An Insider Perspective On Credit Unions And Banks

A Q&A with Scott Witherspoon, chief credit officer of Affinity Federal Credit Union.

Credit unions have been tapping talent from the banking community for years. Here, Scott Witherspoon of Affinity Federal Credit Union ($2.2B, Basking Ridge, NJ) discusseskey differences between the two types of financial institutions from an insider’s point of view. As the credit union’s senior vice president and chief credit officer, Witherspoon is focused on how the institution can best serve its morethan 134,000 members and differentiate itself and its lending products in the market.

How long have you been with the credit union?

Scott Witherspoon: I joined Affinity in May of 2013. Prior to that, I spent nearly 21 years running the credit risk and wealth management group for Morgan Stanley. I also spent 10 years in banking in New Jersey, so my background in financialservices is pretty broad.

Did you know much about credit unions before you joined Affinity?

SW: I knew a bit about credit unions as both of my parents worked for Bell of Pennsylvania, which became part of the AT&T network. Affinity began as the AT&T employees’ credit union, so I knew it from the member perspective. I evengot my first car loan from the credit union.

What are the biggest differences you see between credit unions and banks?

SW: I think one of the key differences is the whole spirit of collaboration within the industry. That is certainly not something you see on Wall Street, and I don’t think you see it in the retail banking industry either. Sharingideas, figuring out what’s working and what’s not, and identifying best of class examples from your peers is unique to credit unions.

There is also collaboration within the regulatory environment. Smaller banks are merging because they can’t keep up with the compliance or regulatory burden whereas credit unions, while some merge, have the ability to collaborate or form a CUSO to address the same challenges. This is refreshing, innovative, and important as it allows us to use the strength of other organizations for the betterment of the entire industry.

What surprised you most about credit unions?

SW: The collaboration piece absolutely surprised me. I didn’t even know it existed in the magnitude it exists everything from industry conferences to CUSOs. It wasn’t something I was expecting coming in to Affinity,and it is one of those wonderful serendipities you can leverage as you develop your own business plans and offerings.

The other thing that surprised me was the loyalty of credit union members to the organization. I was here only two weeks when we went through a major system conversion. After closing for a long weekend, the CEO thought it would be important for the managementteam to go out to the branches and observe and interact with members. We wanted to make sure if lines were longer than usual that we were engaging the members and thanking them for their patience. The members were so patient and understanding andpositive about the fact that the conversion would be good for them as member-owners of Affinity over the long term.

From an operations standpoint, have you noticed any differences?

SW: The overall operations side is not dissimilar in terms of the structure here versus a bank. I have all of the lending areas reporting to me along with the loan servicing and member care. I didn’t realize at first that membercare was the name for collections, and the way that area relates to members is different than how a bank’s collections department might relate to customers.

Affinity’s mission statement is to improve the financial lives of our members and the communities we serve. We work hard with members and modify mortgages if they’ve lost their job or had a medical catastrophe or other major issue. Creditunions go above and beyond to try to keep members in their home and not have an adversarial relationship or foreclosure ensue.

What do you think credit unions can learn from banks?

SW: A couple of things. First, I think we need to be aware of each other’s products and services. One of the challenges for the industry is that the products and services we offer are commoditized and it can be difficult to differentiateyourself. A car loan is a car loan and interest rates are probably in a fairly narrow, competitive zone.

Two areas that can help are the manner in which you deliver the product the member service level and how quickly you deliver it, which leads to technology. Looking at what tools both banks and credit unions are incorporating to streamlineand make their processes more efficient is important. For example, Affinity is in the process of incorporating e-signatures, so if a couple is applying for a car loan we can have the husband sign on his iPad and his wife sign on her smartphone versushaving to physically go somewhere to complete the paperwork.

Another activity that I’ve seen banks do on the commercial lending side is to set-up advisory councils of professionals and business owners. Banks use that to network and to generate business referrals. Attorneys, CPAs, insurance agents, realtors,and successful business owners within the community surrounding each branch were included, which is something I haven’t seen as much of on the credit union side.

What can banks learn from credit unions?

SW: Beyond the member service focus, one area where I think banks can learn from credit unions is financial literacy. Credit unions do more in the way of financial education than I had traditionally seen in banks. This applies to membersand the larger community. For example, tomorrow evening we’re hosting an event here for realtors. We want to work with first-time homebuyers to educate them, pre-qualify them, and if they aren’t working with a realtor referthem to the network of realtors we’re working with. There is a natural synergy there to educate and let members know what to expect throughout the mortgage process. We think our focus on education will help members make the best choices whenit comes to home buying and other types of financial decisions.

July 24, 2014

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