WSECU Invests In Innovation To Solve Pain Points

If the fintech has what appears to be a novel idea, we’ll bring it back to WSECU for consideration. We’re often surprised by ideas we hadn’t considered yet, meaning we didn’t realize a pain point even existed until we investigated it further.

Washington State Employees Credit Union ($5.1B, Olympia, WA) began its venture into fintech investing in classic financial cooperative fashion: standing up a new way for members to access responsibly priced and managed short-term loans.

Now the Evergreen State institution has evolved from building and operating its own CUSOs —  including the payday-loan alternative pioneer QCash Financial and a mortgage origination and servicing company — to investing through a dedicated CUSO holding company that backs innovative ventures focused on helping credit unions solve member and operational challenges.

Paul Kirkbride, chief operating officer for WSECU and CEO of its CUSO holding company, One Washington Financial (OWF), shares how the organization approaches fintech investment and partnership.

How does WSECU approach fintech innovation and investment?

Paul Kirkbride: WSECU got started in the CUSO/fintech space with QCash Financial, which offered a payday loan alternative product for credit unions. The solution started as a loan product built specifically for WSECU’s members, but we soon expanded it to dozens of other credit unions through a CUSO. We also owned a mortgage origination/servicing CUSO for several years.

We exited both of those in 2023 and stood up OWF our holding company, to make investments in CUSOs that solve credit union pain points in new and innovative ways.

How are credit unions approaching fintech investment? Future Bets explores how leaders balance immediate needs with longer-term bets, evaluate potential partners, and define success alongside mission and member value. Read the series today.

When choosing what to invest in, how do you balance your day-to-day business needs with longer-term strategic goals?

PK: Technically, OWF’s main charge is to extend WSECU’s current strategies through our CUSO investments, but we go beyond that now given today’s rapid pace of change and fluid expectations.

If the fintech has what appears to be a novel idea, we’ll bring it back to WSECU for consideration. We’re often surprised by ideas we hadn’t considered yet, meaning we didn’t realize a pain point even existed until we investigated it further.

We haven’t struggled finding a balance between “run the business” and “future bets,” and having a good balance helps to diversify our risk.

What does success look like for a fintech investment? How does purpose play a role in your definition of success?

PK: Success means you’re solving a credit union or member pain point — current or future — and the CUSO can achieve a strong financial return when compared to alternative investments. We’d call this direct value. We also look for indirect or intangible value, such as improved service scores, efficiency gains, new connections, and influence over product design.

Being a design partner is probably one of the greatest advantages to being a CUSO investor. We always seek win-win partnerships with our vendors, but being an owner gives us a chance to create added value for all parties.

Purpose is deeply important to us. We want to work with partners who are committed to working with credit unions and their members and align to our values and our industry’s values. It drives our decision-making.

What’s one lesson you’ve learned about bringing along internal teams?

PK: I could write an entire paper on this question. At a credit union, executable innovation can’t happen in a silo. You need the rest of the organization aligned to assess, approve, test, train, and launch all the great ideas you generate or discover. You also need the credit union’s leadership team, at all levels, supporting your efforts versus believing you’re competing with them for the same resources.

To help with this, we leverage the talent inside of the credit union from the start. For example, if OWF meets with a CUSO that’s solving a lending problem, we bring in our lenders. Do they think this product solves an industry problem? Will they use the product or service as a client? Does the pricing make sense? Will they champion its implementation?

It’s fun to see their faces light up over a solution that solves a real issue, and it’s also telling when they seem completely disinterested. OWF never forces a solution on WSECU. The team that owns that specific product or service lane always has the final say.

What’s one thing you’ve gotten wrong or would do differently if you started over today?

PK: Finding a way to reduce the duplication of investment due diligence and vendor onboarding requirements. Although WSECU wholly owns OWF, OWF must operate independently when it comes to decision-making, so we created our own investment due diligence process.

Throughout the review process, we’re gathering many of the same things the credit union will likely need to gather later. At first, we didn’t have a process to share that information, so our CUSOs were getting hit up with duplicate requests — first from OWF as an investor and then WSECU as a client. We wasted a lot of time.

The other thing I’d add is the need for dedicated resources, which we didn’t add until year two. If you’re hoping you can tap one of your current executives to do all this, in addition to their day job, you might be overestimating their capacity or underestimating the work. We currently have two full-time employees at OWF and are now adding a third.

Without this team, which includes Scott Daukas, our chief partnership officer, and Amy Schultz, our director of fintech engagement, I don’t think we would have made much progress. Their backgrounds — Scott having been a former credit union executive and CUSO board member and Amy having been a fintech founder — are complementary and give us added confidence in our decision-making, relationship-building, risk-taking, and performance-monitoring.

What’s one thing fintechs consistently misunderstand about working with credit unions?

PK: Credit unions can be quite slow at making decisions, working through contracts, and implementing new solutions. Some of this is risk aversion, some relates to being overloaded — trying to do too much — and some of this is simply a prioritization issue. Long sales cycles, followed by long implementations.

Founders, on the other hand, are accustomed to a faster pace, with rapid decision-making, higher risk tolerances, and fewer distractions. So, when just starting out in our industry, they’re often surprised and frustrated by what they encounter.

And if they need to show traction quickly — signed clients and revenue — that pressure can be rough on them, and in turn, they might begin to pressure the credit union to move faster. That rarely helps the situation, and it can damage the relationship.

Of course, credit unions do need to move faster — we’ve invested heavily in doing that at WSECU — but founders also need to understand credit unions are highly regulated, with lots of moving parts and several concurrent priorities. Both sides need to be realistic from day one about timelines.

By the way, credit unions often misunderstand fintechs, too. When I asked Scott for his thoughts on this, he said, “Credit unions need to have strategies, systems, and frameworks in place long before engaging with a fintech, as the absence of a fintech strategy and related preparation can lead to paralysis when a decision is actually needed.”

What’s one piece of advice you’d give a fintech about how to partner with credit unions?

PK: Be authentic, put your motivations on the table right away, and always start with your “why.” There’s a reason you do what do, and we’re investing in people as much as we’re investing in a solution. Oh, and be realistic with your projections.

This interview has been edited and condensed.