By Ray Birch
RANCHO CUCAMONGA, Calif.—Fintechs, once feared by credit unions simply for their speed in service delivery and appeal to younger people, are now increasingly a threat for a reason that has been the traditional wheelhouse of CUs—they are building trusted relationships with consumers, according the co-founder of one of the fastest-growing fintechs.
That assessment was shared with attendees during CO-OP Financial Services’ latest THINK virtual forum by Noah Kerner, co-founder of Acorns, an Irvine, Calif.-based company founded in 2012 that now has more than eight-million users and which began as a platform for micro-investing. It has since expanded into other financial services offerings, overlapping CU offerings in many ways.
Kerner was joined in the presentation by financial journalist Jean Chatzky.
As CUToday.info has reported, many of the fintechs have seen considerable growth. Beyond Acorns, market leader Chime has seen a 50% increase in users in just one year to more than 12-million customers.
According to a ranking by Fortune, Acorns has approximately 8.2 million customers and more than $3 billion under management. Among the company’s investors is U2’s Bono.
How Acorns Has Grown
Acorns’ Kerner shared with the CO-OP THINK Forum how his company has focused on those building trusted relationships.
Acorns offers a debit card that allows consumers to round up purchases and the extra money goes into a savings account. Acorns is available via a subscription model, from $1-$5 a month, and the company offers, in addition to the debit card, investment, retirement, and checking products, and a kids savings account.
A video and additional information on Acorns can be found here.
“Acorns is all about helping people stay committed (to their financial future,)” said Kerner. “We get actively engaged in people's lives. It started with our Roundup feature…and the reason that's important is because it's not about trying to change behavior, it's about trying to merge into someone's behavior and trying to leverage what somebody already does to help them. You are also helping them do something good for themselves, which is why the Roundup, investing the spare change, is so powerful. We're not saying skip that cup of coffee; we are saying have your coffee and the extra will get invested for you. It’s those little things, everyday behaviors, that will help you lead a better life and create a better future for yourself and your family.”
Will Also Sound Familiar
Another key to the Acorns model will also sound familiar to credit unions, as it’s yet again a traditional strength—financial education, according to Kerner.
“It’s about that idea of how do you help people actively learn and how do you educate people at the moment of decision-making?” he said. “In financial services, the concept of just having a product where people engage with you but may not understand the product without education to support it, in my view, doesn't work. So, we think about those moments, particularly when you think about investing: how do you actively educate people when they're making decisions.”
In addition to Acorns’ ongoing financial advice delivered via mobile devices and interactions with its site, the company reaches out to consumers with money management tips at key points. Kerner said Acorns engaged in the practice when the pandemic struck the U.S. and the economy and stock markets tumbled.
A ‘Journalistic’ Approach
“Right around that time we went to an active education model, where we started sending a daily newsletter about what was happening,” said Kerner. “We did that every day for months. We did that because that period was scary for people. We said let's hold people's hands, let's report objectively. We produced the newsletter together with CNBC. We approached it from a journalistic perspective.”
Kerner explained during those months, as the newsletter was being distributed nationally and many people were wondering what was coming next from the health crisis, Acorns’ customer retention scores increased as did their trust rating and Net Promoter Score.
Kerner said those results clearly indicate the model of being very transparent with pricing and products, and providing financial education, strikes a chord with consumers.
“Keep things super transparent and super simple. Let people know what they're paying for and then make it clear what they are getting…,” said Kerner.
‘One the Right Side of History’
Overall, Kerner said the model builds trust and relationships.
“Our level of trust has grown very much in the past few years,” said Kerner. “We have a high level of trust among our customers and we track it. It comes back to doing the right thing. We really have a high net promoter score—in the 95th percentile. We deliver responsible products and make sure people get education. Being on the right side of history, and doing the right thing, is just in my DNA.”
What’s Missing?
Meanwhile, according to Chatzky, outside of what fintechs are doing that models CU behavior, for credit unions the question being raised by the ongoing market shift and the budding trusted relationships between their customers and fintechs is this: “What’s missing?”
“Make no mistake, the fintechs are not going away anytime soon,” said Chatzky. “Why? Because in most cases the fintech service model honestly works for younger consumers and within the overall financial landscape. Many are looking to defragment the financial landscape. They want to become the one-stop, full-service financial services shop.”
With fintechs like Acorns looking to build that trust into their business models, Chatzky reminded credit unions have been around a lot longer than the upstarts and have been emphasizing that same values.
“But if you look seriously at the relationship model that fintechs offer, it’s one that's tapped into the daily and digital financial lifestyles of their customers,” she said. “You just might find that they're showing you a way of creating more active engagement with your members. That's something to think about.”
A Message Repeated
Chatzky pointed out fintechs in their advertisements, typically make references to ability to avoid the “old ways of doing things.”
“We hear that repeatedly in their messages,” she said. “People are empowered to take charge of their money in ways they've never done before—make your money work for you. That is an idea that clearly comes across.”
Chatzky warned credit unions there is a growing perception of fintechs among consumers that they are not only trustworthy, but a friendly and accessible financial services partner.
“And don’t forget, they're all available wherever and whenever you want them—at your fingertips,” Chatzky added.