What It Actually Takes to Turn New Members into Real Financial Relationships

Speaker A: The NCUA reported that credit unions added 2.9 million new members last year, but 64% of those new members showed zero activity beyond opening the account. That's not member growth. That's a bunch of inactive accounts. I'm Joshua Barkley, and this is banking on experience. Today we're tackling one of the industry's most stubborn problems, new member onboarding and and account activation. Credit unions are spending real money to acquire new members who never show up. Today we're getting into how to fix that. How to activate new accounts before they go dormant, how to onboard thousands of people during a merger, and how to turn indirect borrowers into members who actually bank with you. My guests today don't just understand the problem, they've built solutions to it. Joining me today is Matt Fairman, CIO of Kohler Credit Union. He's. He has led member onboarding at scale inside his credit union. And he's joined by Harai Khalsa, CEO and co founder of Swastack, who is building technology specifically designed to solve this engagement gap. This episode is sponsored by Business Next, the leading CRM for credit unions and banks. If your member data is scattered across dozens of systems, Business Next brings it all into one unified view so you can service better, cross sell smarter and grow relationships. If you want to see Business Next in action, you can find a link to a demo in the show notes. Let's start the show. All right, let's kick into segment number one. The NCUA reports that of the nearly 2.9 million new members added last year, 64% showed no activity beyond opening the account. So that's no deposits, no direct deposit, no meaningful engagement. Hrai when you look at this drop off, when you look at this number of 64% showing no activity beyond opening the account, what are the first actions that you've seen that actually anchor a new member and get them engaged?

Speaker B: Ultimately, Josh, when we were at Finovate in New York in September, we posed the question to the crowd. We said, are these new members opening accounts and they're going inactive because there's not enough incentive or there's not enough motivation to the member to truly switch a primary banking relationship, or are they going inactive because there's actually a gap in the digital experience itself? So we propose that we think it's both. You need to be able to provide the path of least resistance to switch a primary relationship and then if you'd like, offer incentives on top of it or carrot so that the member has a little bit more wind in their Sales. But when you talk about the components of a primary banking relationship, number one is the deposits that are on other financial institution accounts. How do we win those deposits? Number two, it's the future incoming deposits in the form of paychecks. We want to get those paychecks committed to the new account relationship. And then number three, how are people spending their money out in the marketplace? Where are they buying their groceries? How are they paying their bills? How do we get top of wallet status with our debit cards? Matt? Yeah. I'll pass it over to you. Would love to hear your perspective there.

Speaker C: Yeah, thanks Harad. I, you know, mirror a lot of what you said. It's about engagement and onboarding. Somebody took the time to open that new banking relationship with us. How are we engaging with that individual? You know, I compare our. And Harai and I have known each other for quite some time now and he once showed me, uh, it was a digital only financial institution. What that onboarding journey looked like and what it was is like 16 emails in the first 30 days. And I'll be honest, at first when Horai put that image in front of me, I thought, no way. He's been a big eye opener for me because now what I do is I look at how we engage me as a member of the credit union and just a general consumer in the marketplace. How do we engage with all the other companies in our lives? I think Amazon engagement be there for the member. So when this member comes and opens that new account with us, how are we engaging with them? How are we making it easy for them to switch that direct deposit to join digital banking? Right. I mean that's, that's our biggest thing, that is how Horai and I's relationship started is my problem statement at that time is how do I get people in digital fast? Because once I get you in digital and you see the amazing things Kohler Credit has to offer you in digital, I'm going to get you there. Now I need to make it easy to move that money in and spend your money and move that debit card to the top of the wallet. So it is everything Hirai really went into there. It's about that engagement layer. Instead of going silent after that account is open, how do we keep engaging with those individuals, keep Kohler Credit Union top of mind and get them to utilize our services. And the faster I can do all of those things, the stickier that relationship becomes and we're off to the races. Now I've got them in. In some of our early testing, I mean, we saw 78% more debit card activity in the first 30 days. We did a test group versus a non test, meaning using the Swastack platform and their engagement layer that we're moving more and more into. We're working on completely retooling it now just for some really amazing things. But all of that really comes down to just being there, being there for the person that needs to understand what to do next. I think a lot of people, we've frozen in that and Horai and the Swastack team very much help our members figure out what actions we want them to do next.

Speaker A: I want to shoot over to you Hirai, and talk more about what is it that Swaystack does to give you that onboarding experience that's simply dripping some emails else is just not going to do.

Speaker B: There's a little contrarian of a response here, Joshua. But you know, I think when when Matthew and I's relationship first started, we always saw onboarding in digital banking as a primary differentiator and even a tool that could be used for reboarding existing member checking accounts and asking them to do some of the actions that they may not have so far. But the email is not dead. I mean, Kohler credit union seeing 75% open rates on their onboarding emails, 50% click throughs on the very first email, we're getting pretty strong engagement and Matt forecasted that. He said, hey, my members want to use these accounts. They're going to engage with the content from me from a servicing perspective, Josh. But to your point, while that's going to be key and quintessential to drive digital banking adoption, which was one of Kohler's key objectives, is we have to email them, we have to message them to get them into the app once you've got them in the app, Joshua, we even had a conversation with your team today, Matt, about, you know, targeting every single member who doesn't have a checking account and messaging them to open one. And then the question is, well, do we send them? Do we pop it up in digital? Do we do both? And so as you think about that, Joshua, some of it is contrarian that the onboarding emails, when they're in the service capacity, will generally be effective because if the member doesn't click that email, they have no path to download the app or to register for online banking. They don't yet have credentials in many cases. In some they may. But I would just say within digital banking, the toughest actions to complete are most likely to be completed. Uh, that's really the channel of choice when it comes to security, consolidating one's everyday banking experiences. So when you think about the ongoing nurturing that it takes to truly win a primary relationship with a member, digital banking is definitely that channel of choice. We've got to communicate continuously within that app to win primacy and privacy does not necessarily happen immediately after account opening.

Speaker A: I'm glad that you clarified that. So email is not dead when it comes to bringing people in the door, Right? So email can be thought of as welcome to the party. I'm opening the front door. I'm giving you the password to come into the party. Now, once you're in the party, email may no longer be the correct way to communicate.

Speaker B: Communicate.

Speaker A: Now it becomes online banking becomes sort of that party. Right, Matt?

Speaker C: Yeah, that's exactly what I was going to add on to Horizon stated is that if you think about it, a person out there took the time to come and open their account here at Kohler Credit Union. I would really be questioning if we then sent them an email. Hey, you know, welcome to Kohler Credit Union. Here's some next best steps for you. Why would they not open that email? Because at that point in our relationship, I have no other way to engage. Right. It's email or text. That's the only. Or a phone call. But I'll, I'll argue till the end. Phone calls are more dead than emails are because you can call my cell phone all day. I ignore all calls unless it says horror and I answer that one. You know, uh, that's our only way to engage at that point. Is that email. But yes, to your point, Josh? Then after that point, that's why I kind of mentioned earlier mine Horizon relationship started because I'm like, I need people in digital immediately. I need them in our digital platform. I can send you push notifications. I can then engage with you. Uh, we engage with all the other apps we have on our phone because that's the world we live in, right? Push notifications apps. Hopefully they move my app to the front of their phone and now I can engage within the which Horai and I have worked through all of those measures as well.

Speaker A: Let's move on to segment number two, indirect lending. According to Flex Credit Union technology, fewer than 1 in 20 indirect borrowers ever open another account or deepen the relationship beyond that initial loan. For credit unions, this means every indirect auto loan is either a gateway to a lifetime member or a dead end transaction. And right now, 95% are dead ends. So what does it actually take to, to flip those odds. Let's start with you Matt. I want to know before Sway Stack what were some of the biggest gaps in converting those borrowers and what is different now?

Speaker C: Kind of similar to what we spoke about the original onboarding but I mean beforehand we weren't doing much unfortunately. I think we were like many others out there, we acquired that indirect relationship. You know, maybe we called and just you know, said hey, you know, is everything going okay with your new, your new auto loan or whatever that relationship may look like. But that was the end of the relationship. And that was another thing Hori and I worked through is we do indirect lending. Right. With as most credit unions do. So we have all these opportunities, that's what I kept calling it.

Speaker B: Right.

Speaker C: We have these members that are opportunities to engage with. They are a member of ours, we have their email address. So we, we attempted kind of a very similar funnel. Hey, check us out. Here's our digital banking because again a lot of these members, they're sending a check in or they went to their primary financial and did a bill pay setup which is even worse because now you're literally not engaging. You're not even thinking of us. You literally see a bill payment come out. Some other financial. You're actually driving us nuts by sending us checks because we all love checks in this world. So you know, to your point, there's, there's a benefit because you know, obviously we, we gained that loan but there's a cost in that, it's a dead end relationship. So we did the same thing. We put them through onboarding and, and we try to get them to download digital banking because I'm just steadfast. If I can get you into my digital experience, I'm going to pique your interest. We invest a lot of money and a lot of efforts into having a really great digital platform. And I can do anything that anybody else out there can do. So if I can get you in there, that's step one.

Speaker B: Right.

Speaker C: We do help you set up payments though, right? At least we're going to try to make this relationship easy for you. It is still a, uh, tough road. There's no qualms about that. But we are seeing further engagement. We are seeing these members getting into digital banking and engaging further with our credit union using this platform.

Speaker A: Hooray. Before I jump over to you, I want you to play doctor credit union for me, Matt. But is it very common for someone in my situation to sign up a loan? I get my indirect loan from a credit Union and then never hear any communication whatsoever from them.

Speaker C: That is extremely common in the industry overall. Yes, I too, right. I too have been that person that has done indirect lending since I've worked here. I've done indirect lending with other credit unions more so as a test, I eventually then just moved it here. So I actually did. What's worse, I let you board that whole loan all, uh, with the intention of two months later moving it here. But I tested your theory, Josh. I tested which of these other financials did anything other than I did get a letter, a piece of mail, which, uh, that's right up there with a phone call for my attention span. That was it. There was one credit union that did a little above and beyond. I was pretty impressed with their approach and I spoke internally about it. They looked at my credit file and they called me and they're saying, we took a look at your credit file. Here's some other opportunities for. I was very impressed with that interaction. But again, it was a phone call that I only answered because I was doing competitive research and I wanted to know what they had to say. If I'm being totally transparent, I probably would have not answered that call or called them back. That had been a normal person out on the streets because I would have. I had no interest in going there. But I definitely wanted to hear what they had to say for competitive research analysis.

Speaker A: Yeah, I bet you did, Matt. I bet you did.

Speaker C: Harai.

Speaker A: Uh, Matt did make some very clean points, but I kind of want to bring the initial question back to you because when I first entered the credit union space, indirect loans have always been talked about as this massive low hanging fruit opportunity and I think you would agree. So from a product and philosophy standpoint, Harai, in your opinion, how turn an indirect auto loan into a real member that's going to be there thick and thin for a while.

Speaker B: This one is so interesting, Josh, because I was talking to one of our clients recently and they have a, uh, KPI around new membership ads. It's one of the KPIs that they track as a credit union. The CEO, even though he's seeing some delinquency and some charge off in his indirect programs, he's still kind of compelled to go buy those loans just to put the new member numbers up that he needs to hit for his board and things like that. So I think it's an interesting one. Joshua. We're seeing more and more folks that are just saying we're going direct, we're seeing more focus on direct, but the Promise was always that you're going to buy these indirect members from the dealers or from the public traded personal loan lenders and then you're going to be able to migrate them toward, you know, depositors who have checking accounts, etc. Otherwise your loan to share ratio could get out of whack. So we're seeing many credit unions who over dipped into indirect their loan to shares out of whack. They're struggling to get enough deposits. They're looking at providers like Sway stock and saying I already have account opening. Let me pepper my existing new member ads, my previous members and let me get more deposits for my base. But I think Joshua, the simplest way that you can approach an indirect member is from the context and the perspective that they're joining the credit union. And you can say to them, you're going to need access to my app to see your statements. You're going to need access to my loan payment portal to make your payments in flexible ways. Or you can call into my call center or you can mail me a check. These are your options. So uh, if we meet that indirect member where they're at, meaning they got a loan for a vehicle, unbeknownst to them, Kohler ended up buying that paper and now they have an indirect relationship to Kohler, we can at least service them where they're at. If we do a good job of meeting them where they're at in lieu of just sending them that paper welcome statement two weeks later, then maybe we have a memorable experience with them that we met them where they were at, we didn't try to stretch them into where we wanted them to be. We met them where they were at, we service them where they're at and then we tried to entertain them on where we want them to be. Now what Matt's team is doing Joshua, is they're segmenting their membership by those that don't have checking account and things like that. So these indirect members will end up falling into other campaigns where we're driving other products. So I think if you look at it as number one priority is make sure that loan payment is coming in. We want to eliminate first payment defaults. We want to get these payments coming in faster, easier, more electronic than ever. And then from there we can work on secondary third product relationships.

Speaker A: I just want to triple down on that because I want, I've been wanting to jump in since Harai said that because the light bulb went off for me and I know listeners are probably thinking, well it's your job to make the guests look good. So of course you would say that. But in all honesty, the one thing that I did do relationship wise with this unnamed credit union that gave me the indirect loan, mobile banking, my online banking, every month when I made that payment, I wasn't writing them a check like I was, you know, gramps over here, I was going through the online banking portal. That would have been the opportunity for them to capture my attention, to put other products and services in front of me. So I want to give a shout out to you, Harai, for finally giving me the light bulb moment on the indirect correct thing.

Speaker B: We have clients that will only accept loan payments through a, uh, linked account. In online banking, that's the only way to make a payment. From their perspective, there's numerous benefits of that. You know, maybe they can pull in some data or they can authenticate the payment method, eliminate payments that fail, things like that. So there, there's a lot of validity. But I think to your point, Josh, the most important one is that they'll fall into your general digital banking, marketing and engagement strategy.

Speaker A: Hey, I'm cutting in here to remind you that this episode is brought to you by Business Next. Your member data is trapped in dozens of different systems and that's exactly why your team can't serve them. Well, Business Next brings all your member data together in one CRM. So better data, better conversations, better relationships, better growth. Check out the link in the show notes to see a demo. All right, let's get back to the share. I mean, it's getting a little bit cliche at this point, fellas, but the merger activity, it is surging across the credit union industry. 2025 is on track for roughly 170 mergers. That's the highest annual total since 2016 according to Credit Unions.com. matt Kohler was a part of that wave in 2024, completing a merger with shipbuilders credit union that brought together more than 730 million in combined assets, multiple branch network of thousands of new members who suddenly faced new systems, new login credentials and new processes. So what I'm wondering, Matt, is during Kohler's merger with shipbuilders, where did you see members struggle most and how did a sort of a guided migration experience change the outcome for them?

Speaker C: I think it was everything. You know, the shipbuilders credit union folks is a very historic and aged institution, a very, uh, staple of the town. I'm actually from Manitowoc, Wisconsin and, and a lot of those members have been part of that credit union for some 50, 60 years. I mean their parents opened their accounts or their grandparents. Right. These were people that were very much used to the way it was, that was used to the app that they had. That's a change, right? That's a change I feel very empathetic with is they didn't choose to change their financial institution. The circumstances did. So how can we, how can we Kohler Credit Union make it easiest for them to onboard with our institution? And my team, the marketing teams here at Kohler Credit Union, a few of our different teams eng with the Swastack team and said, okay, let's do this. These are essentially new members for us. Right. How can we guide them through their experience? So we queued it all up the very first morning the new membership could engage with digital banking. We queued them up with some onboarding workflows and hooray, help me out here. The stats were what, what percentage?

Speaker B: We sent over five and a half thousand emails. Swastack drove 40% of the registrations for online banking. I think day one, uh, more than half the membership had already established online bank credentials, uh, 2,600 plus digital banking enrollments. The digital onboarding experience drove 40% of those enrollments. So really, really happy about that. And then I think, Matt, one of your team's concerns is we're migrating these folks over. You know, we've got to get them into estatements. We don't want to all of a sudden have $60 yearly costs with 5,500 members. That could be expensive. So I think we had like 700 plus enrollments and e statements as soon as onboarding went out.

Speaker C: Yeah. So those, those stats kind of speak volumes. Right? And that's, that's why I wanted Horan to have that opportunity. That was, I mean just 40% of the new digital enrollments were due to sway stack in the onboarding efforts. And those, those well timed against what you believe emails that that membership opened and integrated with and now these members are in digital. And I can attest that, huh. Again, the credit union was in the town I, I grew up in and live in. I've run into many people that have shared the pleasant experience and how easy we made that for them. They open their emails, they saw this welcome email, they got this nice easy to work workflow from the Swastack team. And, and, and really once you're in digital, they got to see our new again back to the new tools and the interface and it was really smooth. I mean I, uh, this is my first merger in the credit union space. I I come from the banking space with some acquisitions there. But I was proud to say this merger, actually the, the systems merger just happened last month. So it was over the course of a weekend. By Tuesday at 9pm we had zero open issue. I mean everything just worked. If you would have told me that a year ago, I wouldn't have believed you. I mean that's a, uh, full core integration digital banking migration and the Swastack team and the workflows to get that new membership into digital was just a smashing success through this, through this process.

Speaker A: Horai, is this the first time the Swastack platform has brought in merged members in this kind of situation?

Speaker B: Yeah, the first time in a merger. We do have some other folks who are looking at the platform also when they're migrating their online banking platform. So there's a couple different use cases that people are looking for either merging in batches, you know, of members, or having to actually change over a tech stack or you gotta update the app or even. What we're seeing, Joshua, is if people change their card processor and have to reissue a bunch of cards, what's the process we want to run through with the members for that new card?

Speaker A: Forgive my, my ignorance here. I guess I, I haven't really thought about what it would be like enough. I haven't empathized with a member of a credit union who is now m merging with another entity. Because the real importance of Sway Stack in this case, Matt, and correct me if I'm wrong, is you're almost starting over, like fresh. You're like, even though we're merging and it's that credit union and this one, and you may be familiar with both of them, it is a new experience for you. And unfortunately or fortunately, depending on how you provide the experience, if it doesn't go well, you are going to lose a lot of those members saying, you know, know, I really like my credit union, Tom, and but they merged with this other one and the experience was terrible. So I, I had to get out of there. I, I'm with Chase now. I know I'm, I'm a trader, I'm with Chase. So if you don't get this onboarding right during these merger situations, it could be catastrophic for you.

Speaker C: You have one shot, right? I mean that's, that's the world we also live in. I mean, how. Take out your phone right now. You could open a bank account with another financial. Before we end this discussion. Discussion. So you have one chance. We had one chance. It's the first impression type stance, right? When Monday, November 3rd, fired up, we had one shot to do this the best way possible. And those members got the best way possible. It was all about the member experience because you're spot on, Josh. It is a new financial relationship. These members got a new debit card, they had to get a new mobile banking platform, they had to re establish some things. It is the same as going to source a new primary financial. Financially, they didn't have to come in to open the accounts. Their money was already there. We migrated that. We worked very hard to keep most of their account numbers the same. But again, relearning mobile banking, getting that new debit card, that new debit card number, it is a new financial relationship. And the amount of hours we spent talking about what this looks like was insane. Right? And again, that's where we went to hor team and said, hey, how can you help us through this? How can you help us onboard? To his point, There was about 5,500 email addresses we had through this. How can you help us onboard those members? And as you heard, the numbers were just insanely amazing. I mean, it was great.

Speaker A: I ask this to all of my guests on the show. This is the part of the show where we ask our guests to hit our listeners between the ears with a velvet hammer and share some brutally honest insights, even if they're uncomfortable. I mean, these could be things that you feel like the credit union industry needs to hear and they're not hearing enough of it. This could be a philosophy or some wisdom that you want to impart with the listeners. But I'll start with you, Matt, that what are your brutally honest insights for the listeners today?

Speaker C: Yeah, I have a lot here, so keep that timer, uh, watching me. You know, to, to me it's all about, I think the credit union industry and community financial.

Speaker B: Right?

Speaker C: Community banks and credit union industry are very similar. To me, we're at a very pivotal moment. These fintechs, these digital only financials are coming in hard. You got PayPal with Will Ferrell on commercials dancing around saying they'll give me 8%. I can't afford Will Ferrell. I can work with Horai, it's just very close. But I can't get the welfare out right. How are we competing in that space? And one of the things I bring back to is this. This is something I say way too often. Credit unions have one primary competitive advantage left. We have buildings, we have people. PayPal doesn't have a branch on the corner. Chime doesn't have a branch down the road. I feel what people want when they have those complex financial decisions or complex financial matters, they still want a purse. As much as we can go against all that, that and apps are going to take over the world. At the end of the day, we are still people and we want somebody to sit down with sometimes, sometimes to solve those complex financial challenges. That's our competitive advantage. That's all we have left. And we have to nail that member experience. When that member walks through our door and walks up to our teller line and they ask that complex financial question, because that's the only reason to go to a branch. You're not there to get a hundred dollars. You're. You're hopefully not there to cash a check. You're there because something didn't go right. The days of just walking up to do a teller transaction action, any data will show you that ours, uh, and every other financial out there is a steep curve down. Members are walking in because they need your help, they need your support. And again, no different than what I said with that merger. You have one shot. If I walk in that financial and you can't help me, or you give me the wrong answer, or you make my life challenging, then why am I not going to chime? Because you know what? The only reason I'm still here is because you have buildings and people. If we miss that, if we miss that member experience and we miss that opportunity and we can help that person, they're going to question why they're a member of Kohl Credit Union or whatever credit union you're speaking of. It's all about that member experience. It's nailing that member needs your help. Give them the right help. Give it to them quickly. We also live in a world where our attention span is about this big. You have to really just engage and be there for them. And they have to think of you when they have these complex financial matters. And I think that's what sets us apart. Uh, otherwise, take out your phone, download an app, and you got a bank account. Well, they don't have the people we do. I'm here for you, right? We're here for life. That's our take. Tagline. We're here for all your life's challenges. Good, bad. Not just to transact. If you just want to transact, there's plenty of apps that'll do that for you. The credit union difference is different than that. We're here for people. We're here for community. We're here to support, and that's our competitive differentiation. And we have to get behind that and rally behind that because you just said it. 178 mergers. Keep calculating that for the next few years. How many credit unions do you have left? It's all about consolidation. The only other piece I'll add to that, we also live in the most fragmented financial market we've ever seen. And stablecoin is going to blow that up even more because now everybody wants my money. Money Starbucks sits on $3 billion. I talk about this all the time. I have money in my Starbucks app. Sure. Many people, you know if $3 billion that are no longer in the traditional financial system that's what we're also competing against. People have money everywhere. So it's that much more challenging to get them to bring that funding back to you and only work with you as their primary financial. And again it goes back to that member experience. Nailing that journey.

Speaker A: Matt just dropped a bomb there Har. I don't know if you. If you want to forego your brutally honest insights and you just a knee by all means you can. But Harai, I'll ask you anyway out of respect because you are the man and I do love you. What are your brutally honest insights for the listeners? Hooray.

Speaker B: Yeah. Ask yourself how many accounts did you open in the last year? And then ask yourself out of those accounts, what percentage of them are funded with over $200? What percentage of them are bringing you recurring direct deposits? What percentage of them are running over five debit card transactions? If you know the answer to the first question but not the second one, that's where millions of dollars are being left on the table. That's where your relationships are being lost. If you have folks only tracking account openings but not tracking the utilization of those accounts and owning those metrics, then you have a serious blind spot going into 2026. So I think we're starting to promote the transition from just owning the net new account opens number to owning the transactional metrics of those accounts thereafter and getting some on that. So ownership of the onboarding and the engagement and the account utilization is what we're really promoting in 2026.

Speaker A: We started this episode with a number 64% of new members showing zero activity. My hope is that number bothers you a little less now because you have a clearer picture of what to do about it. Thanks to Matt and Harai for their time and their honesty. I'm Joshua Bart Barkley and this is banking on experience. I'll see you next time.

Speaker C: Mhm.