TransUnion’s Sean Flynn Explores Key Trends Impacting Credit Unions and Community Banks

SPEAKERS
Sean Flynn, Rich Alterman, Matt Tepper

Matt Tepper  00:02
Greeting Lending Link listeners. Before we dive into today's episode, we wanted to bring attention to GDS Link's latest offering ePrescreen365. An easy and cost effective digital solution to present prescreened loan offers to your customers or members. ePrescreen365 can be easily implemented on your website enabling a seamless and tailored experience. Put your borrowers in the driver's seat, allowing them the chance to be competitive and relevant offers all without impacting their credit score. Intrigued? You can find the link to the replay of our detailed demo in the episode description. Now let's jump into today's episode of The Lending Link.

Rich Alterman  00:44
You're syncing up and tuning in to The Lending Link Podcast, powered by GDS Link, where the modern day lender can dive deeper into the future of Data Decisioning and Credit Risk Solutions. Welcome to the show everyone. I'm your host Rich Alterman, and today we're syncing up with Sean Flynn, Senior Director of Community Financial Institutions with TransUnion, where he has worked for almost six years. Sean is a community enthusiast at heart spending the majority of his career in and around the credit union and community bank industries. And TransUnion's Sean responsibilities include leading the execution of TransUnion Community Financial Institutions strategy, and consulting with customers on solutions to their most pressing business issues. Sean earned his degree in finance from the University of New Hampshire and his MBA from Norwich University in Vermont. Sean's passion for community takes shape outside of trade union as well, where he coaches youth sports and serves on a number of town commissions and committees. In this episode Sean and I will touch on key trends impacting credit unions and community banks with a focus on the resumption of payments on federally guaranteed student loans. What credit unions and committee banks need to do to attract new depositors and retain existing ones and so much more. But before we dive into the interview, please head over to our LinkedIn and Twitter pages at GDS Link that's G D S L I N K and hit those like and follow buttons. If you have not done so already, please subscribe to our podcast on Apple podcast, Spotify, or wherever you prefer to listen to your podcast. All right, now let's get synced with GDS Link. Welcome, Sean, I hope you've been having a great week so far. Thanks for participating in our podcast today. We are happy to have another member of the TransUnion team joining us. Having met with Liz Pagel back in February discussing the Buy Now Pay Later industry. Sean, where are you joining us from today?

Sean Flynn  02:32
Yeah, thanks, Rich, happy to join them. I'm in Connecticut. But I was born and raised in New Hampshire. So ultimately, that's really home for me. But we make our home here in the lovely state of Connecticut now.

Rich Alterman  02:43
Great. Where in Connecticut are you?

Sean Flynn  02:45
I'm just south of Hartford, a town called East Hampton. So it's a it's a small, it used to be a farming town. Now it's a lot of kind of young professional families and good school system. Kids like it here. Good sports. So.

Rich Alterman  02:57
Great. Well, thanks for sharing. So Sean, you've been with TransUnion now for almost six years, maybe you could spend a little bit of time sharing a bit on your background before joining to you, and how experiences in those positions have been leveraged in your current role at TransUnion.

Sean Flynn  03:11
Rich, I got my start in credit unions way back when I was a junior in college, actually, I answered phones for a military credit union in New Hampshire. And they had, they had branches on bases overseas in Germany. So it was a lot of fun. And the folks I worked with there are still, a lot of them are still in credit unions today, some of them in executive roles. And so there was a kind of a tree of us that have made our way throughout the industry. So I still keep in touch with many of them. But since then, I've made a couple of quick stops one at a mutual savings bank in Boston, and then a commercial lender, where I did a lot of commercial real estate, like government projects and stuff like that, but ultimately came back to the credit unions and spend most of my career before TransUnion in lending and operations there. So I think those experiences, they've helped me help our customers here at TU. And it helps them understand our customers, the problems that our solutions solve, best practices around using some of those solutions and implementing from those solutions. And it's really the best part of my job, honestly. And that's the, you know, the consulting and educating our community bank and our credit union customers on how to solve problems with TU data and the analytics. It's a real blast.

Rich Alterman  04:29
Great. Well, Boston is one of my favorite towns, I went to school there. And we returned, returned back in 85, and worked for Bank of Boston for three years. So certainly a town I always like to go back to and appreciate you're sharing that with me. So before we get into business, I always like to get a little personal. And as I mentioned in the opening introduction, you said that you serve on a number of town commissions and committees, maybe you can share some of the key objectives of these groups. And what were some of the personal drivers for getting involved?

Sean Flynn  04:56
Yeah, I mean, I think just growing up in the credit union space and even working at a mutual bank, there's this big focus on doing your part. And so I've always thought that was a big part. I mean, I go back to when I was a little kid and my, my parents spent like a week, you know, a couple of days outside of work or whatever, trying to help build the playground for the kids in town. And we've done that here in our town as well. But, but ultimately, I've always had this like deeply rooted sense of like, you gotta give back somewhere. So first and foremost, I think, you know, the youth sports thing. I really enjoy that and I've coached baseball and soccer and basketball recently, and that's, you know, especially depending on the age group, it's it's an exhausting thing to do, especially on your weekends. But the juice is really worth the squeeze there. I really enjoyed spending time with some of the kids to get to know them. We run into them in the grocery store in town and stop, and I get "Hey, coach". And so that's always fun. I just recently joined our town Economic Development Commission. And our kind of goal is to make it easier for businesses to operate here in town, whether that's through incentives or, you know, building community or building some sort of, you know, programs to where they can run their business successfully. And ultimately, we want to attract those small businesses into town. So I'm new to that commission. So still learning the ropes there. But I, the last thing I'll mention I'm pretty passionate about the education system. I was a professor part time, you know, I worked in credit unions, and I do some volunteer work here in town, for our school system. And with the school board. Town politics are not for the faint of heart. So I just do my best to kind of operate around the peripheral. But yeah, that's a it's a it's a passion of mine as well.

Rich Alterman  06:35
Yeah. Well, great. Well, thanks for sharing that. So I, I did learn a little fun fact about you. So I'll need you to explain. So I understand that A you're both and you love weightlifting. And you're also a fast food junkie. So I got it, it's one to help the other.

Sean Flynn  06:49
Yeah, no, it totally is. I mean, it's so so first off, yeah, I do enjoy hitting the weights. And I always have, but we built a basement gym, sort of like on the during the pandemic days, we paid a premium for wood and flooring and all this stuff was probably double what it should have cost me what we finished a portion of our basement and put a home gym in there. And so my wife and I have really maximized the ROI on that investment. So we it's sort of become a little bit of an addiction for me over the last year, year and a half, really spending a lot of time down there. Clearly, we're at video you clearly you can see I'm not getting into bodybuilding anytime soon. But it is something I do enjoy and that kind of helps me in a number of ways. But yeah, fast food, love it, love every bit of it, I do hit the weights a little extra hard if I played out eating it, or if I have eaten it, I know I gotta go home and kind of burn it off. But it's funny, I'll share this quick story and I'll, this executive shall remain nameless, but there is an executive at TU that I've done some work with and he's also a fast food junkie but he probably weighs about half of what I weigh. So he can handle it a lot better but when we travel together if we go into different customer meetings or conferences or something and we are the West Coast, we always say like you know kind of give the the wink like let's let's hit up Jack in the Box. That's our our favorite spot and so we always make time for it. It has this kind of stuff feels so good when you're eating it but the sort of the food hangovers the worst after. Like my wedding, my wedding band doesn't fit because my body is on sodium overload or whatever. But yeah, that's, you got the real details of my personal side there.

Rich Alterman  08:30
Hopefully your weightlifting equipment downstairs doesn't have like towels hanging over it like a lot of people's peloton bicycles that they....

Sean Flynn  08:37
Oh no, that it doesn't.

Rich Alterman  08:42
Good. Okay, well, let's get down to business. So when we first met in late August to discuss topics for today's podcast, September 1 was right around the corner which ended the three and a half year pause on payments associated federally backed student loans with payments starting actually in the month of October. I feel it goes without saying that lenders around the country are having internal discussions on the impact that this might have on their customer base. According statistics that I've read about 44 million Americans must start repaying their student loans having secured a reprieve back in March 2020. As part of the pandemic related relief measures. About 20% of these note holders, according to Robert Farrington, founder of College Investor will be making student loan payments for the first time. While there are several new programs available such as the Income Based Repayment Plan save savings on a valuable education. There's no doubt this could have an impact on these consumers' overall financial positions. Case in point I came across an article on the Market Insider Website published in June of this year. It noted that according to a recent survey of about 2000 consumers by Morgan Stanley, concerns over upcoming debt mortgage payments has soared to the highest level since the survey began and highlighted that part of the surge is due to this October's restart of the student loan payments, with the average payment being between $300 - $400 based on various estimates. According to the survey, only 29% of consumers who have federal student loans are confident that they will have enough money to start making payments without adjusting spending in other areas, meanwhile, indicated that 37% of respondents say they will need to cut their spending in other areas to make their student loan payments and a whopping 34% of respondents said they will not be able to make payments at all. In this case the restart of payments will negatively impact low income households and most according to the survey. Consumers concerned about the impact of the imminent restart of student loan payments has spilled into other areas of their finances. The Morgan Stanley survey indicated that 31% of consumers were worried about their ability to repay debts and 27% to pay rent or mortgage, with both metrics reaching an all time high. With all this said, let's jump into finding the insights that TransUnion has pulled together. And some of the guidance and advice that you're you're giving credit unions and community banks as they work through how they're going to deal with potential problems coming down the road. So Sean, why don't you start and kind of walk through some of your findings? And along the way, I'll inject some questions as appropriate.

Sean Flynn  11:03
Yeah, sure. So Well, first and foremost, just acknowledge, I guess this this is happening, federal student loans are, are now coming back into repayment. And a lot of people are going to have to make payments on loans, they haven't in three and a half years, or in some cases, have they graduated, or they're now kind of working and out of school, they're gonna have to pay them for the first time. So, you know, we at TransUnion, we took a look at some of the data that are available to us with a couple of questions in mind, we thought, you know, are people in a different position now than before the pandemic when they were paying loans, student loans? And if so, is that going to create an issue here? For the good or for the bad? The second question is like, are they going to be able to afford these payments? And will that create an impact in other areas of their financing, you reviewed a lot of the qualitative data, which I think is, we'll find when we talk through some of this, that that's going to support a lot of the the quantitative stuff that we've went through. So we found a couple of dynamics that were sort of at play here. Before I get into the the data, let's just kind of talk about what's going on. I think, first, the, the pandemic era stimulus and lender accommodations were historic in nature, and never really happened before. And a lot of folks use that as a moment to kind of catch their breath, so to speak, and reset something's financially. So and this is anecdotally I don't have like a ton of data behind this. But we did see a lot of consumers paid out credit card debt, reduce their payments, and really use that extra cash when they weren't really able to go out and do anything. Or use the ability to not make payments on some of these loans. They paid down the debt, and they did the right thing. And for some folks, they are in a better position today than they were before they went into the pandemic, because of those accommodations. And so that's a good thing. So with that, though, paying down balances and paying off debt, a lot of times that produces higher credit scores, because utilization and other things like that go into most scores that are used in underwriting. So today, on average, the credit scores are higher than they were in 2019. In some tears, they're higher than others, but across the board, for the most part, the average or the median score is higher than it was four years ago. And so that influx of cash, that consumers had, created this opportunity to increase their scores, because their financial situations were better. So the scores were reflective of the risks that they have at the pad at the time. And so you know, at the same time, you've got this dynamic going on, where all those people that have cash, those, that cash is sitting on an account somewhere to financial institution, as well as institutions with all these, you know, excess dollars in deposits. And so there was a full tilt, full time kind of marketing engine going on, for a lot of people call it end of 2020, all the way through 21, and into 22, the whole lot of marketing going on there. And so a lot of people with these new scores, and these higher scores, they were getting pre approved offers, or they were applying for loans, they typically wouldn't have applied for before. And they were getting approved because scores were higher, and their debt load was lower. Right. And so that, like affordability was there and everything else. And so you got people that took these new loans, new cards, new things they had never had before, because of a lot of those marketing campaigns. And fast forward to today, many of those folks who took out those new loans or bought new homes during the the time where prices were really high, or bought new cars, where prices were at all time highs, their monthly budgets have adjusted to a new normal without that student loan payment, you know, those are due again, and that's going to create a level of payment shock. And that's what we really sought out to find. And it's not just about the student loans, right. I mean, to your point, right, I did a podcast the other week with a gentleman from Black Book. The average car payment right now is $740. You know, as I stated on a prior podcast, credit card debt has exceeded $1.1 trillion. For the first time I was just reading today that delinquencies are starting to ratchet up. Despite what we'll be hearing the market. There's no doubt inflation is still really hitting people hard. Yeah, when you throw on another $300, that becomes a problem. In one of our conversations, I understand that you guys had developed some interesting attributes to kind of look at excess liquidity before and as we move forward, can you can you talk a little bit about that?

Rich Alterman  14:54
And it's not just about the student loans, right. I mean, to your point, right, I did a podcast the other week with a gentleman from Black Book. The average car payment right now is $740. You know, as I stated on a prior podcast, credit card debt has exceeded $1.1 trillion. For the first time I was just reading today that delinquencies are starting to ratchet up. Despite what we'll be hearing the market. There's no doubt inflation is still really hitting people hard. Yeah, when you throw on another $300, that becomes a problem. In one of our conversations, I understand that you guys had developed some interesting attributes to kind of look at excess liquidity before and as we move forward, can you can you talk a little bit about that?

Sean Flynn  15:30
Yeah. And in this I'll tell you sort of what the data what we found because we do have some of those attributes that look at excess payments. One thing in particular, we look at pretty frequently and have for a number of years is what we call aggregate excess payment. And this is a summation, so to speak of the additional payments that our consumer makes on their loans on a monthly basis above and beyond the minimum payments due so if your total payments are $100 that are due every month and you make 150. That $50 is what we would call excess payment, right? Pretty, pretty logical, we've actually found that measure, though, to be a pretty, a pretty darn good proxy for excess liquidity. It's not perfect, but it's pretty close, I mean, we get pretty close to, you know, at least directionally and understanding if people have that excess money to put on other payments, that usually suggest that they have excess dollars in their in their pocket at the end of the month. But for today, one of the things we did is we looked at this measure of the for the student loans, we looked at the measure of excess liquidity across different segments of consumers. And then we said, well, what's going to happen when the student loans come in. And so some of the findings are pretty interesting. So for example, today, about two thirds, so 66, some odd percent of consumers are now facing a payment that's coming due again, that they haven't had so resumed federal student loan payment of $300, or less. So two thirds of, of consumers with a student loan, those people have a payment due of $300 or less. But that same segment of consumer, and again, these are consumers that have a federal student loan payment coming due, 52% of them make less than $300 in aggregate excess payment, on average on a monthly basis. So they have a payment of 300 coming new, but from what we can understand they have less than 300 in excess cash hanging around. And in fact, all of those those portion of consumers that have student loans, 22% of them currently make $0 or less on average excess payment, meaning they're they're struggling to make their minimums due without the student loan payment. 22% of people are kind of still struggling to make ends meet, at least from the credit standpoint.

Rich Alterman  17:52
And once again, to the credit card debt, right, there's more and more people are looking to that plastic to solve some of their economic problems, higher grocery, higher living gas prices, those monthly minimums are going to be rising to interest rates are rising, they're talking about maybe another two bumps in interest rates. So their credit card even if they're only paying that minimum, they may be looking at higher minimums over the next couple of months.

Sean Flynn  18:16
Absolutely. Yeah, I mean, that's that's part of the problem, right is it's not just that people got new loans, they did get new loans. But the minimum payments on those balances are higher than they were before the pandemic because of that, where interest rates are. And that's the reason auto loans or auto loan payments are higher. You know, I bought a car before the pandemic and locked into 2.6% on my car loan. To kind of close out on the student loan topic though, when we took that federal student loan payment that those consumers were going to have to start making. We added that back in to that sort of monthly budget. And we wanted to see what happened with excess payments. And the what we found was kind of kind of startling. And that I'd like I said before 22% of consumers with a federal student loan payment coming due currently make $0 or less in AP. When we add the student loan payment in that number jumps up to 49%. So in other words, about half of the consumers that have federal student loan payments resuming are either going to have exactly nothing left at the end of the month or less. So it's going to put a good amount of folks in the pinch, for sure.

Rich Alterman  19:29
One of the things I think that would be really helpful and you know, at GDS, where clients use our software for underwriting and bring in data from TransUnion. And, you know, systematically, we're evaluating credit reports. I don't think a lot of people necessarily understand how federal student loans get reported to the credit bureaus, we read that they're not going to start reporting again for 12 months under the program. So maybe you can just give a little background on how how student loans federally federally guaranteed student loans get reported. Second would be how do you identify that a student loan is coming from a private entity versus the government? And then lastly, maybe just talk a little more about I know you guys have just released your student loan attributes that come back and one of your segments I think, at CH01 for those geeks. Get down to that level of detail. Maybe can you just touch on those three points? Once again, what how do they get reported? You know, how do you detect that it is a government student loan? And lastly, maybe just talk at a high level about the attributes you guys have assembled?

Sean Flynn  20:36
Yeah, sure. So a couple of things. We are in pretty regular discussion with the Department of Education and we get information from them. That's, that's relatively new every once in a while here. But the current information we have today, which again is subject to change, is that no derogatory, reporting on the federal student loans that are coming back into repayment will be reported to the credit bureaus for 12 months. There could be folks that don't make a payment for 12 months, and that it may not hit their credit file. Again, there's some situation that may change but at this point, that's the information we have.

Rich Alterman  21:14
Is it correct that even before all this, that student loans, federally guaranteed student loans don't even get reported? As far as delinquency until they are 90 days past due

Sean Flynn  21:25
Before the pandemic for the most part, most of the student loan servicers that were servicing some of the federally guaranteed loans did not report delinquency until 90 days past due. But in the fact that the majority of services were only reporting derogatory details at 90 days or more. So that was, you didn't see 30 or 60, show up on the credit file for most servicers.

Rich Alterman  21:48
Okay, so the ability to detect that it's a federal guaranteed, is it really just based on looking at this subscriber and seeing that it is one of the servicers that supports those programs?

Sean Flynn  21:58
Yeah, that's one of the ways we've done it, we have a set of about 400 attributes that are specific to student loans, including those that are federally guaranteed. We have multiple data points, though, that we use to identify whether or not a student loan itself is federally guaranteed on their credit report.

Rich Alterman  22:15
But one of the things that you said that you do in your role is advise credit unions, community banks on on ways they need to look at their risk management strategies, maybe make adjustments. So obviously, we've talked a lot about the student loan, we've talked about credit card debt. Lending Club puts out a joint report, I think it's every quarter with payments, that shows that more and more people are living paycheck to paycheck, even families making over $100,000. So you know, when we think about the consulting role that you play, can you kind of talk to us about how credit unions typically work today? My understanding is that they do rely very heavily on scores. And can that work moving forward? Or do they really need to start incorporating other data assets to make better decisions both to maybe approved people that they would have denied as well as denied people that they maybe would have approved?

Sean Flynn  23:04
That's a great question Rich. So a couple of things, I think it, lending today, in the environment we operate in in 2023. And what will be 24? You, as a lender, it's for lender, it's different than it was even 5 years ago, and certainly 10 years ago. We have a lot more data available to you as a lender these days, and I'm not talking about just traditional credit data, like we've just been discussing, but you know, trended credit data is obviously something that's massively adopted in financial services. A lot more alternative credit data is coming into the fold, and lenders have access to that. And then there's a, you know, I think a lot of the credit unions and banks are getting a lot more comfortable with figuring out what their own data means and how to use their own data, whether it's account data, or transaction level data, and all those things bring value to not just the decisions that are being made, but how a lender might structure an offer, or manage their accounts. And so it plays into how they compete as well. And so it's much different today than it than it has been. And I think, given how competitive the market is, we are of the belief that you know, trend there, banks and credit unions need to continue thinking differently. And considering considering, like the next big thing, or the next best practice, kind of like making sure that they're, you know, doing the things that sort of their competition are doing and keeping up with. And I'd like to phrase this and we've talked about this, but it's sort of like "What Got You Here Won't Get You There", kind of mentality and so making sure that they're kind of progressing and using the most available tools to them, or the best available tools to them to make decisions. So we recommend a number of strategies for our credit union bank customers, and this is a control credit risk, but also to stay competitive. And one, you mentioned the score, I think like, there's still a tremendous amount of value in credit scores in general, they do a really good job at predicting outcomes and rank ordering risk. And we found that the trended credit scores tend to perform far better than traditional models. And so those are our scores, many ones we have, you know, there's a vantage score 4.0, that is the Vantage score version FICO as a 10 T, those trended scores tend to perform far better, and they score more consumers. So there, there a more inclusive score as well. And so you found that those continue to be very predictive, and, and valuable. But then there's also other elements too, it's not just a score. So to your point, especially when you get into making underwriting decisions, you know, be able to understand consumers behavior in this area or another, and how that might impact their financial, the risks that they present as a as a as a credit, that is incredibly important to and we found a lot of folks using the score plus some attributes, or some algorithms or, you know, a traditional or trended score matrix, then, you know, an alternative were blended data score, or even kind of leveraging their own custom model, you know, there are number of players out there that built custom models, and we're one of them, you're one of them. And those models tend to do really well for the lenders that use them. And so, again, there's just there's a ton of data out there, and there's more and more every day. And so I think it's kind of hard to keep up if you're a credit union or bank trying to run your business. And that's where I think we play a vital role. And we're really excited about how we help customers kind of figure out where the, where are the things that I can, what are the things I can go do, they're going to drive the most return to my membership and my customer base.

Rich Alterman  26:53
So, so you mentioned trended scores. So why don't you spend a little, little bit of time for our audience, not everybody that's listening to this podcast, or will be listening to this podcast, maybe it's familiar with what a trended score is, versus a static score, obviously, that leans on trended data. So why don't we kind of go back in time a little bit. Let's talk about when you guys started, you know, adding trended data, and how, you know, some of the improvement that you've seen in models, moving from more of a static score to a trended score, I think that might be interesting

Sean Flynn  27:24
Yeah, no, and I'll, I'll put my historian hat on for just a moment, and then come back, I don't want to give you the the entire story of of of this. But I think if you look back to the the great recession in the US financial crisis 2007 - 2008 and then the 2009. At that point, TransUnion said, we, you know, we get all this data on the metro to file that comes in the reporting file from all these institutions, which includes the payment that was due the payment that was made the balance the credit, limit, all these things. And every month, we replace that on the credit report with new data, and we don't do anything with the old data. So we somebody, I don't know who but somebody at TransUnion said, we should start stringing that together and kind of archiving that and modeling off of it and seeing if there's value and understanding where people are, are kind of heading. And so for a number of years, we did and we kind of started building this trended behaviors database. And fast forward to about 12 years ago, we came to market with what was called credit vision, which is, you know, a trended credit report. And we started building scores and attributes and algorithms off of that, and I think that the industry is really fast forwarding to today, the industry is that has become the standard. Now the other bureaus have their own trended types of data. And again, just being able to understand where someone has come and understand exponentially more data points as opposed to a handful. The more data you've got, the more accurate you can build models. And so that's sort of what our our thought process was and where we came from. And again today, I'd say, you know, just in terms of the success, I think we've got nine out of our top 10 card issuer customers using trended data. I think something to the tune of 80% of our FinTech customers and the FinTech lenders, are using trended data in some sort of decision or account management. And then we've seen the smaller banks and credit unions really start adopting that I think 2020 and forward has just been they've leapfrogged in their adoption of trended scores and trended data. I think the last number who has about 48% of the scores that we deliver on TU credit reports to institutions outside of the top 50 banks, so almost half of those are trended credit scores now, but yeah, really taken hold and really has become kind of the new benchmark in the market.

Rich Alterman  29:55
Cool. Well, let's kind of switch gears a little bit. So you know, as you know, GDS finalized its purchases their technology corporation in February of 2022, which provides credit based loan generation and marketing solutions. The majority of our clients today are credit unions. And, you know, when we speak to them about what are their needs, certainly one of the big things we're hearing is that they need to find a way to attract more depositors and keep more depositors. I read some research by a Raddon Research Fiserv company found that 75% of credit union depositors belong to members who are baby boomers are older, making the need to attract younger generations and important focus. The challenge to attract new members exacerbated by the fact that both millennials and Gen Z prefer national banks over credit unions, and those 25 to 34 are most likely to use neobanks, according to go banking rates survey. I know that you guys acquired Verisk financial services from Verisk in April 2022, which included August information advisory services, which provides benchmarking data analytics models and advisory services, credit unions and other financial institutions. So you know, with that in mind, maybe you can speak to what are some of the services and data points that might be available to you credit union, in particular, to really help solve this challenge that they have of both attracting new depositors, as well as retaining existing ones.

Sean Flynn  31:16
So this one is going to be a little, I don't want to say abstract, but let me let me talk a little bit about some of the strategy behind deposit marketing. And then I'll tell you a little bit about what we're doing and what we're seeing out there. So if you think even 10, maybe 15 years ago, if you as a financial institution needed to go acquire some deposits, you put out a hot CD rate, you get a bunch of deposits, and you can, you know, basically buy my deposits real quick. And sometimes you did that through a billboard on the side of the interstate, sometimes even that through even in the early days of email, email campaigns, or you put an ad in the Sunday paper. And that was, again, 15, maybe 20 years ago. And fast forward to today, we've just kind of ended where we did and a couple, maybe a year ago or so a very long period of economic expansion in this country where deposits were cheap money was cheap lending was, and lending and credit were kind of the growth levers and there really wasn't a big pinch for deposits, maybe a little bit right before the pandemic. But then, of course, that got stood on its head. So now we're in a situation where it's time to market deposits again, and I think a lot of our customers are dusting off those playbooks and saying, okay, like, I'm to put a ad in the paper and, and time to, you know, grab that billboard, I was just driving home from the airport a couple of nights ago. And there's an ad on the side of interstate 91, in Connecticut, for a financial institution advertising deposit rates. So it's still happening. But I think, you know, when we think about how we market loans, it's so different, right? We're doing digital marketing, we're doing prescreens, we're doing prescreen presentment, behind online banking players like CuneXus, and, you know, some of these other folks that are presenting offers when you log into your online banking, but that kind of marketing isn't necessarily happening with deposits. And so we're sort of of the mind that the deposit marketing sort of flywheel needs to change because it used to be very linear in nature. And so things that we're doing is we've, we've acquired a number of years ago, a rapid modeling capability that has a tremendous amount of data behind it as well. And we can model not FCRA type attributes. And we can, we can build custom scores very quickly. But we can actually take an input file from a bank or credit union of people that have recently opened direct deposit, or set up direct deposit. And recently open checking accounts. If they say we want a lot of people that looks like this, we can go find a lot of people that look like this, right? And we can kind of say, Okay, give us the geographies you want. And we'll, we'll tell you who those people are, and they have a propensity to bring deposits over to you. And that's different, because it's more of how we can learn marketing today. So we've we've kind of overlaid that to deposits. That's one way of it. And then I think, once you get them in there, once you get them hooked on the offer, maybe it's a checking account, maybe it's a free Yeti, or whatever it is, you got a consumer that says I want to sign up with this bank or this credit union, a lot of times they go to the website and either have to start the whole application over again, or it's a lengthy process, and there's some identity stuff that doesn't happen real smoothly. And so it's it's frustrating for the consumer and some of them, just abandon it. And so I think there's a there's sort of like an onboarding and identity resolution problem there. And so what we've done is brought a suite of origination solutions to market that are identity focused that help you verify the person is who they say they are, and that the person on the other end of the phone is actually a person made the right person that that and they do it very passively, but very quickly and very accurately. So that helps the onboarding experience. And then the last piece of that sort of flywheel wrench, I would say is, you mentioned Argus. And once you've got depositors, once you've got people that are using your accounts, whether that's a CD, whether that's money market, whether that's a checking account, or a savings, or credit unions out there, their Christmas club accounts, you want to understand what they're doing with their money, and you want to understand you have all right, and so with the Argus consortia, that's now you know, part of TransUnion. There, we have a tremendous amount of data on deposit accounts in the US down to transaction level, where we can say, and it's all kind of depersonalized. So I can't tell what you're spending your money on. But I can tell you what your bank in the customers and your bank, you know, what are they doing, I mean, where's that money going. And that data, and the advisory that comes behind it, the advisory services that we offer, really helps credit unions and banks understand what people are doing with their money, and do their products meet their needs. And so kind of keeping people engaged and making sure that those accounts stay profitable, and that they stay, you know, in good standing, and that they are accounts that can continue to grow. And so when you get that data, kind of feeding some of the campaigns as well, then you've got this sort of life cycle that happens. And it's much more modern, much more data driven, and much more analytical in nature. And that's one of the things we're really trying to help our Credit Union Bank customers achieve.

Rich Alterman  36:36
Going back to your, your tagline, "what got you here won't get you there", we're not going to see any more set of steak knives or a free, you know, free toaster oven.

Sean Flynn  36:47
It's funny, I'll say this, I tell this to other customers when we talk to them, but it wasn't long ago, it was after the after 2020. So it was between the last two years I'll say we met with a customer, let's just say they're a financial institution, I will tell you if they're a bank, or if their credit union, but we're talking about deposits, we're talking about loans and and some of the tools that TransUnion brings to market and the the institution where the leader said, you got a question before we're really trying to figure this one out. You know, we've we dusted off this deposit growth playbook that we've got, and we're we're trying to market deposits, and it's just not work and he said, do you have any insight as to which giveaway is the most successful in bringing accounts in and without a without a smirk or without a pause? I said toasters, hands down toasters. And it took him a second because he, like took a note down. Oh, toasters. Okay. And then I think he, as he was writing it, he realized that was kind of messing with them a little bit and got a good laugh out of it. But yeah, I mean, those those days are sort of gone. I mean, there's still people that will move for, you know, yeah, to use, or whatever the new giveaway is. But I think for the most part, people want to go where their money is going to do the best for them.

Rich Alterman  38:03
I'll share a story. So I'll let people connect the dots. But when I was working for a credit card company, the head of our marketing department said one of our problems was that we didn't have a very pretty credit card. And my boss kind of shrugged it off, like, Are you kidding me? And then I happened to be down at Faneuil Hall in Boston one day, and I was at a store. And this lady was had pulled out her credit card to pay, you know, while she's standing in line to pay the bill. And it was a credit card from Shawmut bank. And it was a picture of these ships in the Boston Harbor. Lady behind her actually saw that card and said, God, that's a really attractive card. And the woman said, yeah, that's why I use it. Yeah. So I went back to my boss and said, Hey, we may have a problem. We don't have a really pretty card.

Sean Flynn  38:52
It's funny, though. It's good. I mean, you know, I personally just recently got the Boston Celtics credit card, because we went to a Celtics game and I said, man, like that's gonna look really good in my wallet. So maybe I'm one of those folks.

Rich Alterman  39:04
Well, look, Sean, we really appreciate your taking time to chat with us today. And it always nice to have our friends from TransUnion join podcast. So this is Rich Alterman. And we've been syncing up with Sean Flynn, Director of Community financial institutions with TransUnion. Once again, thank you, Sean for joining us today and sharing information on how credit unions and community banks and lenders in general need to be thinking about their credit risk strategies, especially with the end of the pause of the federal student loan debt repayment, which took place on September 1. We hope you've all enjoyed this podcast, please stay connected with GDS Link and The Lending Link to listen to future podcasts and catch up on once you've missed. Thank you and make it a great day.

Matt Tepper  39:45
Thanks for tuning in to The Lending Link. As we wrap up today's episode, we'd once again like to highlight GDS Link's innovative offering ePrescreen365. A streamlined and cost effective digital tool designed to showcase prescreened online loan offers to your customers. By easily integrating ePrescreen365 into your website, you can provide borrowers with seamless and bespoke loan offers and the best part they can explore these offers without any hit to their credit score. Curious to learn more? Find the link in the episode description to access the replay of our recent live demonstration. Thanks again for listening, and we will see you on the next episode of The Lending Link.

Rich Alterman  40:25
Thanks for listening. If you've enjoyed today's episode, please be sure to subscribe on Apple, Spotify, Google or wherever you listen to your podcasts. And be sure to leave us a review. Follow us on LinkedIn and connect with us on Twitter at GDS Link that's at G D S L I N K. Have a question for the show or have a specific topic you want us to cover. Hit the link in the description to drop us a note. Thank you for lending us part of your day. Make it a great one.