By Roy Urrico
The $6.72 billion East Lansing, Mich.-based MSU Federal Credit Union (MSUFCU) continues to take innovation and financial technology collaboration to new levels with the development of The Lab at MSUFCU, which pilots innovative solutions; the launch of Reseda Group, its wholly-owned CUSO, to help develop credit union technology; the introduction of Evergreen, a new Reseda Group subsidiary; and investment in Spave, a financial wholeness app.
MSUFCU has a well-earned a reputation for staying at the forefront of cutting-edge technology, said Ben Maxim, vice president of digital strategy and innovation at MSUFCU; and chief technology officer of Reseda Group and subsidiaries Spave and Ever Green 3C.
“We are really trying to create an ecosystem. There are places out in the industry where pieces are happening separately. Like incubators, accelerators, ways to get financing, ways to pilot and partner, but we are trying to pull it all together, and really try to help focus on fintechs working with credit unions,” said Maxim.
“We're trying to take a lead in that position. We have the ability to do so,” explained Maxim. “We also are really trying to help these fintechs realize that there is this great opportunity in the collaboration that is already inherent in the credit union industry.
Conjuring Pilots at the Lab
MSUFCU established The Lab in late summer 2020 to identify, create, and execute innovation opportunities. By devoting resources to cultivating an entrepreneurial mindset, collaborative concepts can lead to pilots and new technology, products and services for members and employees.
Fintech interaction with the Lab starts with an initial conversation to see if there is a fit into one of the credit union’s key strategies in areas such as digital human interaction, financial wellness, self-service, operational efficiency and personalization. If there is a fit, a short-term or a large-scale pilot proceeds from there.
Active pilots include:
Larky Nudge delivers tailored push notifications based on loyalty offers and geolocation. Members can also receive alerts about the credit union’s mobile app functionalities, such as sending money, depositing checks remotely, credit score availability, or loan applications. Consumers can also receive discounts for shopping at certain stores while using MSUFCU Visa cards. “We'll geo-fence a digital border around a location and as they approach the store (Larky) lets them know they have (for example) 15% off if (members) use their credit card,” explained Maxim. “The ultimate goal is to see if we can geo-fence (auto) dealers. So, we can either close the deal on the back end and wire the money or we digitize an already pre-approved loan. They just sign the check over to the dealer.”
GreenPath Financial Coach, a virtual chat bot, helps members looking to improve their credit scores, move forward after a credit decline, pay down debt or build healthy financial habits. It uses artificial intelligence to deliver guidance through text-based conversation. Maxim noted GreenPath is a nonprofit in Michigan that works with a lot of credit unions. The premise behind the chat bot version is some individuals prefer talking about finances to a virtual financial coach rather than an actual person. “You get the conversation started and then develop a rapport. We’ve had a lot of great success with it, about 60 new members trying it each week, which is pretty good for a pilot.”
ChangEd is a mobile app that helps members pay down student loans by rounding up purchases and using the spare change to make additional payments. Once the total roundups exceed $5, the ChangEd account receives a transfer from the MSUFCU account. When the ChangEd balance reaches $50, the student loan(s) account receives a payment. “It's been well received so far, one we're wrapping up, piloting for a little over a year now with great success. It is in our portfolio,” said Maxim.
Financial Concierge, a self-service virtual assistant integrated into MSUFCU’s online banking system, utilizes a 10-question survey to learn more about members and their behavior. The virtual assistant then provides members with a tailored mix of financial resources based on the profile. “This is one of the few instances where we didn't partner with a fintech. Maxim explained, “The concept behind Financial Concierge is similar to a Stitch Fix (an online personal styling service) or some of the other personalized subscription services. We can see what they're buying, but we don't necessarily know their personality.”
Being Proactive in Financial Technology
At the beginning of 2020, before establishing The Lab, MSUFCU started focusing on taking a more proactive role in innovation and keeping tabs on emerging technology. This includes Pocketnest, a venture-backed, financial wellness tool that guides users through personal financial health and education areas using a step-by-step, do-it-yourself approach. The credit union tested Pocketnest to a portion of its members in spring 2020, then to its entire member base (more than 320,000) in November 2021.
In April 2021, MSUFCU stepped up its financial innovation drive by creating Reseda Group LLC, a wholly owned CUSO, to help advance technology in the credit union space and, according to Maxim, “to help drive fintechs in the credit union industry and help them understand why it's important to work with a credit union.”
In January 2022, Pocketnest announced its latest institutional investor, Reseda Group, for its seed round co-led by The Impact Seat and ID Ventures.
One business the CUSO ended up acquiring is Live.Give.Save. Inc., a women-founded fintech company that created a personal finance mobile spending app. Said Maxim, “We started that relationship as a pilot and then that kind of grew to investment.” The acquisition agreement, which closed on June 1, 2021, called for Reseda Group to form a new company called Spave LLC, which empowers consumers to use everyday spending to save for themselves and give to charitable causes. Live.Give.Save. contributed all its assets to Spave, with Reseda Group obtaining 80% ownership in Spave.
Maxim said, “A lot of credit unions have foundation and charitable partners they work with, and we really want to be able to bring this technology to the industry, and private label it for everybody who wants it. We're running a public beta for now and looking to recruit credit unions to help pilot the technology.”
In October, 2021 the Reseda Group, announced the launch of a new subsidiary, Ever Green 3C, a consulting firm committed to helping credit unions and adjacent organizations grow through increased engagement opportunities with employees, members, and the communities they serve.
Member Feedback Critical to Innovation
Receiving relevant feedback from members is critical to The Lab., which actively recruits members as the participants in pilot opportunities. Maxim said, “We have two ways to get people in. We have the specific pilots that they can be a part of. And then we have our member panel. We’ve actually been able to recruit about 500 members to be on this ever-growing group of members who are available for both pilots and innovation research.”
Maxim further explained that the credit union is trying to use the member panel as at least one level of input. With 500-1,000 members on the panel, depending on the pilot’s size, they represent about 1.5%-3% of MSUFCU’s membership base. MSUFCU can prioritize its research and development based on which technology or innovation members show interest in. “We’re also trying to be cognizant of the fact that people don't always know what should come next, or maybe what they could care about.” In addition, fintechs like knowing members will see and a evaluate a product.
It has been helpful for people to see MSUFCU as an innovative credit union, Maxim added. “Partners are coming to us and asking to work with us at this point. We are trying to prioritize our queue, making sure we are not losing sight of some of the things we were trying to do.”
Maxim summed up MSUFCU’s Lab goals. “We’re really trying to build these fintechs out, getting them in front of members. They're able to get some feedback on their product and as they start to scale and grow, we're now able to invest in them in the traditional sense as a strategic investor.”