[00:00:00] Steve Willis: We need to help them and help them to prosper and succeed and, um, it’s us rolling up our sleeves with them. Finding solutions and products to help them grow.

[00:00:13] Narrator: Welcome to 22 minutes in lending your Go-to podcast for insights on all things lending from lending practices, regulatory updates, how to enhance lending efforts and more. In each episode, Vince Paone connects with industry leaders to discuss the latest trends and happenings around the lending industry.

[00:00:33] Narrator: Let’s dive in to the latest in lending.

[00:00:37] Vince Passione: Welcome to 22 Minutes in Lending. I’m your host, Vince Paone. Today’s guest is someone who knows the credit union space inside and out, and spent nearly 30 years shaping it. Steve Willis, president of Leverage. Steve saw his career in auto lending before taking on key leadership roles at the Michigan Credit Union League.

[00:00:52] Vince Passione: In 2016, he joined the League of Southeastern Credit Unions as COO and now leads affiliated consolidated services and [00:01:00] leverage. Two Powerhouse for-profit arms of the league supported nearly 900 credit unions through innovative partnerships and solutions. Steve, welcome and thanks for joining us today.

[00:01:09] Steve Willis: Thank you. Looking forward to chatting with you, Vince.

[00:01:12] Vince Passione: Same Steve. Hey Steve. We had Samantha Bieler on the podcast recently and she, obviously, she runs the league in affiliates, but you always see the League services core. So can you describe the distinction and the structure and how one supports the other?

[00:01:26] Steve Willis: Yeah. So, um, you know, leverage is a service provider that helps credit unions grow and succeed. So we really try to do this in about three different ways. So, you know, we acquire or invest in companies or QSOs, you know, that provide immediate value to our credit unions. You know, like Leverage Payment Solutions, credit Union Audit Group, um, credit Union, vendor Management, Kanban title.

[00:01:47] Steve Willis: These are some of the companies that we’ve gone out and acquired. We’ve also built some solutions. You know, true Treasury was one of the ones that, you know, we partnered with a couple credit unions, um, a core provider and [00:02:00] MDT. So we’ve looked at different ways to do this and then, you know, and then we go out and we find partners, you know, best in class fintechs and Service Pro, um, partners that are basically re marketing agreements that we go out there and we sell their products across the country for them.

[00:02:14] Steve Willis: Um, while this approach to product development, you know, we also work closely with the league. You know, getting feedback from them with the, the credit unions are, you know, some of their needs are. And then, um, you know, we support their events, their initiatives. And then recently we, um, we did testimony on interchange for them.

[00:02:35] Steve Willis: So we have some experts on our, on our, um, cards processing team that went before the Florida Senate and um, uh, gave some feedback on the interchange that helped in their advocacy efforts.

[00:02:46] Vince Passione: I was gonna ask that. So, so given the league’s role as also doing advocacy work and lobbying it, it, are you guys typically brought in Steve to be a be sort of subject matter experts in, in, in going to the hill?

[00:02:59] Vince Passione: I. [00:03:00]

[00:03:00] Steve Willis: You know, that was the first time on the interchange because we have the card processing. Mm-hmm. Um, that was one of the few times that they’ve come to us and asked us to give some expert testimony. But, you know, with our audit and co audit group, that would be another one that, you know, with the NCA and everything we, that they might reach out to for advice or direction too.

[00:03:17] Steve Willis: So. We do have some experts on the team that could help and support their efforts.

[00:03:22] Vince Passione: Understood. Now, how do you select these providers? I mean, do you, do you run surveys with your, your customer base and do, and figure out what subjects or what areas they have interest in? How do you, how do you come up with this every year?

[00:03:36] Steve Willis: You know, it’s, it’s, it’s really a lot of different listening, you know, I mean, being a good listener, you know, which is kind of a skill that, you know. Some people don’t use as much anymore, but I, I believe in listening to what our credit unions need, you know, we do it by one-on-one conversations. We have lead consultants that are working with our credit unions.

[00:03:53] Steve Willis: We have, and our card, and our card, um, processing company. We have consultants there. They’re out [00:04:00] talking to our credit unions. So really they’re getting to understand what their needs are. And then our, you know, our, our league association, they have people out there too that are getting the feedback of what the, you know, the challenges are.

[00:04:11] Steve Willis: That their credit unions are facing. And then we, um, we have committees. We have an innovation committee made up of credit unions on different levels that get together once a quarter and talk about some of the solutions they’ve seen or some of the challenges they face. And then, you know, events, you know, we put on a lot of events.

[00:04:28] Steve Willis: We go to a lot of events, you know, money 2020 I go to, I look at, you know, what kind of solutions are out there, what are things that could help us? And then networking, you know, I mean. You and I, I mean, how many times did we chat a year about things that we see as pain points and, you know, trying to solve?

[00:04:44] Steve Willis: So I mean, it’s, it’s really just listing out there what the needs are and then trying to go out and find the solutions.

[00:04:51] Vince Passione: No. Got it. No good answer. Steve. We’re in some interesting times, right? I think I’ve said this now a few times in the last couple years, right? We had, we had the pandemic [00:05:00] and, and, and now we’re dealing with a really interesting time where things are just very unpredictable, right?

[00:05:06] Vince Passione: Stock market’s up and down. The bond market is doing something really strange. There’s a concern, are we really in a recession yet or not? And credit unions were just sort of coming out of a difficult time. Right. As many of the financial institu other financial institutions were as well. Right. Liquidity dried up very rapidly.

[00:05:21] Vince Passione: Default rates were spiking. Is this winning your remit to sit with credit unions and help them plan and figure out how to prepare for things like this? Or is this something that they would defer to a different group?

[00:05:33] Steve Willis: You know, it’s a little bit of both. You know, first off, credit unions have been through volatility before.

[00:05:38] Steve Willis: You know, the Mortgage Chrysler crisis of 2008 COVID. And when, when we go through these crisis, we, we try to find out what’s causing it and what solutions can help them. So, um, during COVID, the employee retention credit, you know, we went out there and helped our credit unions, you know, get their employee retention credit.

[00:05:57] Steve Willis: Um, we also just recently, ’cause liquidity has [00:06:00] been a challenge for our credit unions. So we just recently partnered with McQueen Financial to help with, you know, asset liability. So during these times, we’re looking for partners that can really help our credit unions through these challenging times. So not just even in the good times, you know?

[00:06:15] Steve Willis: You know, it’s, it’s funny, it’s almost like it’s cyclical. ’cause you know you’re gonna go through a couple good years and you’re gonna have a bad year, right? So when we’re going through the good years, we’re still looking for what are the challenges that are gonna be on the horizon that we can prepare for?

[00:06:28] Vince Passione: Yeah. So I wanna reflect back on a a, a quote from Samantha, uh, Samantha’s interview. She said Credit unions must shift from being finance organizations that use tech to being tech companies that deliver finance. So do you agree with that statement? Do you wanna embellish it a little bit more? In your experience working with a lot of these fintechs directly and with your partners.

[00:06:49] Steve Willis: You know, I, I think it’s a mix in the middle. I think that they can’t forget that they’re a credit union because, you know, the membership loves still to come into Credit Union, say hi. Do those things, but they also [00:07:00] have to provide the services of the fintechs, you know, because we are having a younger generation that likes to use the phone, likes to have, uh, more technology.

[00:07:09] Steve Willis: So I, I think they gotta find that happy medium. And then they gotta go out and do the research because, um, you know, what fits into their core, you know, what doesn’t fit into their core, you know, what are they, you know, you can’t be a, you know, you’re not gonna make everybody happy. So you gotta find those FinTech companies out there that can really.

[00:07:28] Steve Willis: Speak to your membership and the products and services and honestly, like one, one of the things I do, I, I belong to I think six credit unions now, and I look at the products and services they’re using to see, hey, what excites me when I’m on their apps and everything. So I’m always trying to learn too.

[00:07:44] Vince Passione: No, exactly.

[00:07:45] Vince Passione: A a but as you think about your, your goal. For your, the partners that you bring to, to your members, your credit unions, is it to help them select or, and say, look, these are, as you’re thinking [00:08:00] through, ’cause look, there are, there are, there are over 10,000 fintechs and, and, and, and over 40, maybe 4,500 credit unions.

[00:08:07] Vince Passione: Now, last count. So, mm-hmm. That’s a lot to parse through. So is part of the remit, part of the, the objective of leverage is to help them select the best, and then beyond that, do you help them figure out how to integrate it? Because you, you, you said core, I’m not sure you’re talking about their core systems, but we all know that’s a tough job.

[00:08:27] Steve Willis: Yep. Yeah. So, you know, that’s a great question because we’re trying to do both. You know, we’re, we’re trying to go out there and find those companies, FinTech companies, I wouldn’t even say FinTech companies. You know, I mean, if you look at our portfolio companies we own, most of ’em aren’t FinTech companies.

[00:08:44] Steve Willis: Most of ’em are, you know, we have a PEO that we do offer, um, payroll and mm-hmm. So we’re looking at different things to help our, our credit unions across the board. So, but we also look at, do these, uh, products and services integrate with their systems, you know. [00:09:00] So if, if we go to a FinTech and they’re only gonna integrate with one core, we’re probably gonna take a look at another FinTech that does something similar to see if they integrate with three or four of our cores.

[00:09:09] Steve Willis: So we’re, we’re always to make it easier for our credit unions because, you know, once you start getting into all those, um, APIs and all this stuff integrating into the core or their LOS, it costs money. So we’re looking for ways to, you know, do it the easiest, financially responsible way for our credit unions.

[00:09:29] Vince Passione: So, so the league represents about 400 credit union, is that right? Yes. So, so that’s about 10% of the system. That’s a pretty big platform. So there, I gotta believe there are benefits and there are probably risks when you’re at that scale. Can you talk a little bit about that as, as a solution provider? You know, because, I mean, there’s that, I still remember the first time I talked to the NCA when we were building a network, and one of their concerns was, well, you create systemic risk, right?

[00:09:54] Vince Passione: Because you’re, you’ve got such a broad. Uh, broad reach. So what are the risks and [00:10:00] benefits of, of working on a platform with that many credit unions?

[00:10:03] Steve Willis: So the, the biggest benefit is scale. You know, vendors want, you know, someone who can deliver their products and services to the credit unions. Um, we’re one of the few that, you know, we really do deliver.

[00:10:14] Steve Willis: You know, we, we vet those products to make sure we go out in the market that we can deliver to those products because they’re not gonna come to us if we can’t deliver what we say we’re gonna deliver. Right. Um. So we really go through and make sure that that product and service is gonna do what it says it’s gonna do.

[00:10:29] Steve Willis: So when our consultants get it and take it to our credit unions, we have the success. Now, the risk we always have is reputational risk. I worry I, what keeps me up at night is reputational risk If you partner with somebody that does something they shouldn’t be doing. So we have to make sure we vet these vendors or partners thoroughly to make sure we minimize that as much as possible because.

[00:10:53] Steve Willis: You know, we’re the, we’re the trade association. We, we gotta look out for our credit unions. We want to do everything we can to bring that product and service to ’em. [00:11:00] So that’s probably my biggest thing I worry about every single day.

[00:11:04] Vince Passione: Alright, so I talked about, I wanna

[00:11:06] Steve Willis: add one other thing. You know, the other thing is, is because they’re their membership dues in our association side, you know.

[00:11:13] Steve Willis: We always gotta make sure we’re helping our credit unions because we don’t want them to think we just brought something that’s not gonna fit or, you know, pulled one over on ’em. We really gotta make sure we keep them happy and, and trust us. You know, we call, we say trusted partner every single day ’cause we want to be their trusted partner.

[00:11:29] Steve Willis: And I always tell, I always tell my team, I’m like, Noah’s okay. We just wanna make sure they understand the benefits of our products and services. If there’s someone out there better that they found. That’s, that’s great. We want them to have the best products of services. Never hurts my feeling for someone to say, we’re gonna go over here because there are other, they’re better products, services, some cost more, you know, most of ’em that are better are usually cost more, but you know, we want them to go out there and vet other products of services to make sure that fits their need.

[00:11:56] Vince Passione: No, and that makes sense given the disparity in size, right, of some of the credit [00:12:00] unions that you serve. I, I wanna go back to a point though, you talked about the number of small credit unions, that small credit union designation, and, and I was recently at a conference, um, and, and there was a whole discussion about shared services, right?

[00:12:13] Vince Passione: And how shared services can really be the solution for smaller credit unions. But the question is, when you’re dealing with shared services, how do you personalize it for that credit union? You know, is the credit union just part of a pool that’s being, that outsourced a service, or can they get personalization out of it?

[00:12:31] Vince Passione: There are examples where you’ve been able to do that?

[00:12:33] Steve Willis: Yeah, so, um, in our PEO, you know, we do their payroll and their employee benefits and they’re de, they’re dealing with our people in at leverage. So they get the personalized service from leverage. They’re not going out and, um, you know, using a third party, they’re using us in those situations.

[00:12:50] Steve Willis: So, you know, we’re looking at more of that fragmented. You know, those products and services from accounting to it to really help our credit [00:13:00] unions. But yeah, we, we really want to be a part of it to help help them grow and prosper in those products.

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[00:13:39] Vince Passione: I wanna go back to this, this idea of exposure to the broader tech community, exposure to what Neobank are doing. Do you think it’s limited to the CEOs, but what about, what about the board? I. We’re at your conference, right?

[00:13:54] Vince Passione: There was a lot of conversation about boards. Do you think the board members need to [00:14:00] also be educated on things like, like cybersecurity, right? We, we saw a couple of ransomware attacks, you know, how does a, how does a board member get educated and, and, and get exposed to the broader FinTech community, technology, community, and the risks?

[00:14:15] Steve Willis: Well, and I, I think, um, you know, they gotta get an understanding like you’re saying. I think they need to go to workshops. They need to go to conferences. There’s a lot of online, um, information out there that you could put together and educate them. I mean, it’s, it’s an education. If you’re not having your board, how do they make decisions?

[00:14:32] Steve Willis: How do they help guide the credit union? They gotta, um, be out there understanding and, you know, I know their board member, they don’t get paid, but you know, they, they need to be involved in understanding what products and service out there can help the credit union. ’cause it’s a changing market too. I mean, it.

[00:14:47] Steve Willis: One product can be there one day and they have a totally different product there the next day.

[00:14:52] Vince Passione: So you, you made this investment, uh, or you may, you have a partnership with Defense Storm. Um, and, and my understanding is a lot, a lot of, uh, I, I know Jeff Lunds for the, the founder of that business, and my understanding is that’s cybersecurity.

[00:15:04] Vince Passione: Correct? Correct. And, and there’s been a couple of ransomware, very, very, uh, uh, public ransomware attacks on credit unions. It’s expensive. Right? I was, I took, talked to one of those credit unions and, and they talked about remediation and what they have to do now and bringing somebody on board to be the chief information security officer.

[00:15:24] Vince Passione: Do you think credit unions are, are distracted and, and took their eyes off the ball when it came to these kind of cyber threats? Or do you just think they were trying to get there but got hit by some very sophisticated rings?

[00:15:37] Steve Willis: I, I think they’re trying to get there, you know, it’s. It’s, it’s one of those things where there’s so many different products and services out there, and they, and they’re very costly.

[00:15:46] Steve Willis: So which one do you go after first? Where, where do you protect the credit union first? I mean, I, I get emails every single day and I’m always e emailing my IT department. Is this legit? Is this legit? I mean, there’s so many different ways they’re scamming today [00:16:00] that, you know, you, you have to be getting educated.

[00:16:02] Steve Willis: We do, just for our, um, for leverage, we do training two to three times a year for, you know. Emails, um, phishing and all the other things. So it, it’s, it’s a, it’s gonna be a long-term battle. It’s gonna get probably worse before it gets better. You know, every time they come out, then, you know, the, the, the cybersecurity counters with other ways to help prevent it.

[00:16:26] Steve Willis: So it, it’s a, it is a game of cat and mouse. I mean, I, I was in Vegas when, um, MGM got hit and it, it shut down all of MGM casinos. I mean, I’ve never seen anything like that. So you’re just. How can that happen to, you know, a multi-billion dollar company where it shuts ’em completely down? So, um, I think it’s very important to credit engine.

[00:16:45] Steve Willis: I mean, we, you’re at the executive dialogue. That was a topic there that, you know, they gotta continue to, um, be prepared and find the products and services that can help you. But it, but we also gotta make sure these product services are cost, [00:17:00] you know, controlled where it doesn’t, you know, hurt them.

[00:17:04] Vince Passione: No, it can be very expensive.

[00:17:05] Vince Passione: And when you start getting into things like disaster re, you know, disaster recovery scenarios, it is expensive. Very expensive, and, and we know that, well, I. So what’s the role of the NCA here, Steve? Do you see exams changing? Um, do you see, you know, the, the NCA creating standards? I know, you know, they certainly have come in and evaluated us and spent quite a bit of time on security and we benefited from that.

[00:17:29] Vince Passione: But you do you see as things like ransomware attacks are increasing and are on the rise, that the NCA is gonna shift their model and exam.

[00:17:38] Steve Willis: Yeah. I, I mean they, they, they do all the time. They shift, um, from our, from my perspective, when I talk to my audit team, there’s always hot topics. Sometimes it’s vendor management, making sure the due diligence is being done on the vendors.

[00:17:50] Steve Willis: Um, but, um, I think it’s gonna be a, a challenge. And it, and I think it, it also has to do with the NCA is who’s in office. Right? Right. You know, I [00:18:00] mean, there’s lots of changes going on right now, so, um. I think they do a really good job. I think they work well with our credit unions. I think they have the best interest of our credits and they wanna help protect them.

[00:18:11] Steve Willis: So, um, I support, you know, the N two A and things they’re doing and I think that, um, we want to help and do everything in our power to help our credit unions so they don’t get hurt.

[00:18:22] Vince Passione: Yeah. Now Steve, we talked about uncertainty in the opening, and you and I have talked about this in the past about deposit outflows.

[00:18:28] Vince Passione: Right. Uh, you know, we saw, we saw a deposit run off, you know, deposit betas went through the roof. Things have settled down a little bit and we’re starting to see some liquidity come back into the system. And a lot of the credit unions showed up the other side, the investment side, the balance sheet, and they’ve gotten shorter.

[00:18:43] Vince Passione: So that’s helped a bit, but it’s still a problem. Um, what are some of the solutions that you’re thinking about to help the credit unions better manage liquidity, maybe attract deposits?

[00:18:55] Steve Willis: You know, um, well, I, obviously, I talked a little bit about it earlier. You know, Charlie McQueen, we’ve [00:19:00] partnered with, we’ve, um, partnered, we’ve had a partnership with Steeple, um, over the years or another one that can help.

[00:19:06] Steve Willis: Um, there’s some new companies coming in the market like Modern Fi that are, are helping with liquidity. Um. I, I think it’s just a long, it’s gonna be a long term, you know, until the market changes, it’s, it’s just gonna be tight. I mean, there’s only so much money to go around and, um, credit unions gotta, you know, find different ways and avenues to, to get it in, you know, it could be by raising rates on deposits.

[00:19:32] Steve Willis: There’s a lot of different things to do. I, I think CDs have kind of, you know, topped out right now. I don’t, I don’t see them going back up. I think they’re coming down a little bit now. Um, right. Obviously some interest rates are coming down right now on the auto loans and mortgages. Not enough on mortgages yet to make, you know, get a refining, refinancing boom going.

[00:19:50] Steve Willis: But, um, there’s, there’s gotta have to be some ways we have to keep looking.

[00:19:56] Vince Passione: So let’s, let’s look ahead a little, Steve. Um, we [00:20:00] have, obviously credit unions are in this audience. What’s one of the technological trends or shifts you’re seeing now that most credit unions aren’t talking about yet, but you think they should be?

[00:20:11] Steve Willis: Oh, you know, that, that’s a tough one because, you know, from my perspective, when it comes to new and innovative products, I like to watch first. And because we’re a trade association, so I don’t want to be the first one ever jumping in. So I wanna, you know, I want to, I want to take a, you know, a slower approach than, you know, if I was in a different role with a, you know, a FinTech or something.

[00:20:36] Steve Willis: So. It’s really challenging. I mean, one of the things that we, we are trying to, gets me excited is, you know, we just created the Office of Small Credit Unions and then we’re, we’re hiring a director of small sized credit union solutions consultant to help our credit unions and to really be out there, you know, understanding what their challenges are, their needs, and to bring solutions back.

[00:20:55] Steve Willis: So, you know, we’re really focused on helping our credit unions and [00:21:00] their needs. You know, I, I really think that one of the things that’s made us successful is. I, we don’t, haven’t really gone after the sexy FinTech product stuff. We, we’ve really focused on some of the old school, from the card processing to the audit company, to the marketing company.

[00:21:17] Steve Willis: Our title companies. You know, we’ve really tried to help credit unions on everyday transactions and things that impact them every day. And, you know, I see, you know, 80, 90% of our focus still on that. Don’t get me wrong. I mean, if we can find a FinTech that’s out there that can really help our credit unions, we’re all over it, but.Um, I’d like to take that wait and see approach.

[00:21:40] Vince Passione: So when you look ahead and you think about, you know, what you’re really excited about coming on the pike, I, is it the small credit union off of small credit unions and what you’re doing there?

[00:21:49] Steve Willis: Yeah, because I mean, I hate when small credit unions merge. I, I think small credits are needed.

[00:21:56] Steve Willis: We have to find ways to help them. I’m very passionate about this. I [00:22:00] mean, I. I’ll talk to some of my team members for hours about this topic where it, it just excites me because we need to help them and help them to prosper and succeed. And, um, it’s us rolling up our sleeves with them and finding solutions and products to help them grow.

[00:22:18] Steve Willis: And, you know, if, if you go into a small size credit union and just stand there and watch how members come in there. And interact with those credit unions. It’s, it’s amazing. You know, it’s, you know, they know, usually know each other by name. It’s old school, you know, and I, I really appreciate that. I really like that, where you’re not a number as you’re walking in.

[00:22:36] Steve Willis: So, you know, we wanna help as many as we can, and we wanna partner. You know, there’s other associations out there that focus on small asset size, credit unions. We wanna work with them, you know, it, it’s, it’s not just us, it’s a we. So the more we can partner with, the more we can help, you know. I mean, even, even the tools that we have with your partnership, you know, and, and, and the home improvement things.

[00:22:58] Steve Willis: Those are, those are tools small credit [00:23:00] unions can use to help grow their balance sheets. You know, um, those loans will help them. No, and they don’t have to do anything, right? I mean, they just, they sign up, they, they commit to, and it just really helps the credit union’s balance sheet.

[00:23:14] Vince Passione: You’re focusing on things that are practical needs of all credit unions, but especially the smaller ones growing their loans right now.

[00:23:21] Steve Willis: Yep.

[00:23:22] Vince Passione: So I, I agree. I agree. Well said. Well said. Alright, Steve, why don’t we leave it there. That’s all the time we have for today’s. Thanks so much for joining us to our listeners, don’t forget to subscribe, so you’ll never miss an episode, and we’ll see you back here in our next 22 minutes in lending.

[00:23:36] Narrator: Thank you for listening to the 22 Minutes in Lending podcast.

[00:23:40] Narrator: We hope you enjoyed today’s episode. You’ll find links to any resources mentioned in the show notes. If you’re enjoying our show, be sure to subscribe and leave us a five star review.