Revolution: Future of Credit Unions and Community Finance -[FULL INTERVIEW]

0:02
Hi, everyone, I’m here with Andrew rabbit today, he’s the CEO of in q2, and in q2 are in the cloud services space targeted around credit unions, community lenders, and affordable lendings. Andrew, thanks very much for joining me and giving us a bit of a whistlestop tour of what you’ve been seeing in the industry.

0:19
Thanks, Chris. I really appreciate the opportunity. So to

0:22
start off with the first question, what what are some of the trends that you’re seeing, particularly in the credit union space, or the community lending space? We talk a lot about cost of living as an example. That is that’s that you’re starting to see that stuff flow through in terms of your customers?

0:36
Yes, although it’s a really interesting challenge, because for the credit union sector, and the community lending sector, the cost of living crisis has been a thing that they’ve been dealing with for decades. It’s not really a new problem. So they’re quite well geared to deal with people who are living in a situation where their income falls well below their their outgoings and, and so they’ve always been on that kind of cutting edge of trying to find solutions to help people where mainstream finance just can’t find a way to do that. And I suppose the real impact of this is that there are just not now more people in that position than there were before. And so actually, the biggest challenge for our lenders is really around how they cope with a capacity increase, whilst not diminishing the level of service that they’re able to offer their existing members and customers.

1:34
So it’s not a change of process per se, or a change of characteristics or change with their portfolio, it’s just a matter of volume that was coming through. And if they seem volumes tick up, or people asking for Top Up Loans more on those kind of things. Is that stuff starting to flow through?

1:48
Yeah, just generally, across the sector. Yeah, there’s a there’s an increase in the numbers of people joining, membership based, so people joining and certainly the number of loans, that has increased quite significantly latest data, end of July, suggested there’s 2.2 billion pounds worth of lending out, which is quite significantly up on the previous year. I think there’s certainly a general trend. And just to set that into context. This is a sector that five years ago, was relatively unknown, it served a pretty set group of people who knew that they existed. And in a lot of cases, they found them almost as a last last resort, and then became quite sticky. What we’re seeing now is that there’s a lot of people coming through who probably traditionally wouldn’t have known that they were there, just because we’re able to open up more avenues to allowing people to find them, and putting them in more mainstream places like price comparison sites, and things like that, so that people can see that they exist and access to services.

2:54
One of the challenges, particularly on that credit union space, traditionally, it’s always been quite community led, or it’s been like locally led, but then you have issues around scale as a result of that. And when you’re up against FinTech lenders, when you’re up against the large banks, I imagine that can be a challenge for some of these folks. I mean, is that is that sort of driven consolidation within the sector? Or is it driven for like this need, I suppose to sort of upgrade to certain extent?

3:18
Yeah, this, this is the overarching problem, right? If you are a lender with a brand, you can go to every newspaper, every TV station, you can be in the middle of Coronation Street with an ad for talking about your brand. What we’ve got is a group of 200 plus separate organisations that are all focused around a community, it may not be a geographical community might be trade. So we usually deal with the police, the fire service, whatever, those kinds of things. But you’ve also got geographically bound ones, and they have a thing called a common bond. So for example, you live or work in a particular town or city, or county or whatever. And so that geographical disbursement also has a challenge around how you how you create a single message and a single experience because you can have credit unions that are very small. So when you arrive at them, everything’s very paper based, very manual, very different onboarding process to a much larger one. And certainly, what we’re seeing is that we’re trying to bring an element of standardisation without taking away that individual community, Finland ethos, so we want to bring an equivalent set of services, but without taking away their individual identity as an organisation. And that really is the kind of challenge for for organisations like Cujo, principally because what you also have is a lack of economies of scale. So you’ve got a group of lenders who between them, if you combine them, actually probably have a quite a significant footprint, multiple billions of pounds of liquidity and capital available. To lend so in the global scheme of things, they are actually a very significant systemic player as part of the UK it’s kind of financial services. Individually, none of them punch up have none of them fragmented ever get above the parapet as being a thing in their own right. Yeah. And I

5:17
know we were chatting before. I mean, there’s quite a bit just looking at the credit union market, there’s quite a sort of spread, I suppose between like a couple of lines, we’ve got a couple of large ones or as a few really large ones. And then you’d have this tale of really, some of them are really quite small because they’re based on smaller communities. Does that that sort of mass exacerbate some of the economies of scale kind of issues, thicken some of the smaller ones? What are some of the what are some of the big things you think that they’d be missing? That sort of puts them in a weak position in terms of competition with say, some of the commercial lenders or commercial financial services? Yeah,

5:47
it’s quite a broad spectrum of things that this particular sector as it happens, I think technology is definitely a big thread through. But technology is an enabler to a lot of other things, right. Technology in its own right isn’t the answer. There’s a whole thing around the messaging. If you think about the, you’ve got brands that go out into the world like Monza and Zopa and people that that can market themselves and give themselves a strapline and they can explain who they are. They’ve got a single voice, from a marketing perspective, but also they’ve got quite a lot of clout in the world about being able to tell the world about what they do. So they command high valuations, and they’ve got investment and all that kind of stuff. Our organisations are very different than not for profit, they tend to deal with people who are underserved traditionally by mainstream financial services. So they are not seen as a place that the mainstream would go. They are typically very underserved when it comes to technology. And so one of the things that we that we took that as our business model, right, we looked at that and said there in lies the opportunity. So if nobody has any money, and everybody’s being overcharged, how do we bring those two things together. And so we created a business model around the idea that you aggregate volume, right, you don’t charge for the technology at all. So the kind of services we’re talking about are very basic, a mobile app, access to the balance, ability to make a payment, ability to be able to return payments and make payments on your loan by direct debit. Whereas a lot of traditionally, credit unions will ask for you to set up a standing order, and more than they already want. And the barriers to these organisations are not just the technology, it’s their own size. So for example, some of them wouldn’t even be large enough to be sponsored for two people to take direct debit payments. So the space that we’ve come in to fill, is we’ve taken a regulated position in some of those areas around payments, facilities management for direct debits, so that we can overcome those barriers. But one of the big things is the equalisation. So the model that we adopt is everybody pays the same, there’s no conversation about how big somebody is. So we’ve got credit unions that have 100 members, and ones that have 30 to 40,000 members, and they all pay the same. But universally, they all pay less than they did if they go directly to any of these suppliers. So I think, as a market, and as a sector, that’s the big challenge that across the board, their ability to be able to access all those services at scale, even down to specifying what it is that they need. Having a system that they can plug it into the sector has systems that have no concept of an API, they’re installed and you know, boxes under the desk, that kind of thing. So it’s bringing all have that connectivity, that then allows them to start to play in a different field. And that field is that speed of being able to make a decision. So the FinTech players sit there in the market today, they pride themselves on being able to make a decision, basically, as you’re applying, they’re making that decision. So by the time you get to the end of the agreement, they’ve said yes to you. Were taking lenders who traditionally might have taken multiple days and weeks sometimes to make those decisions. And asking them to codify those decisions against people they’ve never seen. Whereas a traditional model was, you would actually meet those individuals who have come into an office, you would see them, it’s part of the community, we’re now taking people who may live in their community, but they’ve never met, looking at the data points around those people electronically, and trying to speed that decision up to the point where it’s near instant, to say I will lend to you to try and give them an equal set of tools that are available to those FinTech lenders, but without the price of it. That makes sense. Do you think that

9:38
adds a lot to their to their brand, but also their obviously their competitiveness? But also it’s just what consumers expect these days people are used to looking online or applying online for loans. Do you think there’s Do you think that’s just do you think it brings them up to speed but it also opens more of the market up for them, which sort of compounds the volume issue to a certain extent, but it means they can get access? Or help to more people?

9:58
Hmm, so here As the big conundrum, right? we grapple with this one a lot. So the cost of lending, for most organisations is very high. One of the key reasons why people are coming to credit unions now is because they’re asking to borrow money to borrow less than 1500 pounds, for example, in high street banks, mainstream lenders typically are not offering that product. And so, the high street banks have invested very heavily in technology. But they’ve invested in technology to speed up saying no, reduce the cost of declining. And whilst we weren’t, they might look at it quite that way. That is the reality of it. And so we have to come with come back to the party with the trade off here. That is the opportunity for the customer. If this is the only lender left in the panel, is the opportunity for the customer that I want to be told no quickly. Or that I’d rather somebody take just a moment and look at me in a slightly different way that might not be so electronic, and then say yes. So the one thing that this sector is particularly good at, is finding reasons to say yes to people and support them. But that’s very difficult to codify in a system as everyone has found out. And so one of the things that we’ve been very conscious of, is definitely not trying to break that mould, we want to make sure that there is absolutely a layer of, of efficiency driven in so that if somebody comes through who’s just an obvious yes, that we speed that up and try and turn that loan around as quickly as possible so they can compete. But the real game here is to create capacity for them to continue to serve the community that is underserved, by dealing with them as individuals and dealing with them as human beings, and still taking the time to assess alone still taking the time to look at that person and say, What could we offer you rather than automating a no. And we’ve been really, we’ve invested quite heavily in the idea that the technology should be an enabler to finding how you build a product around the person, and not how you say no to them, if that makes sense.

12:04
Yeah, so you’ve got the technology at one one level, you’ve got almost like the workflow management elements of it. So if you’re on spreadsheets or pieces of paper before you now know where everything is, and it’s now in a workflow. But then it sounds like we’re talking elsewhere, Randall was like these points of friction, that would say, Hang on, at this point, we’re going to stop and we’re going to take a review. And but that can get codified in rather than being something that happened just on a desk versus piece of paper. Whereas before, you’re saying that the rest of financial services will just automatically flow it through because that’s even more efficient to a certain extent.

12:35
Yeah. And if you’ve got super large volumes, you’ve got more than enough people you gotta say yes to that is just a game of saying no more quickly, right? You want to just reduce the cost of saying no, it’s a different problem statement. In our world, that’s mainstream finance problem, right? You got too many applications, you don’t want to imply huge teams of underwriters to look at every single one. So you need to get rid of the ones by default, that you just really not going to want to waste that much time on in our world, heavily. The decisions in the judgement are not made on the basis of traditional data. They’re not used, they will use bureau data as a mechanic of understanding where someone is, but they will very often lend to people with defaults and ccjs. People who’ve been recently discharged from being bankrupt, whatever, there are people who mainstream finance just by default, would have got rid of no pun intended, who this sector will not, don’t want exclusively to deal with those customers, but they will absolutely do what they can to support them. And so for us, you can’t just apply a traditional model, a risk model over these kind of things. Which goes back to the question of what’s the problem for this sector, it’s underserved in its own right by technology, because big banking platforms, big tech just doesn’t have the capacity to be able to look at that more holistic view of an individual from a loans and savings perspective and the background of that person without using those traditional risk models. That alternative way of looking just doesn’t exist. Whereas that is the way that so our tech wouldn’t be that applicable in a high street bank and the high street gangs tech wouldn’t be that applicable in the sector. So there is a there is a challenge there. Around how how far up the tree, you can go with technology before you hit hit that

14:28
barrier. And what about culturally in some of these lenders, how do you find that in terms of you’ve got automation that can definitely help and it can help with workflows and give new functionality and probably increase the volume of lending that’s applicable with the same staff. But how do you find that in terms of you’ve got people who might have been doing it for a long time. They’re very embedded in the community. Being an employer in the community is a big part of that as well. And so people might have fears around technology coming do you find is there resistance around new ways of working or new thinking about it and how do you get around some of that?

14:56
That’s a really good question. There can be resistance So I think in the early days, there was, I think there was a fear of technology, a fear of the idea that, that it would somehow be a kind of computer says no sort of model. And that’s the end of it. And we’ve worked incredibly hard to break that expectation, I always describe this kind of scenario, there are 10 people in a queue, right. And the first three people wants to know, the balance, maker withdrawal, all that kind of stuff, they didn’t need to be there. And so they’re just in a queue. The next, the next three people need help with something direct, they need help filling in a form, they need help understanding something that they don’t understand. They need someone to interact with them and assist them. But they’re behind three other people who are inconvenienced. The four people at the back of the queue, actually walk through the door, there’s six people there already, they’re not sticking around. So you never really know what they wanted, they probably don’t stick around long enough to find out. And they’re the last opportunity. So our model technology wise, is the three at the front and the four at the back. And the capacity that we create, by making them their experience better, is we get more members and they they join because they stick around long enough because they didn’t suffer the indignity of having to wait, the people at the front get a much better service because they didn’t need to interact, and the people in the middle now get everyone’s attention. And for us, that model has now being demonstrated more and more what we’re creating is capacity for people to deal with other people in a human way. What we haven’t seen is this mass exodus of closing branches, taking people away from the frontline, if anything, it’s the opposite, we can now serve people better. And so I think that over time, we’ve managed to overcome that the pandemic helped. Number 17. And our bullet point list of features and functionality was, it would allow you to work from home if you needed to. and M number one. So I think a great deal of Reliance suddenly got placed on the idea that hang on a minute, if I have to close the branch, and the only way to get to me is via that branch, then I’ve lost all access, my members have now lost all access to these services really did help to trigger the idea of resilience and sustainability of the organisation without it. So that has definitely if there was any silver lining in that world that that would be one of them. But I think overall, actually, just generally, I think people are just becoming more and more comfortable. That’s the way you deal with financial services. You said at the beginning, so the way that people expect work now. So the demand is coming through. And especially with the younger membership coming in and everything else, it’s just a growing demand for those kind of services.

17:48
I want to go back to your brand piece or the or the community piece, which is quite interesting, too. So you mentioned credit risk there, do you think there’s credit risk advantages, because you’re almost like taking someone’s like an additional attribute for a population, isn’t it. So if you take a particular employer, then that becomes an attribute for profit, which on the big banks won’t go to. But if you look at it as a subsection of a particular population or in a particular area, then that almost becomes like an additional risk characteristic to a certain extent you think there’s it’s almost like they’re mining a sub population to find people who actually are credit risk, which is not served from elsewhere? Was that a fair way of looking at it?

18:24
Yeah, and I think, actually, it’s a very fair way of looking at it. But it implies that’s been done, proactively to go and do. Whereas in fact, it’s just happening. And employers are very important to the sector. So that link to an employer, and many credit unions have links to the local councils for payroll deduction, savings and lending. They have links to local NHS Trusts, police forces. So there are lots of public sector organisations that use credit unions as their payroll partners, there have been other challenges that have come along. But these guys are ethical, they stood the test of time, they’re transparent about the way that they behave. They’re transparent about the products and services they’re going to offer, and the impact that they’re having. And they’re not for profit. So that really does open the door. And one of the things that they’re uniquely able to do is structure a product around an employee, so you could get a large employer who effectively has a product subset as the kind of sub population has access to that they just wouldn’t have anywhere else. So the can you whereas if you went to high street bank to do that, you’re not you’re not getting Barclays to, to create a product for your business, whereas you will get some attention because these guys are smaller and these community focus. I also think there’s a big piece in here though, about that. Community Impact because you live and work somewhere and you are able to access that and you can see the impact of that locally I save into this organisation and that money is being used to good effect to support people who might live two doors down in the same street, that really genuinely does have a powerful impact, the default rates in this sector are remarkably low, even compared to traditional mainstream lenders, for people who banks don’t want to serve.

20:17
But and I suppose getting back to that brand piece, I think in the irony, almost as if you’ve got commercial organisations that spend absolute fortunes on marketing, creating brands to try and create loyalty, but in some ways, in this sector, the loyalty is actually created by by the product itself, because you’re loyal because you work for the company, and it’s a benefit the company or you, you live in a turtle area, and you value your community, right, to a certain extent. And it’s that, that that loyalty premium almost comes through without the marketing spend to a certain extent.

20:48
Yeah, and it’s very, it’s really interesting, actually, because one of the things that we’ve been able to successfully do recently, are very grateful for actually with the with the price comparison sites and mainstream press compressor sites, is to be able to put credit unions under their own brand, into those price comparison sites, so people shopping around, because to your point, there is that kind of brand association with a lot of these lenders, but actually, price comparison sites get an awful lot of traffic. But if you think back to the last week, if you watch TV, of how many times you’ve seen a meerkat and a wombat on the screen versus seeing an advert directly for a bank offering your product, right? You’ve probably seen the wombats weigh more. And I’m not even talking about loans. They’re just a brand association. But the funny thing is, we’re all quite used to the idea of simply shopping around like going up, it tells it gives me a suggestion of the five or six products. And over time, they become sharper, working out what the eligibility for those products are, so that you choose one that you’re likely to get, well that’s brought about is actually further exclusion. Because it’s now led to a point where for a lot of price comparison sites, there’s a significant population of people, not only the numbers of people, x isn’t going up for the significant number of people who get no or low probability product. And from our perspective, when are putting credit unions in there and CDFIs in there, who are then able to fill some of that gap. And that starts to create a different dynamic, because now this is people who are just shopping around. And that’s a very different tier, if you are financially excluded, you’re not getting a bank loan from a mainstream bank, you’re not going on to a price comparison site to check out who else is there, you’re just going to the people that you know, what we’re not getting is people who have never heard of a credit union, who are just browsing the market. And it may be that the credit union is now the only product that they have available. So then it comes down to service level, then it’s if I click that button, what happens? Yeah. So I was just gonna take the key to that, though, is, as you say, is the branding of it, if you can get that brand association that says this is a safe, warm, ethical place to go? You would hope that you can get people who naturally look at that and go, that’s a choice. If they do see it and a list of five or six lenders they go, I’ll choose to go there, rather than it being the default option. Because he’s the only one that Do you think

23:21
there’s a bit of a danger there, though, if the market widens up so it’s not basically geographically linked, or there’s not that you get that positive selection that’s going on? Because it’s something I feel as part of my community? If you then if a wider group then looks at it, particularly as we go through the cost of living crisis, more people are finding it? Will that change the risk characteristics of people coming through because they’re coming through based on price rather than based on brand? And will that therefore increase default rates, which might change the dynamics around the lending characteristics the banks have to deal with? But is that something that people are gonna have to think about in the sector?

23:52
It is, and it’s something that we’re investing quite heavily in ourselves to look at how we report on that, and be able to add that layer of intelligence to know. And I think a lot of it comes down to the product design as well. So which products you’re offering out and what the risk appetite is, I think the interesting thing here is to create a balance. So what you can’t do is run an organisation that is effectively charitable, is doing low value, high volume lending to people who nobody else will deal with that that that model exists. That’s traditionally where payday lenders were sitting, right. And so their rates were significantly higher than a credit union could ever charge like 10s of multiples higher. And so we’re in that position now, where what we have to do is to try and expose a greater number of people, but without breaking the risk model without taking them into a danger zone, whether they’re just a transaction engine, because that really isn’t the space that they fill. But I do think that there’s a role there’s a wider conversation about the way that the finance Your services system is set up anyway, about how mainstream banks will support those organisations in the long term, especially with the onset of consumer duty and other things where everybody is now responsible for looking at what happens to somebody, after you’ve dealt with them in a way to make them no harm and looking at how those kinds of things can happen, and what kind of support can happen more broadly across the sector, to look after those individuals, but I think you’re right, there’s a risk appetite issue, in terms of how this new group, this new cohort of customers coming through, will impact their traditional risk appetite. But I think fundamentally, at the moment, it’s a good thing, because it’s spreading the risk a little bit, that is bringing in a different type of lending, that slightly higher value, longer term loans, better returns, and that allow them to cross subsidise almost the other lending that they would have done? I suppose

25:57
there’s two ways of looking at that. One is it broadens the market, maybe it gets additional revenues and say I suppose the other piece of thinking is off the people who were then coming through Do you almost have you have an eligibility criteria in terms of credit risk in terms of returns versus the interest rate and those kinds of things. But then is there also needs to be an eligibility criteria are really based around their brand? So do they meet the community eligibility, as well as the community rules, as well as the actual financial eligibility as well, which is something you don’t see necessarily in financial, in public financial services commercial?

26:28
That’s been one of the barriers to them accessing these services in the past, right? If your brand appears, and you are Manchester credit union or Leeds credit union, and you’ve got somebody from South Wales applying, then they’re just going to say no, so there’s a cost associated, and then they have to say no, but it’s not necessarily because the risk is bad, it’s just simply because they don’t fit the common bond. What we’ve now overlaid into that is where the engine that provides the product to the market, so when somebody comes through, we know where they are, geographically, we can return a single product based on the lender who will lend to them, but applying a layer of not only the geography, but some of that initial credit risk assessment as well. So we’re behaving where the engine between the lenders and the marketplace is then to be able to start to apply some of that logic upfront and try and minimise the volumes that come through the people who wouldn’t be eligible.

27:24
Obviously, I spent a lot of time looking at the the collections and recovery space, and the backend has a new saying the default rates are particularly low. That’s been a lot of discussion when you’re looking at default rates, arrears levels, those kinds of things. Is that also true in the credit union space? What’s the sort of the outlook of the the, you know, the people already have at the moment?

27:40
That is a very good question. This is not this is not an official answer. This is my personal opinion. Right? I think that because of its community focus, the way that a lot of the lenders typically have traditionally looked at this is that they will do whatever they need to do, to work with someone to, to not put them in harm, to make sure that they do all the right things, and look after the members. And so you will see, with all of the best intentions in the world, people who have borrowed money and just can’t pay it back. And so I think part of the challenge here is how you now standardise some of those processes. In a way that is more, I’m going to use it word a loaded word on purpose that if any of our customers are listening will be unhappy, but they need to professionalise that. Because actually, there is an argument that it doesn’t do people any favours to not collect the debts that they need to pay in an effective way. Because ultimately, it just impacts and further down the line when another lender might be looking at them and saying I can’t or even an insurance company or somebody utilities company going, you’ve got a load of missed payments on this account. So I think there are certainly things that have to be done here to this sector in particular, to help them to drive that because I think that the systems don’t help. So the level of reporting and available data is pretty poor. It’s very after the fact. And I think them what we know now is that the quicker you can interact with someone around that issue, and the more tools and services they have to interact without having to pick up a phone or send them a letter. And the more self service for example, you can be about that, the better. But the speed at which you interact is really important. allowing someone to go for 714 21 days before you tell them that they’re Mr. Payment just because you’re being nice, actually is not being that helpful in the grand scheme of things and the recovery rates will be worse as a result. So I think these organisations have a they have an empathy And a care for the community which is unparalleled. And I would never want to disrupt at all, I think we came here to embed that not to disrupt it. But I do think that there is a place now for looking at that wider set of processes and structures around how you handle in an ethical way, recoveries in collections when it comes to people falling into arrears, even just recognising vulnerability, even recognising that you might need to do something else. This isn’t just about traditional debt collection routes. But I think that needs to be way more formalised.

30:35
And you just suppose just on a wider basis in the industry, how much has transformed versus say 1015 20 years ago is like night and day difference. And it’s all about support, isn’t it these days, I suppose. And very much what I’ve been seeing elsewhere is like the early you get to things, the early you can offer the support, that you’re minimising the problem, it seems like that’s a common kind of theme everywhere it sounds.

30:57
And anecdotally, and unfortunately, there, there seems to be a quite a significant increase in the number of people entering debt management orders, IPAs, and those kinds of things. And actually, genuinely, anecdotally, because we obviously don’t have any visibility to those, there’s a great deal of disappointment in that, that if somebody had picked up the phone, now that conversation, actually, the organization’s would have had would have accepted a far better return, they would have got a far better return and the outcome for the member would have been significantly better had they have just engaged and I picked up the phone. But we know that picking up the phone is in its own right for a lot of people a barrier. So actually being able to offer some self service ability in that area as well, I think is really critical, because people are becoming more and more difficult to reach, but they have more and more tools available to them. What we don’t want is them to see an advert for an ova and just take it because it’s a quick fix when it really isn’t. And that that kind of financial education being layered into this as well, I think is a really important piece of it. So I think it’s that support and financial education bit. And financial education is a big thing in the credit union world, they really do take that very seriously as well.

32:06
And how much do you think can be done? We talked there about arrears and when people are in arrears, but how much can be done, almost around signalling that or priming that almost pre arrears in terms of that relationship, and the relationship in the community relationship, almost like before people even have problems is that something that’s been discussed?

32:23
It is, and we’ve talked about this a fair bit around this idea that actually there’s a real sense of community around the people that have traditionally been a member of Credit Union began quite a large level of engagement, send an email campaign to credit union members. And it’s eye wateringly high percentages and numbers, that kind of thing where it’s a marketing dream, right. But the biggest thing there is about that kind of that sense of support and help. So there’s no judgement, if you tell us you got to pay something, we’re not going to come and knock on the door and be angry with you and all that kind of stuff that’s been layered in over years. I think the challenge now is there are new people coming in, there are people who are used to dealing with a bank, in a bank, you miss a payment, and there’s problems unitive charges are some of the things that come in, in this sector, if you don’t start to overlay that same level of rigour, then it can often be seen as a bit of a soft touch. So I think there’s that bit, but the community bid is super important to that message, because there’s almost a sense of, I’m letting down my neighbour, if I don’t make this payment, right. But that’s, that’s something that a lot of bigger organisations, I think, HMRC have done a whole bunch to for a nudge theory and all that kind of stuff, right to replicate. These guys just have that embedded in their DNA. I mean, even the concept of being a member, right, I’m a member of an organisation, I part, own it effectively, at the end of the year, we make a profit, I get a dividend. It’s that kind of ethos. So I think they have that in spades. It’s how they balanced that with the things that they need to do as a business to keep the business alive. There’s no point in being nice, warm and fluffy and ethical and a wonderful place to go if actually, you’re inefficient at recovering the money that you need to actually stay open.

34:11
And I suppose a ticket for the population changes as a reaction to what’s going on the economy and the sort of the population changes, they make changes in some sort of risk criteria at the front door, and you get a slightly different kind of customer coming through. I suppose it’s an interesting challenge. I mean, what’s your kind of what’s your kind of outlook for the next sort of two, three years? I mean, was in this sort of economic doldrums? It feels like a little bit at the moment. Hopefully, it’s not gonna it’s not gonna get worse. But what’s your kind of view for the next sort of 335 years for the sector, but also for the economy as well?

34:41
That’s a great question. I’m actually pretty optimistic. I think something’s going to shift here that’s needed to shift for a long time. There’s been a lot of talk for many years about millennials and Gen. Zed and all that. People talking about ethics, and people talking about Purpose, people talking about the idea that they want to have relationships with companies that they understand that they have ownership of, there’s a whole kind of movement, actually. And I was reminded the other day by one of our customers that I keep talking about this as a sector, and actually the credit union describes itself as a movement. And I think that’s a real, a really important way of looking at it. And if we look overseas, in America, 54% of population have a credit union account in Ireland and 75%. In the UK, it’s like two or 3%. So I think there’s a real opportunity here for this sector, this movement, to really start to engage the population. And I think this scenario right now is, it’s incredibly tough for so many people isn’t new, it’s just more people affected by it. And I think the more the broader the message can be that this set of organisations is here to help. The more structured it becomes, the more sustainable it becomes, actually, it becomes more embedded as a systemically important part of our financial financial system. And they’re important everywhere. And they are important in their own right here today. But people don’t see them. Every talks about them, the government go, oh, yeah, credit is great, you know, you should go to one of those. But they don’t really see them as a risk. Like if they all went bust tomorrow. You know, the impact of that, in the real world would be about the size of a relatively small challenger bank, right. But the real true social impact of that would be monumental, absolutely monumental, you hear of a kind of Silicon Valley Bank, kind of organisation go bust and you go, Wow, that feels seismic. But just think about the shockwave that you create if that lifeline was taken away. And we saw the same thing happen when the regulations changed, and the payday lender started to go out of business. And everybody kind of sat there go, Well, isn’t that great, and you go, it’s great, unless you needed a payday loan. And they were the only people who have lent to you, right? So it’s great, but you have an unintended consequences. So what we’re seeing in the market is an increase in the amount of illegal money lending. And what we’re really hopeful for now is that we can start to see these organisations embed as a critical and recognised and accessible part of that, that kind of UK financial services, infrastructure. And our role in that is to be that infrastructure layer. It’s that equality and accessibility and a platform that they can all use, it’s affordable to be able to bring that in a macro economic sense, I think I think there’s going to be an awful lot of uncertainty for a long time. It’s very difficult to be optimistic when you look at all of the potential challenges that the economy faces. But I think what we need to focus on is areas of our economy that create resilience. And traditionally, that has been financial services. And I think, whilst we look at the world is very different. Now, I think we still got a long way to go and a lot of value to create, in financial services on a global stage to lead the world. In this particular area, we don’t actually I think it’s a really good thing that we could come back and put a footprint on to go look how we can attack this problem of access to affordable credit, look at how we can innovate, and bring to bear the transformation around payments, the transformation around the cost of lending, to make that a thing that we can then globally go take to the world, I’d love to see as being a player in that kind of social, social lever evolution and revolution that needs to take place on that

38:52
new making me think as you’re chatting there about the community element, and you just look at how our society to an extent is almost like getting increasingly fragmented between different communities. And you have I just look on Facebook and the different groups are involved in and we’ve almost got these like micro communities, which we’re we’re all part of because we’ve got interests, let’s say I’ve got an interest in cycling as an example. There’s a role for, for credit unions with that community focus and think of it not just as my town but as a community to say, Well, that’s an additional characteristic where these people are the same. And maybe there needs to be groups or finance to do that. And as we almost like society breaks out into these different communities. That’s almost like an opportunity that this sort of large scale lending piece really can’t react to, but it gives them actually extra information to to lend to a certain extent.

39:39
Yeah, I think one big shift that’s going to take place over the next three to five years is that kind of data and intelligence side of, of this world, big banks, big tech have invested heavily in that data processing. And if you think about that kind of social media side, being able to segment those populations in that way and And then how you apply that risk based pricing and look at that in in a more kind of geared way around the products themselves. But you’re absolutely right embedding of these organisations within their community actually will happen. They’re there anyway, interestingly enough, you walk along a high street in some of the towns I was in, I was in one that’s not too far away from where we are right now is just over in the pines. And you walk down the high street, and you realise that, three, four years ago, when I walked down that High Street, the credit union branch was there. But it was flanked by HSBC, and Lloyds and a bunch of others. Now, it’s there, and it’s the shiny, nice Street. And that’s where you go, because the other ones, they’ve all gone. So I think it’s how we reengage that, that present there, they’ve got all of the ingredients that they need. I think the big conversation is what are the products, services, regulatory changes, tools that they actually need to be able to capitalise on that. That’s, I think, where a real opportunity sets to get a much broader conversation and making

41:06
sure they can do that with risk and making sure that they’re not losing your shirt as a result of some of the changes that are going on as well. So Andrew, thanks very much fascinating chat, just around that whole sector. I mean, it’s it’s really interesting how it’s different as well from mainstream lending, as well as some of the dynamics. So I really appreciate you making the time.

41:22
Absolute pleasure. Thank you very much for the opportunity. As I said, it’s, it’s always good to be able to talk about the sector that we we spend an awful lot of time advocating for more time talking about credit unions, and we do about ourselves. So

41:35
very, very fascinating. Well, thanks very much