members have this line of credit?

David Park (07:54):

I don't know the exact percentage, but it's maybe 60, 70%. Whoa, whoa.

Jim Marous (08:00):

60, 70%. So, you proactively try to make it so that every member ... because that 60, 70% is not people applying, it's basically you actually making this part of their overall portfolio. And in today's marketplace, I talk quite a bit on the podcast and in my writings that engagement is more important than just the experience.

Jim Marous (08:21):

So, this makes it so a lot more members are engaged on a regular basis with their accounts as they're flowing between things. And is this on their mobile? Do they know they have this on their mobile platform? And can they initiate it on their mobile platform?

David Park (08:36):

Yes. They're able to apply with MeridianLink through their mobile platform, yes.

Jim Marous (08:41):

But what this takes to make this all happen again, gets down to data and insights. Because you have to make credit decisions on a person's portfolio and what they have, but it's usually a bit lower on the insecure, but the reality is you're giving them the buffer. You're giving them the confidence.

Jim Marous (09:01):

That data is obviously always updated because you have to take credit bureaus and say, "Am I still safe? Would this person have this credit?" But I would imagine, and it seems … organization I've talked to in a long time that had this type of product that basically it becomes a part of their overall relationship. But it's something that really protects you as an institution from attrition.

Jim Marous (09:22):

Because if a consumer wanted to go elsewhere, they have to think in their head or they're going to find out real quickly, the next institution's not going to give them a personal line of credit unless they have a really deep credit bureau and have had an account with them for quite a bit of time.

Jim Marous (09:38):

So, how do you adjudicate these loans? Because 60, 70% are not in money institutions traditionally credit worthy in the old way we looked at things, how do you do that?

David Park (09:49):

We're all about giving members the opportunity to build credit with us. We're their first credit offer. And it's not something like $5,000, it could be $100, $250, $500.

Jim Marous (10:04):

So, what your goal is really to make sure that no matter what the level of credit is, we're going to make an impact on their lives that says, "We're going to find a way to avoid that $35 NSF fee at another institution even," because you can transfer those funds. What other things have you done?

Jim Marous (10:20):

Because this is all based on the credit side, which is really the strongest side of the relationship, I believe. Especially since deposit related, we're now longer ready checks and all the normal ways of engagement. What have you seen from the data you get from these transactions?

Jim Marous (10:35):

I mean, it's obviously your relationship with MeridianLink is very much in the data solutions and in accredit adjudication and on the collection basis but everything's based on that customer journey data. What are the things you do in at Franklin Mint Credit Union?

David Park (10:51):

On a fairly regular basis, we run two programs. One's called Credit Line Asset Management, that's CLAMP, and I think it's CLIP, Credit Line Increase Program. So, we take data and you run it through the entire portfolio.

David Park (11:10):

You find a variety of attributes and criteria and memos just go out to members that say, "Congratulations, your credit line's been increased." So, as they go on that journey, and they exercise their credit-

Jim Marous (11:24):

There's a proactive ongoing credit adjudication process. Because you're trying to increase — you want the people to be rewarded. If I'm a brand-new customer, or I've recently opened an account, let's say in the last year, how frequently is it possible that I could get credit increases based on what I'm doing not just with you but outside my relationship with you?

David Park (11:45):

Six months to a year later, if you wanted to be proactive, you could reapply and try to find more. But on an annual basis, you may find yourself with your credit limit increasing through use of the credit line increase program.

David Park (11:58):

Conversely, you may find credit line asset management is taking place and you're going to receive a letter that says your line of credit's been revoked. That's still a member education experience because then the member is going to say, "What can I do to get a line of credit back?"

David Park (12:14):

And the member's able to participate in financial education, learn what it means to manage credit, learn how a credit score is built, and then pay back what used to be a line of credit now like a loan. And if they continue to pay that loan back and move their credit score back, they'll be in a position to apply for a new line of credit at a future time.

Jim Marous (12:34):

So, you're really building proactive engagements with the member to keep them active and not let them forget they have a relationship with you so they can get the credit line increase. If something goes wrong south, you have a team that really helps them manage their credit and understand the values of credit, you have the ability then to take that data and look at other services.

Jim Marous (12:57):

I would imagine that that helps the deposit side, that helps other areas of the transactional side of what's going on. Do you also monitor flow of funds within your organization? So, in other words, if I'm working with other financial institutions, are you getting any measurement of that or is that somewhere on the-

David Park (13:15):

That to-do list? That's a future thing.

Jim Marous (13:20):

Because you're extraordinarily doubling down on data everywhere. And deploying it across the organization for people to bring better solutions to the marketplace.

David Park (13:29):

One day I'd like to have an indicator of should we call a member from the collections team. The member solutions team should be discontinuance of direct deposit or average daily balance is decreased by 20% month on month.

David Park (13:46):

I would love to be able to use deposit activity as data that informs, does it make sense for us to reach out proactively to a member and ask the member, “Are you starting to experience default or impairment of your credit?” Because maybe their loan isn't past due with us yet.

David Park (14:02):

But if we can see that there are troubles in how their cash flow is operating, and we know that they're using that cash to pay other debts with other creditors, we're going to want to get into a conversation with that member well before the member is past due or receiving a notice that their payment is late.

David Park (14:18):

Because as you go further along that journey, the ability to have a quality conversation with the member starts to deteriorate pretty quickly. So, we're actually working with MeridianLink on propensity of default models that we would be able to place into the insight tool. And then from insight, it's kind of like our pre-default. You're not even past due yet, but you're high risk enough.

Jim Marous (14:47):

I mean, just what you're saying and the other service you have, this is not trying to save the company money, even though you are, it's not looking at fraud and risk from a, "We got to stop this loss before it happens."

Jim Marous (15:00):

It sounds, and the way you talk about it and the way you've talked about this, it's really looking for opportunities to help your members in their normal daily life as opposed to being the bad guy. Now, I would also … how big is your organization?

David Park (15:14):

We're about 300 employees, 1.8 billion in assets.

Jim Marous (15:19):

To me, this gets me jazzed every time because small organizations doing amazing things in the marketplace because they're making partnerships with third-party solution providers as a composable solution.

Jim Marous (15:32):

And what's interesting is as you dip your toe in the water, as you do these other things, you find other ways to deploy this data. But you're also building the mindset as an organization to build highly personalized relationships.

Jim Marous (15:44):

We're all talking about increasing personalization. You can't do it from a standing start. You have to learn how to use data, how to deploy data, how to deploy solutions, how to understand the interactions and what you're doing at your organization is you're finding more and more ways through your partnership with the MeridianLink to take data and make it work on a highly personalized basis.

Jim Marous (16:06):

I mean, the line of credit is an extraordinary example of each one of those lines of credit is highly personal. The ability for the consumer or you as a financial institution to increase that or decrease it based on what's happening in their life-

David Park (16:23):

Or we see they haven't used it in a while, and we remind them, you have this here. You go in and take an advance over a certain duration of time, your entire outstanding balance, what's already outstanding, and the additional advance that you take, you're going to have a promotional rate.

Jim Marous (16:38):

So, you've been with the organization for a while, within the organization to build the culture of interactivity of engagement of not helping the member, because that's part of the credit union mantra. But really looking and saying, "How do we make it so that we don't just set and forget it?"

Jim Marous (16:56):

So, a lot of organizations would do a credit line program. They put it out there and they'd only look for people that are going fault. Once in a while, they may increase but usually it only happened if you asked for it as opposed to proactive, which is a great way to remind somebody they have, it's going, "Your credit line, you haven't used it lately, but we'd like to increase by another $100."

Jim Marous (17:17):

And so many organizations try to build that credit relationship in such a way that it's a 2000, 3000, 4,000, that big amount, which I understand the rationale. But if you have that $100, that is a loyalty thing.

Jim Marous (17:32):

It is something for a new customer, a younger customer, a customer to realize, "I got this umbrella. I have this protection where I'm not going to land hard. I'm going to land soft." And that's extraordinarily important.

Jim Marous (17:47):

Even the best programs however, at the best organizations, there's things that go wrong. What is the biggest challenge you've had lately from the standpoint of bringing more to the marketplace to the relationship?

David Park (18:00):

Efficiency of ability to make payments. In the member solutions department, we are currently in the process of implementing a solution with MeridianLink and SWBC, where members will have the opportunity to cure their default on the phone with an agent through use of a card from any financial institution. And I don't know that that's a very common way to go about-

Jim Marous (18:24):

We can instantly solve this problem. Get to it possibly before it hits the credit bureau. I mean, you're going to know what's happening because you've seen the account. Because you can easily tell the member, "Oh, by the way, if this goes south, even on the minor degree, this thing sticks for five years. It sticks for seven years."

Jim Marous (18:47):

You're also adjudicating credit, I would imagine somewhat non-traditionally, from the standpoint of being able to say, "How do we make this work?" You're all about making it better for the member as opposed to, and not that you forget about risk and fraud, but without risk and fraud being front and center so that you — I often talk about organizations that can't do digital transformation gives in a risk avoidance mode as opposed to managing risk mode. There's a very big difference there as you well know.

Jim Marous (19:15):

From a culture standpoint, how's this work throughout the organization? I mean, obviously in the customer carrier, the collections area, it makes him a much happier employee.

David Park (19:25):

We're kind of like the first ones to bring card services into the member interaction space. I would imagine one day it would be really great if I could walk into a traditional branch and I could use my digital wallet and tap a deposit.

David Park (19:44):

So, we're at the very beginning, the earliest stages of digital wallets or card technology being a cash management or cash flow or loan payment tool that members could use however they interact with our credit union.

David Park (19:59):

We're like the first ones to kind of pursue that and if we see success, I certainly see that it's something that would eventually find its way throughout the footprint of the service channels of the credit union.

Jim Marous (20:11):

So, you have a lot of differentiation out there. How do you let the members know they have this stuff, for lack of a better term.

David Park (20:20):

Our marketing department is really good with sending email communication, U.S. mail, postcards. We do a lot of local billboards, radio, local television. We want to move further into the sending text messages. So, our marketing department right now is developing a marketing by text, way of going about doing what we do.

Jim Marous (20:46):

And that, by the way, asking a member for their cell phone number, it's not an abnormal process, but it's not a giveaway. It's not something you can easily get. But when you have this engagement, you're showing on a daily basis, what I try to do as an organization is provide value. And that if they give me the text now, I'm going to even provide you more value.

Jim Marous (21:07):

Because I can increase your credit line by text. I can monitor you and say, "By the way, we see that things are a little different than they used to be, do you need some help? Here's somewhere to help." I mean, it's very powerful. But you're setting the stage ahead of time to get those cell phone numbers from what the other things you do across the organization.

David Park (21:29):

Yeah. Eventually, we're going to go from transactional banking to asynchronous dialogue, relational-

Jim Marous (21:36):

You're doing it now. I mean, in stages, but the mentality within the organization, culture is there. Which by the way, we have found that you can buy all the technology in the world from any provider. It's not going to make a difference if your culture doesn't let you do what you can do. You’re thinking outside the box.

Jim Marous (21:57):

So, not every organization's like yours, you know that you can see them at MeridianLink LIVE that there's differences across the board. Some better, some worse. What recommendation from your experience would you give financial institutions that are trying to think out of the box on the credit area just for that area.

David Park (22:14):

Find the people with your vendor partners who are responsible for defining how products operate, the desired outcomes they're going to create for clients and defining where the changes to those products sit on a roadmap and then align your strategic roadmap internally to the roadmap that you have with your vendor partners and collaborate with each other to bring forward the kind of results from members that they want to experience.

Jim Marous (22:40):

Know your North Star, make sure you find partners that understand and will live to that North Star. And it's very clear from what I've heard, both from MeridianLink side and from you today, that you don't have to watch over your partners on a moment-by-moment basis. You let them run knowing what your mission is and, in some cases, you're pushing your partner beyond where they've been in the past.

David Park (23:05):

Or to consider things that voice of client, they may not have heard it yet from someone and they're willing to listen.

[Music Playing]

Jim Marous (23:13):

Great to meet you.

David Park (23:14):

You as well.

Jim Marous (23:15):

Great story. I heard before you came on, this is your first podcast, you're a pro. You could be a host. Nice to meet you. Thank you very much. Have a great time at the conference.

David Park (23:25):

Thank you very much.

Jim Marous (23:27):

Thanks for listening to Banking Transformed, the top podcast in retail banking and the winner of three international awards for podcast excellence. We appreciate the support we've received from MeridianLink in making this eight-part series of episodes a success.

Jim Marous (23:43):

This has been a production of Evergreen Podcasts. A special thank you to our senior producer Leah Haslage, director Dave Douglas, audio engineer Chris Fafalios and video producer Will Pritts. Thanks for joining us and until next time, keep innovating and transforming.