New digital credit union hones in on college graduates

College alumni are getting a dedicated credit union.

On Thursday, Michigan State University Federal Credit Union in East Lansing, Michigan, announced the official launch of AlumniFi, a digital-only credit union for college graduates. The $7.3 billion-asset credit union, which is aimed at the greater MSU community and surrounding areas, received approval from its board in 2019 to create a digital brand, although the pandemic slowed down the process of building it.

"The idea came from wanting to support members who don't connect with the MSUFCU brand," said Ami Iceman-Haueter, chief research and digital experience officer at MSUFCU.

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College students and graduates are an audience that banks and credit unions have increasingly targeted over time, often through partnerships with fintechs. One popular focus is student debt.

For example, several fintechs, including Candidly (formerly FutureFuel.io), Savi and Summer, help financial services companies and other organizations navigate student loan repayment. KeyCorp in Cleveland acquired GradFin, which helps clients figure out the best solution for their student loan situation, in May 2022.

JPMorgan Chase's disastrous acquisition of college financial-planning website Frank is an example of is an example of how some banks are attempting to secure college students as customers before they even graduate. In its lawsuit against Frank, which alleged that Frank's claim of 4.25 million users was largely false, JPMorgan Chase noted that college students represented a market it wanted to reach.

This past September, Citizens Financial Group in Providence, Rhode Island, announced a deal for online higher-education planning platform College Raptor.

"The acquisition of College Raptor offers unique opportunities to engage with prospective college students and their families as they navigate the college search and selection process," Chris Ebeling, executive vice president and head of student lending at the $226.7 billion-asset bank, said in a press release.

Meanwhile, there is one challenger bank, Mos, targeting college students directly with features that help users find jobs, fill cash-flow gaps and get personalized help.

Iceman-Haueter estimates there are 330,000 Michigan State University alumni who do not use the credit union's services, "but we do think they can align with AlumniFi," she said, considering the need for nearby brick-and-mortar branches has declined over time. 

"It's consistent with the expectation of the Generation Z crowd that are new college grads and expecting a digital interaction with their financial services providers," said Mitch Wein, head of community banking and credit unions at Aite-Novarica Group.

Although the credit union plans for AlumniFi's demographic to expand over time, it is currently targeting recent graduates from 22 to 35 years of age at Michigan State University and Oakland University in Rochester, Michigan, although alumni from any college are eligible. 

MSUFCU is the parent company of AlumniFi, managing backend operations and ensuring that the banking services meet regulatory standards. The product was built by bank technology provider Nymbus and runs on its core, which is separate from MSUFCU's Symitar core from Jack Henry. 

"Nymbus gave us the skeleton and we added all of the muscles, personality and how we wanted it to function," said Iceman-Haueter.

To appeal to alumni, who Iceman-Haueter points out may be managing their finances on their own for the first time, the brand partnered with three fintechs to deliver features on top of the checking and savings accounts. For now, AlumniFi refers to these services within the AlumniFi app. It hopes to embed them more seamlessly into the experience over time and add more partners, as well as a bill-splitting feature, credit cards and loans.

One is white-label financial wellness platform Pocketnest. AlumniFi members can input such information as their ages, incomes and savings goals to receive a customized array of financial education articles, quizzes and more. Another company, Changed, lets members round up their AlumniFi debit card purchases and direct the difference toward student loan payments, "which we think will be a big part of this audience's financial picture," said Iceman-Haueter. Spave has a similar function, but directs spare change toward charitable donations.  

"Accessing [these services] through the AlumniFi app streamlines the experience and promotes these healthy financial habits," said Iceman-Haueter.

Eventually, MSUFCU intends to set up what Iceman-Haueter calls "high performing" accounts with competitive rates on checking and savings and a more complete suite of products so people find reasons to stay with AlumniFi as their college days fade into the background.

"Someone doesn't stay 23 forever," said Wein. "I think this would be very desirable for college grads, but the key is to grow with them."

"Our intent is to support you as you move through your financial phases," said Iceman-Hauteer.

For Marcus Rothaar, manager of data analytics development and delivery for consulting and research firm Raddon, building a strong brand will be important.

"Having a targeted brand like this may allow the credit union to be more overt in demonstrating their commitment to helping members tackle post-graduate challenges such as student loan debt," he said. "Ultimately, their success will hinge on how effectively they are in establishing a powerful brand identity that resonates with their target market."