Inside MSUFCU’s Approach To Innovation

Michigan State University FCU ($7.5B, East Lansing, MI) has maintained the mantra of “grow or die” for decades, and investments in innovation are helping the cooperative adapt that philosophy for the digital age.

“If you don’t have a path forward to grow, it’s harder to be relevant and to sustain,” says CEO April Clobes. The MSUFCU chief’s spoke earlier this week as part of “A Conversation With…,” Callahan’s ongoing webinar series featuring in-depth discussions with leaders from across the industry.

Since Clobes took the helm eight years ago following the retirement of longtime CEO Patrick McFarland, the credit union has worked extensively to modernize many elements of its operations. A major part of that has been recent branding efforts to put help membership within reach for more consumers.

Case in point: Collegiate Credit Union, a trade name launched recently to bring in new members who don’t necessarily have an affinity with Michigan State. MSUFCU has an extensive presence on the Michigan State campus and throughout the Greater Lansing market, but the days when 90% of the university’s incoming freshman class would sign up for membership are long gone. With a target market of consumers late in their high school careers all the way through college, Collegiate aims to recapture some of that audience, in part by serving as a digital-only institution.

The credit union also recently launched AlumniFI, a brand designed for Michigan State alumni who qualify for membership but don’t have an MSUFCU account. Clobes said the university currently has roughly 500,000 living alumni nationwide, and the initiative was designed with an eye toward creating “another opportunity for alumni to feel engaged [with] something that resonates with them.”

While both of those brands are distinctly credit union offerings, Clobes said each one is designed to compete with digital-only brands like Ally and Goldman Sachs’ Marcus. The latter, which launched shortly before the pandemic, was a major source of inspiration for Clobes. The credit union had plenty of assets to work with to launch new ventures, but different branding also provided the opportunity to offer different products MSUFCU might not offer or use different rate structures.

Of course, successful innovation doesn’t happen without buy in from boards of directors and associates, and a simple reality check helped get all parties on board.

“We have the data; the bigger we are, the member growth percentage is going to be smaller, so we need to sustain a certain percentage of new-growth members,” says Clobes. “So how do we have a brand that is more open that other people could be interested in joining?”

Along with new brands, MSUFCU has invested heavily in fintechs, including partnerships with ChangEd – which allows users to round up purchases into a savings account that can be put toward paying down student debt – and Spave, which combines financial wellness training with charitable giving.

Much of its fintech work is done through The Reseda Group, a CUSO the credit union launched two and a half years ago to help find and finance new opportunities, while also bringing in additional revenue through services like board planning, financial projections, and more. That additional revenue, says Clobes, will be particularly important as MSUFCU approaches the $10 billion-asset threshold and the accompanying drop in interchange income.

“No one’s going to stop living at the lifestyle we’ve become accustomed to, so we need different revenue streams,” she explains.

While the CUSO was originally launched to sell versions of some of the credit union’s internal software, “it just snowballed, to be honest, in ways that we did not plan.”

The 27-year MSUFCU veteran says one of the most effective ways to keep the board engaged has been to ensure those members are consistently furthering their education and being exposed to new ideas from across the financial services space.

“I welcome my board to [attend the National Association of Credit Union Service Organizations’ annual conference], I welcome my board to go to fintech conferences,” she says. “We took a few board members to Finovate, because it’s very helpful; They hear what we’re telling them, but for them to have their own lens of experience, that’s when they’re super excited at what we’re bringing back…They then are as excited about new fintech partners as we are, because they see the demos and see what’s out there, and they say, ‘Oh, I can picture why we would do that.’”

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