By Ray Birch
CHICAGO–The “existential” challenge facing many credit unions today is similar to that Dave Mooney faced when he took over at Alliant Credit Union as CEO. Seventeen years later, with Mooney retiring, he is offering some lessons learned and advice for other CU leaders looking to not just survive, but to grow and prosper as Alliant CU has.
“We were facing an existential challenge, as a single-sponsor credit union—then known as United Airlines CU—dependent on a troubled company in a troubled industry,” recalled Mooney. “So, we made the decision to diversify our sponsorship and membership and really become a competitive financial institution, going to a community charter and placing an emphasis on digital transactions over branches. When I came on board we were basically a credit union that resided inside the United Airlines company store. We had to diversify.”
A similar, existential decision is facing credit unions today, according to Mooney, who is now retired from his role as Alliant CEO and has been succeeded by Dennis Devine. Just as Alliant Credit Union had to, Mooney said many credit unions must now pivot quickly to further emphasize digital services delivery as the pandemic accelerates consumers’ shift to remote banking.
Mooney said it will take courage for many credit unions to de-emphasize bricks and mortar in favor of e-services—as Alliant did many years ago. When those CUs do so, they will face the same issues and decisions as did the CU formerly known as United Airlines Employees’ Credit Union, said Mooney.
“We had to adopt a new brand identity,” he explained. “We cut our employment and operational cord with United when I came on board. We had to upgrade information systems—as we were pretty primitive in that area.”
The move to remote services led to the launch of one of the largest credit unions in the country, growing from $4.3-billion in assets in 2003 to whatis now the eighth-largest CU in the nation at $13 billion. The credit union’s assets grew by nearly a billion-dollars per year over each of the last four years. Capital was 9.91% at the end of 2019.
Branches Close for Good
Alliant, which has transitioned to a national, digital-direct banking model, was still operating two branches when the year began.
“We closed them due to the health crisis and we just decided we would not reopen them,” said Mooney. “We are now completely branchless.”
What credit union decision-makers now need to pay attention to, as well, Mooney believes, is how the emphasis on digital is moving consumers away from the concept of a primary financial institution (PFI).
“How do you adjust to the changing consumer relationship—when PFI is getting thrown out the door and the Internet and mobile banking has changed everything?” said Mooney.
Mooney stressed consumers are moving away from bundling services with one primary financial institution.
“They are unbundling,” he said, emphasizing the evolution is happening fastest among higher-wealth consumers. “The idea of having my checking account locally is going away. Why would I get .005% interest when I can go with one of the high-yield online players? People are getting very comfortable with having their banking accounts at several different institutions and then consolidating those themselves under a financial management tool, for example. The consumer is going in the other direction now. To be selected you can’t just have a menu of products, you need to have a compelling value proposition in each product to be able to compete effectively.”
Low Expense Ratio
Perhaps the biggest value proposition delivered by Alliant over the years, said Mooney, is its streamlined operations that have allowed the credit union to run very efficiently, posting 1.37% net operating expenses-to-assets ratio at the close of 2019. That has allowed it to offer very attractive pricing across all of its offerings.
“Throughout our evolution I’m proud that Alliant has delivered consistently superior financial returns to members, ranking in the top 2% of credit unions in member giveback,” Mooney to CUToday.info.
David Mooney
MONEY in 2019 recognized Alliant as the Best Credit Union of the Year and Bankrate named Alliant Best Credit Union in 2020. Alliant’s focus on the digital member experience has also helped Alliant earn NerdWallet’s recognition for Best Online Experience in 2020. Since 2016, Alliant has received recognition as one of country’s best workplaces in the medium-sized business category by FORTUNE.
Mooney said being recognized for excellence is rewarding for the entire organization, and he is “extremely” proud of Alliant’s staff.
“I am most proud of our human capital,” said Mooney. “We are consistently in the top 15% of companies in Gallup's database for employee engagement. We are perennially among the top great places to work in several rankings. We have a highly engaged workforce, and to me that is critically important in driving staff and credit union performance. It's been a huge competitive advantage for us over time.”
The Changing Game
Turning back to the company’s focus on digital, Mooney said he always realized the Internet was changing the game for financial institutions.
“As we have said for a long time, the credit union is in your pocket. But it’s more than that,” said Mooney. “The effect of the Internet on banking goes well beyond access. In the new dynamic consumers have access to abundant information, which has fundamentally changed the nature of the marketplace and competition. Once consumers were restricted to a small set of providers within a convenient distance of their home or office. Now they can bank with national providers. Online applications, online account openings, as we know, have become much more prevalent in recent years and those things will only accelerate with the health crisis.
“Branches, your location in the marketplace, used to dictate your relevance. Not anymore. And a branch presence can be very expensive,” he said. “You can’t have your relevance tied to a local office because then you are constrained by the local market. And by us being essentially branchless over the years it has lowered our operational costs and given us a competitive advantage. For a typical bank or credit union, 60% of their costs are in branches.”
A ‘Hand in the Business’
When Mooney is no longer paying attention to those kinds of costs in retirement, he plans to “keep a hand in business.”
“I'm on the advisory board of a startup AI company. I have interests in serving on a board of a public or private company,” he said. “I may do some advisory work for private equity company, and possibly do some teaching.”
The main thing Mooney hopes to do is “continue to contribute.”
“And I am also looking forward to extended travel with my wife, Mindy, and doing a lot of fly fishing. That is my passion,” he said.