Credit Union Exam Solutions Presents With Flying Colors

treichel: Hey everyone, this
is Mark Trifle with another

episode of With Flying Colors.

I'm excited to be here today
with Dan Preso of Olden Lane.

Dan, how you doing today?

prezioso: I am doing great, mark.

Good morning.

It's good to chat with you.

treichel: Yeah, good to catch up with you.

You've been on the podcast, I
think maybe this is the third

year in a row, maybe fourth year
that I've had you on the podcast.

But for those listeners or watchers who
haven't seen the older episodes, could

you give a little bit of your background
and olden Laden's background and what

it is you do in the credit union space?

prezioso: Sure.

I'm a partner at olden Lane and our
firm is a investment banking boutique

that is dedicated to credit unions.

We formed ourselves and started focusing
on credit unions about around 2017.

We were a group of.

Capital markets professionals, financial
engineers that didn't have a very long

background with depository institutions,
but but a long one in capital markets.

And we formed a group that was looking
for gaps in certain markets where a

small firm could make a big impact.

And one of our thesis.

At the time was that credit unions
were underserved from a capital markets

and investment banking standpoint.

And one of the things we were
observing that we formed that thesis

around was that credit unions were
not by and large raising capital

in the form of subordinated debt.

Even while at the time, about half the
industry had the low income designation

in the ability to do that market
was very still and had very little

activity, so we started to probe there.

And long story short a lot's
transpired in that market.

You and I discussed it
in September of 2022.

As you mentioned on this podcast
we've been able to help credit

unions issue over a billion dollars.

Subordinated debt and
supplemental capital.

Of course, a lot of our clients
that are interested in supplemental

capital are looking for growth.

That was, one of our thesis is that this
capital could be used by strong credit

unions and wanted to grow for a period
of time faster than maybe their ability

to retain earnings in that period.

And acquisitions is a classic use
case for supplemental capital.

So we also assist clients.

With mergers and acquisitions and
the last time we spoke was about

two years ago, December, 2023.

And what we'd spoke about
at that point was our.

Expectations coming out of the small
banking crisis after Silicon Valley

bank and signature bank blew up and
the rate hiking the very aggressive

rate hiking cycle caught a lot of
banks and credit unions off guard.

And as well as a lot of
trends that accelerated during

the pandemic, including.

This shift in consumer taste to
really advance digital banking

capabilities the aging of leadership.

In addition to all those earnings
pressures at the time, we prognosticate

on your podcast at the end of 2023
that there was gonna be a more

interesting consolidation cycle.

That was, we were gonna see
more credit unions that were.

And able to exist independently,
actually choosing to combine for

strategic purposes to reach for scale.

And that is something that
that, that was good products.

Prognostication, of
course, we've seen that.

We've seen the strategic merger activity,
which I define as mergers between

credit unions where both sides have
at least a hundred million in assets.

Really at a higher level and with
more frequency than we've seen before.

And I could just show you a
little chart what the NCA merger

approval activity looks like with
respect to strategic mergers.

And, right after we spoke in
2024, there was 18 which was

almost a a several year high.

There was 19 prior in 2022.

But then this year.

We're gonna break a record
in the middle of the year.

We already, the NCA has
already approved 14 of them.

Of course, everyone's seen the headlines.

We've seen some massive
mergers, first Tech and digital

Boeing and Safe Wings and End.

And so it's obviously a a trend
and a fashion now, and it's

something that we expected.

I think the next era is
gonna be interesting.

It's what I'm interested
to talk to you about today.

We've seen some of those factors.

Ab bait earnings are rebounding now.

They're almost back to where they
were before the rate hiking cycle.

And and their interest rate
environment is now very benign.

In fact, the net interest
margin is a 20 year high.

So that's gonna alleviate some
pressure on credit unions.

But we do think that there's
challenges ahead that will definitely

be a factor in consolidation.

And I know our clients, and I think
the market generally is interested

in consolidation and inorganic growth
opportunities that come from it.

So I think, this discussion is one that
those sorts ought to pay attention to.

treichel: Got it.

Got it.

Yeah, it looks when you hear you rattled
off the names of the big mergers out

there, two or three of the biggest ones.

But when you see that chart and
that by the middle of the year

they've almost matched last year
as far as these strategic mergers.

If, as you call them.

Fas fascinating.

A you predicted where it was going and
b, to see the data picking up steam

and seeing that chart is eye-opening.

You and I chatted a little bit before
the show about different things that

you think might impact those strategic
mergers and credit unions in general.

What do you want to tee
up first in that regard?

prezioso: So now o obviously we're
always trying to look at this market

and kind of position ourselves a little
a little bit ahead of things to come.

And one thing that we're aware of,
and I think everyone in the industry

should be aware of is the fact that
significant demographic transitions

are, really powerful currents that
that shift markets and shape economies.

And if you think about where we are
today we are at the inflection point

of a very significant demographic
transition, which is the succession

of the baby boomer generation.

And what I mean by that, if you
think about it just this year.

The most senior baby boomers
that were born in 1946, which is

generally considered the the first
year of the baby boomer generation.

They turned 79 this year, which
is the average US life expectancy.

Wow.

The most junior baby boomers who were born
in 1964 turned are turning 62 next year.

Last year MassMutual did its
retirement happiness survey,

national survey of retirees.

And it concluded as part of that
survey that the average retirement age

in the United States is actually 62.

So we have a situation now,
demographically where this very

significant generation, both in terms
of size and its economic impact, is now

at a point where they're going to be
transitioning assets to beneficiaries

and reaching a point of full retirement.

So their their impact in banking
and the economy is gonna shift

profoundly in these years to come.

Where they're not gonna
be as prominent as savers.

And of course we're seeing their
activity in terms of their total

outstanding debt shrink considerably.

And that's to be expected.

Another thing that is gonna be interesting
about that transition is that baby

boomers are not measuring very strongly
when it comes to retirement readiness.

So about half of them according to
analysis by Vanguard, are actually not

very well funded for their retirement.

If you think about them as savers
and depositors, it may be a situation

where as they get older and really
age into their latest years.

They may start drawing down
their savings quite considerably.

And you'll rate shopping quite
aggressively to make the most outta

the savings that they do have.

So that's gonna be a significant shift
for banking, and that's one that I think

this industry has to position itself for.

And it begs the question
how well positioned.

Are we right now for that?

And, the data doesn't look great on
that, but I'll pause and allow you to

treichel: Yeah.

So prompt me.

So 62 is the average retirement
age and half of those that retire.

Don't have enough saved
up to achieve that.

And taking an average in a, in another
number of half you can't, you can

draw some conclusions tied to that.

And thinking about what you
just unpacked on credit unions

is these folks aren't gonna be
borrowing they are your big savers.

They are your big depositors.

But since they're not.

As ready as they might need to be,
they might burn through some of

those savings a little quicker.

Setting aside, do you take social
security at 62, 65, 67, all

those things that, that people.

Have to start thinking about.

And then you throw in, the one thing we
didn't, you didn't mention is we've gone

through this inflationary period, right?

Maybe they've always planned on
retiring at 62 or 63 yet what is it?

Sequence risk, right?

What the, your, the market's high right?

Now you, you walk out and decide
you are ready to retire, and

then the market gets hit by 20%.

And oh, by the way, we've
had this huge inflation.

You could see credit unions
challenged to grow, right?

Through just maintaining
their own member balances.

prezioso: Yeah.

That's absolutely true.

The sort of the fiscal dominance,
which is this overarching theme of

the macro environment, in combination
with this demographic transition

is I think gonna be the story.

And what.

Credit unions need to appreciate
as they think about how to engage

their markets, in terms of, the baby
boomers in their transition, the

baby boomers have really dominated
the economy for the last generation.

And I just pulled up a chart for you
and I to look at that just shows the

distribution of household wealth.

The baby boomers have been the majority
of it for, dating back since before 2010.

But it peaked in 2016 at 58%.

Baby boomers are 58% of
household wealth in this nation.

As it's 2016, it's down to 51%.

Now, and it will be less
than the majority, probably

next year I would expect.

If not then definitely
the year after, and then.

So now we have to look to
the rising generations.

And, baby boomers obviously were born
born during a very significant spike

in birth rate after World War ii.

They are thought of as
a, a giant population.

But in fact as of 2019,
millennials are the largest.

Part of the US population and at
22% almost, and gen Z which is

the, younger than millennials,
they're actually the second largest

cohort of the population at 21%.

The baby boomers are shrinking
their less than 20 now.

And Gen X is is the smallest
generation between the four of them.

They're almost at 19.

So just from a sheer standpoint of
the number of individuals out there.

The baby boomers are shrinking.

They're gonna shrink from a standpoint
of the number of consumers as well as

the amount of assets that they control in
the economy, and they're really gonna be,

migrating their assets to millennials and
Gen Z, and we're gonna see a significant

rising of those generations from the
standpoint of, who influences the economy.

And I think banking
needs to consider that.

And when you think about inflation,
it's gonna be a struggle for

both those generations and it's
gonna impact their behavior.

But I think we need to really focus
on how millennials and Gen Z are

reacting to it, because that's
gonna be from a banking standpoint.

What's gonna start driving
performance and balance sheets.

Yeah.

And that's where I think credit
unions need to assess where they

are relative to those generations.

And one of the things that I would
say concerns us is that is that

some of the survey data doesn't
look great and just to emphasize.

Reasons to expect this rising, and I
think they're intuitive, so I don't

think I need to harp on it that much,
but just to show you that these things

are, transpiring this year in front
of our eyes in terms of savings.

Santander Bank just did a survey, came
out in August and they determined that

the majority of Gen, Zers and millennials
have increased their savings this year.

Through the first half of 2025,
about 58% of Gen Zs and 54% of

millennials increase their savings.

Conversely, gen X and baby boomers, a
majority did not increase their savings.

In fact, only 39% of baby
boomers increase their savings.

60 presumably have declining
savings and that's what we're.

What we're cautioning here
is that's probably gonna

accelerate in the years to come.

And then when you look at total
debt balance by age millennials and

Gen Z are driving all the growth.

Total debt balance of Gen Z in 2025 so
far compared to last year is up 32%.

Wow.

And millennials, a strong
growth rate over 7%.

Gen X is mostly flat, a little less
than 2% growth, and baby boomers

are shrinking as you would expect.

And of course the, silent generation
over 80 years old, shrinking even

more and those are be the trends now.

I think that growth rate on
Gen Z is quite eye topping.

Whether or not it's a.

It's too much growth, I think
is something to consider.

But this is where banking is going.

It's going to have to focus on these
generations in order to generate

growth and performance going forward.

They are where the action is.

treichel: And when I, again, when I
think through with my lens as a baby

boomer on the young end of the baby
boomer side and the frequency at which

I used to walk into banks versus today
when everything's online, and even me

in that generation having embraced.

Technology, every generation that
follows that is more into technology,

is more into FinTech, is more into
less traditional type of banking,

if you will, credit Unioning.

So what are, what, where do you the
Wayne Gretzky and, the credit unions

want to skate where the puck's going?

Where do you.

What should credit unions be
thinking about in that regard with

the younger generation and what are
the risks that, that are out there?

If they don't, you got a board
of directors that, that looks

like me, that is my age or older.

You got management that that, that
is my age or slightly younger than

me, or slightly older than me.

And none of them are borrowing
and they're not saving as much.

What what should those credit
unions be thinking about?

And where might you, where might these
other generations be taking credit unions?

prezioso: Sure.

Let's start with, there's a lot there.

I said a lot there yeah.

No.

Great question.

That is the question.

Let's start with what are the risks?

And that conversation I think starts with,
how are credit unions positioned for this?

And I've alluded to, my concerns that
that they're not positioned well.

So let me support those concerns.

We've seen survey data in the last couple
years that are concerning on this point.

In 2023.

McKinsey did their consumer life study.

And they looked at banking and
banking by household primary

financial institution type.

And what they determined as
part of that study was that.

Credit unions had really concentrated
between 2015, which was the point

when they did their last study in
2023, credit unions significantly

concentrated their membership in
baby boomers, so that baby boomers.

Whereas in 2015 comprised 28% of credit
union memberships by 2023, they were 39%.

Wow.

Whereas millennials actually shrunk
during that period from 24% to 21%.

And Gen Z members didn't
budge or grow whatsoever.

If you compare that to banks in
2023 bank customers, 29% were

boomers, and 29% were millennials.

That's a better alignment, and
I think where you'd want to be,

credit unions look misaligned here.

Then when when they looked at
recently opened a deposit account,

market share, those numbers were
concerning as well for credit unions.

'Cause in 2023, and that's something
they look at more frequently on

almost an every two year basis.

It was a multi-year low in 2023
when McKinsey looked at this for

credit unions with 10% market share
compared to 15% market share in 2021.

And it had been about 15% market
share dating back to 2015.

It showed that this, the credit
unions have been perhaps too reliant

on baby boomers and it was starting
to show as an engagement deficit.

Relative to younger generations,
which was impacting recently

opened account market share.

That data is from 2023 last year, aperture
which is a digital banking tool provider

for credit unions and banks commissioned
Harris polls to do some surveys.

And that also found that when it came
to primary financial institutions,

millennials and Gen Z were less likely
to less often utilizing credit unions

as a primary financial institution,
millennials, about 10% less Gen Z, about

35% less than the rest of the population.

And then, this year.

Payments intelligence did a survey.

I think this one had about 16,000
consumers as part of the survey.

And they looked at Gen Z credit union
members members of credit unions that are

Gen Z, and they found that 37% of them in
their survey were at least somewhat likely

to switch to another financial institution
over the next year compared to 15%.

Of other credit union members
saying the same thing.

So more than twice as many Gen Z members
that were already banking with credit

unions were looking to switch and a
far lower number of Gen Z compared to

other credit union members were certain
that they would stay about 42% of Gen

Z relative to 74% of other members.

And, numerous conversations that we've
had in the market validate these numbers.

We've seen several.

Calculations of average age of
credit union members show that

they're drifting up into the fifties.

And these numbers don't look good
when you consider, the demographic

transition that that we're talking about.

So that's a concern.

It's something I expect to see.

In the numbers, but a, as I said,
the performance numbers look

good because of the net interest
margins being so benign, right?

But you can see in the data some
hints at this engagement deficit.

One thing I like to look at
is growth, but I'm starting to

look at real growth more often.

Just because I, with the fiscal
dominance and the, the money

circulation and the inflation, real
growth is an interesting measure.

So I pulled up a couple charts
here that show, real growth

of total member deposits.

Alongside nominal growth as well, and
not ignoring nominal growth, but looking

at the real growth story as well.

And then the growth of the average
member relationship versus the

nominal growth of that relationship.

And that's total balances
of deposits and loans.

And as you can see, the real growth looks
very constrained, very, and it, it's

barely recovered to positive territory
when it comes to deposit growth.

When it comes to the average member
relationship, we're still negative

from a real growth standpoint, and
we've been negative since 2021, and Dan

treichel: so real growth would
be deducting out the cost of

funds that you're paying, right?

So if people it's deducting out CPI, it's

prezioso: conducting out the rate of
growth in the consumer price index.

So we're taking inflation out because.

Some growth.

Got it.

Nominal growth, inflation driven
growth is going to, is just gonna

increase money everywhere essentially.

Sure.

So I want to see what that looks like.

And the reason why I look at that is
'cause this OPEX ratio and where we

think about what the consolidation
pressures are now, I think it is this Inc.

Expenses, the increase of
expenses in this OPEX ratio.

And when you have a real growth deficit.

You would expect to see some pressure
on opex ratios, and that's exactly

what we're seeing where, during
the pandemic opex ratios collapsed

because of the surge of asset.

Of asset growth and, and we got a lot
of efficiency producing technology.

So you would like to see the industry
harness some of that efficiency.

But what's happening is at that OPEX
ratio on average across the industry,

is drifting right back to where it was.

But what's also interesting
is this incline, as you can

see, we're looking at a chart.

And I know a lot of your audience is
probably audio only, but this chart shows

the opex ratio is bottoming in 2022,
and then it takes off like an airplane,

leaving the runway and and you rarely see.

A line that's over so
many quarters this smooth.

It's not really bouncing at all.

It flattened a little bit in 2023,
but then it just steepened again and

it just looks like it's taking off.

And I think that's the consequence of
the real growth challenge that we were

looking at on those previous charts.

Sure.

And then another thing that, may hint
as well at this engagement deficit with

the younger generation is the fact that.

We're not really seeing credit unions
showing a lot of evidence that they have

pricing power in the deposit market.

The Fed has started to cut rates.

They started to cut rates in
the middle of last year, and.

Of course it's, you're gonna see a lag.

The cost of funds is not
gonna reprice in lockstep.

It's going to lag those cuts.

But we're not seeing any evidence
that the cost of funds is budgeted up.

It hasn't budgeted at all.

It's exactly where it was in the
first quarter of 2024, but before they

started reducing rates which suggests
that there's really no pricing.

Power that credit unions have,
they're still having to to offer

generous rates to get deposits.

And I think that's an indication
of the engagement deficit as well.

But my expectation is that we
haven't really seen anything yet.

We're just seeing hints at things.

Perhaps, but this is going to get
more problematic if that survey data

is is a, is an accurate depiction
of where credit unions are relative

to these rising generations.

And it doesn't improve it's going to,
these issues are gonna get more more

apparent and more difficult to manage

treichel: And three things kind are
running through my head that, the

younger generations are saving more.

The baby boomers are saving less
and tapping into their savings.

Yet over the last 10 years,
the concentration of deposits

in baby boomers has gone up.

Despite the fact that they're
saving less than the other

generations are saving more.

The older generation is stickier in that
they'll stay with their institution.

The younger generations aren't as sticky.

They're more likely to move which.

It can be a glass, it can be glass.

Half full is the, if you market to them
and if you embrace this and you figure

out how to bring them into the credit
union they may be willing to come.

So there's that opportunity.

But if you don't embrace that, they're
also, the ones you have could be going

to the banks or to the non-banks,
to the other FinTech o options

out there that are, that might be

prezioso: brewing.

That's exactly right is I think credit
unions have an opportunity here.

I don't think that there's any
reason why credit unions can't be

a fan finance fantastic financial
partner for millennials and Gen Z.

I'll say this though.

They're not presenting
themselves as a one now.

I could say that as someone who
is a millennial, I was born in

1982, I'm a senior millennial.

The team that I'm working with at
to research this subject are mostly

very smart analysts that are Gen Z.

All my friends are millennials,
all their friends are Gen Z.

I think we know something about
what appeals to our generations

and, credit unions, are not.

Delivering on that.

And I don't think it's 'cause they
can't but for whatever reason, we're

not really seeing a really compelling
set of offerings from credit unions

that are gonna drive that engagement.

I believe the data because, it's the
best information we have, but also

it aligns with what I'm just feeling,
qualitatively as, one of the consumers

that is, part of this subject here.

Now let's talk about those that
you know, that are engaging with

millennials and Gen Z and, what
are they doing and what's their.

Experience and what are they in
terms of a competitive pressure

relative to credit unions?

One of the things that I think credit
unions have to appreciate about these

younger generations is their challenges.

What are their financial challenges?

We've talked about the cost of
living severe increase in cost

of living and in particularly
the cost of housing so that the.

Average median first time home
buyer is now 40 years old.

A 40-year-old person, a 40-year-old
home buyer is not someone that

you know, has been saving for
a down payment for a few years.

A 40-year-old home buyer is someone who's
been working 15 years and investing the

entire time for that home ownership dream.

So I would ask credit unions listening.

What are your investment options
that you're offering to those?

To those aspiring home buyers in
these generations they perceive

that their savings are being eroded
by the cost of living increases.

What are, and they want to
invest those savings to keep up.

What are your offerings?

And if your offering is LPL
financial advisor, that's not

what the generation wants, right?

That's not what they're looking for.

That's not where they're going.

Where are they going?

If they're going to Robinhood
And what's Robinhood doing?

Robinhood is now offering
mortgages through Safe Home.

Safe Home Mortgages, which is
a digital mortgage origination.

They have a partnership.

If you are a Robinhood
Gold subscriber, you get.

Below market mortgage rates at
least 75% below the national average

through Safe Home, and you get
a $500 credit on closing costs.

So these platforms are
getting into banking.

They also issue their gold
subscribers credit cards with 3%

cash back and high yield savings.

And we can look at.

Their performance.

It's pretty fantastic.

That gold subscription,
let's look at its growth.

In 2023 Robinhood Gold subscribers,
they had a hundred and 1.4

million subscribers
in, at the end of 2023.

At the end of Q3 of this year,
they had almost 4 million.

It was a 77% increase.

Since 2024, the deposits, the bank
deposits that are on their platform

is up to 35 over 35 billion.

Wow.

Which is a 44% increase year over year.

And if we look at their August operating
report, which shows us a breakdown

of those deposits, 95% of it almost
is from those gold subscribers.

So these investment platforms are
are offering banking and are banking.

Their clients.

SoFi is another, and my partner Mike Ola
just this month published a op-ed with

typhoon called SoFi versus Credit Unions.

SoFi of course known as a student lender.

They opened a bank in 2022.

And they've been growing just,
it's amazing, their growth very

prodigious and in fact, last quarter.

They, I think it was their
best growth quarter yet.

They grew deposits by 3.4

billion.

And the entire credit union industry
in total grew deposits by 7 billion.

So this one bank, which is not
a large, it's not a behemoth it,

as of the middle of this year, it
wasn't even among the top 50 banks.

It wasn't even in the top 60 banks.

The bank only started three years ago,
but it is a bank that has a very modern

investment platform like Robinhood
and has a business model that is very

focused on being the lifecycle financial
partner from Gen Z and millennials.

And you're seeing, the
power of that model.

They, they also, grew loans
even more, even faster.

Their loan growth was about
55% of the entire loan growth

in the credit union industry.

And in terms of customer acquisitions,
they grew mere about as many new

customers as credit, as the entire
credit union industry grew, new members,

and again, this is not a top 50 bank.

They're growing like a behemoth, but
they're not it's not a very large bank

comparably, it's a small regional bank
essentially, but they're a national

digital bank that has a great model
for engaging millennials and Gen Z.

And they're getting all
the benefits of that.

Then there's, there's other out
there like Coinbase which is,

strictly a crypto investing platform.

But they they're issuing credit cards now,
and I'll give you a personal anecdote on

that, I, I learned about blockchain in
2017 from, colleagues of mine that were

in finance that were excited about it.

And I thought Bitcoin was cool back then.

And I bought one one Bitcoin 2017.

It was only about $2,000 back then.

Obviously, when you buy Bitcoin
2017 you a little hooked.

So obviously I like it.

I still have Bitcoin and I've
accumulated some more, but.

Blockchain for me, I don't
entirely understand all of that.

So it's not like a big
part of my financial life.

But I've always kept a, what I
would describe as a material,

but modest exposure to that
asset class in that industry.

And I've done it through Coinbase, where I
have some very passive investments there.

Bitcoin mostly, but some others.

I just consider my my material, but
modest exposure to that asset class.

But Coinbase this year issued a credit
card that has Bitcoin rewards, and based

on my customer status, I'm entitled
to 3% Bitcoin back on all my purchase.

I liked that, I liked the idea of
stacking more Bitcoin, especially how

that that asset has rose in so much
prominence over the time since I learned

about it and got involved and also more
recently so I have the card now and,

my, my top of wallet card used to be
a Amazon rewards card, which is, nice.

Everyone shops Amazon, very
simple to redeem the rewards.

But now I'm splitting equally
between between the Coinbase

card and my Amazon rewards card.

So they've become, a top
of the wallet card for me.

But what's even more interesting
is, this is very recent.

I've only had the card a couple months
when I went to make my first payment.

Obviously I use their mobile app.

I'm not the most tech savvy millennial.

I'll be the first to admit I've a hard
time using the printer in the office.

So it was late, my payment was
due, I clicked some buttons.

I made a payment, but I realized I made
the payment from my Bitcoin, right?

Holdings, pay the balance with
Bitcoin, which was not exactly

what I was going for, right?

I was trying to add to my
Bitcoin position, right?

These rewards.

Fortunately Bitcoin, the price
of Bitcoin's been going down.

So I was able to move money into my
Coinbase account and buy it back.

But I had to, look more closely
after that and decide, how

I'm gonna make these payments.

And you can you can connect
the a banking account to it.

But then as I'm looking at it, I see that
Coinbase is paying 4% on stable coins.

I've never really used stable coins.

'cause as I said, for me, blockchain
is just, some of these more interesting

assets as a way to get exposure.

I'm not doing any gymnastics on the
blockchain where I need to, do dollar

transactions on it outside of just,
using some cash deposit at Coinbase to

maybe buy Bitcoin or something like it.

So stable coins have never
been interesting to me, but.

Now I'm looking at it, why don't I
just move some of my checking account

balance to Coinbase, keep 'em in stable
coins, earn 4%, and now I could pay

my credit card balances with them.

So now I get the stable coin.

And it's interesting to me that
Coinbase is not a platform, is a

platform I used, but I never had
any inclination that it would ever

be part of my everyday finances.

Never, but they've drawn me in
to the point where now they're

capturing, my top of wallet, credit
card activity and deposits from me.

Sure.

That's how these platforms.

Integrate themselves into
the lives of their customers.

So I just want credit unions to
appreciate, when you decide not to

offer self-directed investments,
not to offer, fractional shares,

the ability to self-direct ETF
investments, at your institution.

Or you decide, crypto is just not
something that we want to be involved in.

You're telling the
younger generations that.

That you don't care about that part of
their financial life and you can't help

them, and they need to go somewhere
else if that's what they want to do.

And the places that they're going for
that activity are saying the opposite.

They're saying, we want to be part
of your everyday banking activity.

We want to be part of
your everyday payments.

We want your.

Deposits.

We want to be part of
your home ownership dream.

We wanna finance it.

We want to be there to
support you through all of it.

And that's the difference
in the growth story.

That's the engagement deficit.

These are the platforms that
are resonating and credit unions

are struggling relative to that.

And I and I think losing the challenge
here, and they don't have to.

There are a few credit unions that
are beginning to offer, most are

everything that Robinhood can offer
and these platforms can offer.

One that I'll mention is, frankenmuth
credit union in Michigan where

you know they have a platform.

You can buy ETFs, you can buy stock
fractional shares, crypto right from your

checking account, right from your check.

You don't have to move money.

You don't have to aach H dollars anywhere.

Buy it right from your checking account.

They have a platform where you can
invest in fractional real estate.

If the home ownership dream is too outta
reach, but you still wanna invest in real

estate, or if it's, or if you want to
invest in fractional real estate as you

build up your savings to get to your own
home, they have that available as well.

And and they have digital
tools for budgeting and saving.

Planning, they have it all.

And I was interested to join them.

They're a community credit union
in Michigan, so I don't know if

someone from Frankenmuth has a advice
for me if if I'm eligible to join.

But, that's, I think what
credit unions ought to be doing.

But by and large, they're not.

And I think that it, it doesn't
surprise me to see, these firms do so

well and, relative to credit unions
and just on the Coinbase story, just

to, close the loop in terms of, their
growth, their stable coin balances

increased 9% quarter over quarter.

That's a 36% annualized growth.

In the, in Q3 it's up to 15 billion.

So we're seeing deposit
gathering is difficult.

Everyone's saying especially
in community banking.

There's one influencer an ex
called community Bank guy.

He seemed to be a anonymous
CFO at a community bank.

He said something that made me
laugh a little bit the other day.

He said I don't know how to
get deposits other than to.

By the people and
institutions that have them.

And I think obviously our m
and a practice is very busy.

There's a lot of appetite to grow
through acquisition because organic

deposit gathering is so tough.

But I would just say it's
not tough for everybody.

There are firms that are growing deposits
very rapidly look at their model.

Look at how they're engaging and I
would say, be a fast follower relative

to these platforms would be my advice.

treichel: Couple general, the that
Coinbase card, when you had it up on the

screen, that was a very attractive card.

I could see how it can get to the top.

The marketing that goes behind
that I, I is fascinating and if

I'm thinking of the Robinhood.

I listened to some podcasts
about that Robinhood card and

that tremendous growth they got.

I also think there was like a waiting
list to get in to get that card.

So not only were they going
exponentially, they were growing so

fast that if you got in line you were
queued up and you couldn't get it

the next day just because it, that,
that growth has been so powerful.

And then what the 4%.

Rewards or crypto that you get
back on that Coinbase card?

I've listened to a few different podcasts
tied to the stable coin, the Genius Act.

The ability to pay those rewards.

And there was a lot of discussion
now how the bankers are trying to

get that carved back out because
they missed it when it got put in.

They didn't comment on it to the
point of how it might impact them.

And they're starting to see this,
these exact things that you're pointing

out that it's pulling away deposits.

And then lastly, on a brain dump here
the banking with interest, which the host

of that podcast formerly was the editor
of the American Banker, and he had a

guest on who made reference to a treasury
survey of some sort that talked about.

The risk of Coinbase actually
eating up a third of deposits.

And if you think about that while you're
trying to grow while you're while you're

having challenges getting the younger
folks into the credit union and the

money's transitioning from the baby
boomers who are passing it on literally

to, to the younger generation you, you
don't wanna to quote, mark McWaters, a

former board member credit unions don't
wanna be like the horse and buggy, right?

Everything's fine.

These automobiles aren't gonna
turn into anything that we have

to really worry about, right?

Lot of pressures out there.

And that merger thing, you can
stay away from having to be

one of those strategic mergers.

But if you don't pay attention and get in
the game you might find yourself having

to be one of those strategic mergers.

prezioso: Yeah, I mean that, that's my
merger consultations with clients now.

What I'm advising is if you look ahead,
you need to position this industry is

gonna consolidate along this challenge.

Who is solving this next gen
gap and who is struggling to, so

if you want to be a successful
acquirer, I think looking forward.

You need to show that you have a
mix of products and services that is

resonating with younger generations.

You need to show that you've made
progress with that engagement and

that will make you an attractive
acquirer and chip filson.

Chip Filson and I are on different
sides of this issue, obviously.

I I am someone that supports
strategic consolidation and tries

to make deals happen in this market.

He's someone that seems
to be very critical.

Of the industry's consolidation
and encouraging them to resist it.

But I take a lot of his
criticisms to heart.

And I do think he has some good ones.

And he is out here today, not to name
names, but he's criticizing one where

he feels like the it's being marketed to
members of the emerging credit union as

they're getting some sort of products and
services, pickup through this combination.

And the fact is, when you take it,
when you take it apart, it's the same

products and services they already have.

Sure.

And I've seen that in some
of my discussions where that

products and services discussion.

Is not really that apparent in terms of
the combination generating actually new,

different or better products and services
for the emerging credit unions members.

I think that the combination often
results in an institution that's more

stable, that is got more efficiency,
and the ability to be more profitable.

From a member experience standpoint,
it's not always completely evident.

I think it needs to be
going forward on this issue.

Do, does the combination form
a a combined institution that's

gonna be more successful.

Reaching out and engaging to
millennials and Gen Z and it has to

have products that speak across a range
of the needs of those generations.

And if I could sum up
what those needs are.

It's, personal financial management tools.

Not, YouTube videos about making a
budget, but actual tools that are

tracking across accounts, including
external accounts that are showing you

your spending, that are showing you,
your subscriptions that you're spending

on, that are showing you your trends.

What, when you might be spending more
in a given month or period of time

than you historically have been, and
losing track relative to your goals,

helping you keep track of and calculate
the progress of your net worth.

Giving you encouragement when
you're, showing when it can, when

the system can see you demonstrating
good financial habits and giving

you warnings when you're not.

Those type of things are out there.

Some credit unions are deploying them.

Any credit union that wants to be
successful with these generations

needs to, in my opinion, I've talked
about the investment offerings.

I just think if you're not willing to give
these generations the ability to control

their investments at your financial
institution and access to a number of

different assets on those platforms.

I think you're gonna lose to these
firms that we've been talking about.

These generations are
heavily debt burdened.

The student loan burdens are very
significant, especially for Gen

Z, more significant than any other
generations had to deal with.

The mortgage balances are gonna be higher.

We can see that.

Buy now, pay later is creating
a really fragmented system of

liabilities that need to be managed
and are easy to lose track of.

Debt advice management and
consolidation tools, the top that

are available, ought to be provided.

First time home buying
programs very important.

But also programs that help them
plan and navigate that journey.

'cause it's a longer one.

And if you let them work with another
group in terms of, how they're gonna

save to get there, how they're gonna
budget to get there, you really don't

have a good claim to the financing.

When they get there, sure.

You can show up and say, we're
people helping people, they're

just gonna ask, how did you help?

And I think, credit unions need
to get into the lives of these

generations in a really active way.

With good tools.

With good systems.

And then you need to
build a community as well.

And the communities that these generations
are building are on social media.

I, I got inter I interested in financial
social media during the meme stock

phenomenon, the game stock phenomenon.

I didn't participate in it, but I
certainly, obviously watch markets

closely and, to see these young
retail investors squeezing these

hedge funds and pumping this obscure
stock to the moon, it just was such a.

Curiosity for me that I started to
pay attention to their networks on

social media to see what was going on.

And I've been watching, I've been
watching it with respect to the blockchain

and the assets that trade there.

And what they do is they form
communities around this activity.

Now, I'm not suggesting credit
unions should be promoting these

sort of hyper speculative activity,
but what I am pointing out is.

If they're going on platforms
like Discord, like Reddit

like X Instagram, TikTok.

And they're creating communities where
they're talking about their finances.

And I think credit unions ought to
think about something as well, where

they are basically hosting chats.

They're, certified financial
counselors are taking questions.

Interacting, their staff are adding to
the community discussion and they're

creating interactive communities.

I think that's what you need, that,
the community formation is not gonna

be as much in the branch, although
I don't think branch networks are

irrelevant even to these generations.

I think they like to know that it's
there, even though they don't use it.

If you want community at your credit
union among your members, social media

is a great tool to get there, and other
industries are using it and they're

not big, the latest meme, coin or,
blockchain asset is not a big enterprise.

It's a very homegrown grassroots one,
and credit unions should look at that

model and start to participate in it.

And then the younger
generations love rewards.

So give them, they want to be rewarded
for their business and their loyalty.

So give them reward programs.

Gamify it a little bit.

So as they get closer to a reward,
they're getting, instant gratification.

The dopamine.

treichel: Yeah, the dopamine, yeah.

prezioso: One of the things about that
Coinbase card mark that I like is every

time I buy lunch, by the time I sit down
to eat it, I have a notification my phone

with how much Bitcoin I, I stacked, 40
cents a Bitcoin, but, but I like that.

I noticed.

I like that.

Yep.

And my, my Amazon points, they just
accumulate somewhere and, once a

couple times a year I log onto Amazon.

I actually don't shop that much.

And and I see, oh, I don't have to pay for
anything basically that I buy on Amazon.

'cause based on my shopping, I always
have points covered, which is nice.

Sure.

But it's very much in
the background for me.

I know it's there, but I'm not really
seeing it on a day-today basis.

Yep.

Yep.

Coinbase is putting their
rewards, in front of me every

time I get one and I like it.

It's a good feeling.

So I think that you gotta
take some cues from that, and

those things are all doable.

There's no reason any
credit union can't do them.

It's just, you gotta have the awareness
of what these generations want.

You gotta have the willingness.

My suggestion would be, if you're
listening to this, you're a credit

union and you want to take this subject
seriously, I'd ask you, who are those

voices of these generations in your.

In your management meetings, in
your boardroom, do you have one?

Is it a token voice that's, being polite
relative to the others in the room, or

are they really asserting themselves?

And if you don't have that voice, you
ought to get it, bring it in externally.

And I guess that's me raising my
hand and my team raising our hand.

We're looking to talk to our
clients about this next year.

I think this is gonna be, this is a
challenge that's gonna divide this

industry between between those that
thrive and those that don't and

is gonna direct the consolidation.

Listen I understand people
don't like when there's fewer

credit unions, but the fact is.

If you're serving fewer members, you
don't need as many credit unions,

and half the credit unions in this
industry are serving less members

today than they did five years ago.

The market's gonna rationalize that.

You Yeah, you can complain about
it, but that's just, yeah I don't

know how you expect otherwise.

treichel: Yeah.

That's a great summary.

There's been a lot of fun.

Dan, if so if someone has
listened to this and they want.

Talk to you and your team about,
how they can tap into some of these

things, or if they're looking to, they
feel they're already positioned to do

some of this and they're looking to.

To grow through mergers and things.

What's the best way for someone to,
to connect with you and your team?

prezioso: Yeah, you could reach out to us
on our website info dot at old lane.com.

We'll go to all the partners.

Of course, you can reach
out to me directly.

I'm at d preso@oldelaine.com.

You can reach out to us on LinkedIn.

We're very active on LinkedIn.

I myself am on LinkedIn
as well as our company.

We post very frequently.

About the industry.

So follow us and and reach out.

And yeah, we love to
talk to credit unions.

Obviously we have a lot of passion
for these subjects and I think

we're pretty well researched on
it, and we have a good track record

prognosticating the next trend here.

Reach out, talk to us.

We'd love to have these conversations.

treichel: That's great.

I really appreciate your time today, Dan.

Thanks, mark.

We'll be in touch.

Have a good one.

Bye.

You got it.

And listeners, I want listeners and
watchers, I wanna thank you for listening.

As always, this is Mark TriCal
signing off with flying Colors.