Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Penny Crosman (00:03):
Welcome to the American Banker Podcast. I'm Penny Crosman. Military members tend to have many challenges accessing affordable financial services. Is this changing? We're here today with two experts from Armed Forces Banks, senior vice president and military executive Tom McLean, and Jody Vickery, executive vice president for military lending. Welcome Tom and Jody.
Tom McLean (00:27):
Thank you, Penny. Good to be here.
Jodi Vickery (00:29):
Pleasure to be here.
Penny Crosman (00:29):
Yeah, thanks for coming. And Tom and Jody actually have their own podcast. You want to tell a little bit about that?
Tom McLean (00:36):
I would love to tell you about that.
Jodi Vickery (00:39):
Tom will jump right through that door.
Tom McLean (00:42):
It's called Militarily Speaking. I should say that it's available on Spotify, Apple and YouTube. We've got nearly 60 episodes out there for the last couple of years, and we focus on like-minded nonprofit military organizations that are serving our veterans, serving our military spouses, serving independents, providing services, providing events, providing ways to get involved and volunteer with these organizations. They range anywhere from the Pat Tillman Foundation, Gary Sinise Foundation, to Fisher House, to Project Healing Waters, some of these hidden gems that are out there where there's actually great programs going on serving those that are suffering from PTSD or those that are suffering from mental health issues or those that are going through food insecurity. But it's very informative, not necessarily focused on Armed Forces Bank or financial services. It's focusing on programs that are available for our military service members and our families and veterans where they can learn a heck of a lot about what's important to them and what's going on in their lives. So we're really proud of the number of episodes we've done, but even more proud of the special people that we get with whom we get to speak on a regular basis. So it is awesome for me, and I'll speak for Jody for that too, but I think we enjoy being co-host and as probably you do Penny, because you meet some really good people, fascinating people.
Penny Crosman (02:08):
That's great. I'm going to subscribe as soon as we're done here.
Tom McLean (02:11):
Excellent.
Penny Crosman (02:12):
So what do the two of you see as some of the biggest difficulties military members have when it comes to trying to get financial services, trying to get loans, trying to get a checking account that they can use overseas and so forth?
Jodi Vickery (02:30):
Yeah, I think I'd probably answer that by starting with why is that a different struggle for them maybe versus a civilian family that otherwise looks just like them. You think about the military family and my opinion as a military spouse, 20 year retired active duty husband is that they don't get paid near enough for what they do as a family unit given the sacrifices they make. But nonetheless, the fixed income that they do receive is low, I think compared to maybe some of the counterparts, same age, same demographic. And when you're in a time like we are today with inflation the way it is, any discretionary money that was there before has gotten squeezed even harder. And so you find that it's maybe more challenging to tuck away money for a rainy day to do something fun. Everybody likes to do that, but also to deal with the curve balls that life throws at you all of a sudden, you need new tires on the car, you need a new fridge.
(03:32):
It went out, something unexpected. It's hard to squirrel away money at an emergency fund when there's not a lot of extra money to go around on a month in, month out basis. So I think that the challenge for them is just a little bit different. You couple that with some families support two households, they don't always live together. I know in the last six years of my husband's service, he lived in another state than the children and I did, and that's expensive. The military might pay part of some of that, but we sure came out of pocket for a whole lot of it. Deployments move all the time. You can imagine there's just expenses that go with all of that. So I think they're set apart in terms of they have the normal everyday challenges of a young family doing all the things young families want to do, and then you layer that on top of it.
(04:22):
And I think whenever you have an audience like that or a group of people like that, that has clear needs for financial services, it's someplace where unfortunately, some people like to prey. Maybe they see that as an easy target. We sort of look at it as exactly the opposite. So we want to help educate them with how they can be prepared for when they need certain things to go their way financially. With the products, I'm sure that we'll talk about that at some point along the way, but it's the education component married with responsible products, I think, that we bring to the table that will help move them forward on a financial basis. Not how you'd add to that.
Tom McLean (05:09):
No, I think the unexpected part of life happens beside the rising costs just to pay for goods and services and go to the grocery store or go to the gas pump, that's tough. But what we're also finding too is that it's very difficult for the service members to put aside money for a rainy day, to have that emergency fund, to have that savings account. And Jody and I both worked together to figure out, and the survey was a big part of determining what's important. It reinforced what we already knew about our client base. But in the same vein, it really gives us motivation and pride to continue to develop products that make sense that are cost effective and have utility to a point where they find value in the products and services we do with it. And we'll get into that later, as Jody said too.
(05:57):
But Penny, we also, when you talk about sort of that predatory lending thing that's been going on for a while, for years, and we pride ourselves because we've been an accomplished financial institution receiving countless awards for being Bank of the Year for all branches of service. And one of the components of that nomination process is what are ways that you're combating predatory lending? There's actually a whole dedicated section of that nomination form. And then that's when we get to showcase the things that we're doing because the fairness of treating our service members with dignity and with respect and giving them the right products is right in our wheelhouse. So we take great pride in.
Penny Crosman (06:41):
So the whole idea that military members have really low incomes is kind of alarming when you think these are the people who put their lives on the lines for the rest of us, is there any effort being made to try to get better wages for military people?
Jodi Vickery (07:02):
Yeah, actually, it's funny you mention that. I heard on the news this morning the source will escape me, but on one of the national news programs this morning that somebody in DC was proposing the largest base pay increase in a long time for military families. Of course being D.C. there's different views on that. And so I don't know if that will go anywhere, but it does give me hope that there's some folks that have an ability and power to do something about that, that are at least having a conversation.
Penny Crosman (07:35):
So I think one thing that came out of the survey that you did recently is that military members financial decisions are very influenced by their friends and family. What did you think of that? Is this normal and what does this mean for companies that want to serve them?
Tom McLean (07:54):
That's a great question. I'll address that a couple of different ways. A lot of times as these 17-, 18-year-olds decide to take the path of military enlistment, typically they're coming to those installations, going through training schools, boot camp, and they already come with a checking account, with a savings account. It's typically that they're following in the footsteps of their parents or parent for those financial decisions. But we also find once they get to the installation, whether it's Navy, Army, Air Force where we operate, they become friends with all the other enlisted at the time. They sleep in barracks, they have meals together, they talk about things. There's all these fintechs out there, the Chimes and SoFi's, and there's just a lot of choices out there for people too. But I do think because they're separated from home because they're in a new environment, that they lean heavily on the brothers and sisters that are at war with them and they compare notes, I think they're influenced to some degree to where they should either open that account or get a loan or get a product from a financial service provider since there's thousands of them out there.
(09:08):
But I do think there's an influence, especially at more of a development age in their military career, in their financial careers, that they are going to listen to their new buddies, that they form relationships with them. But I do think the parents also started it early with them for the influence about what services will benefit them and where they choose to bank or where they choose to have a credit union relationship or other fintech.
Jodi Vickery (09:35):
I would just add you think about the level of trust that they have to have in one another for all of the things that they're asked to do, life and death kinds of things. It makes a lot of sense to me that they would trust each other for advice on things related to maybe less life and death matters, finances and probably other things too in general life.
Penny Crosman (09:55):
Sure. And then you asked them which aspects of financial services are most important, and I think 59% said low fees, 55% said customer service, 51% said online in banking experience. Is this what you expected and is this readily available to them or is this a gaping need that needs to be filled in your opinion?
Tom McLean (10:22):
I think another great question. There were some of these stats, again reinforced what we already thought as a bank and based on our product offerings as well that understood what's important. Jody talked earlier about the rising cost and the low wages that every penny matters, every dollar matters and eliminating nuisance fees. I think we tend to, no matter what industry, there's nuisance fees in there. So how do we develop solutions that eliminate those fees? We think about education. That's a big part of that too when it comes to how they can avoid going the route where there's excessive fees for getting financial services too. So the more we can educate 'em with broad content that we have on the Armed Forces Bank website, the more we can do personal financial education inside of the gates that we collaborate with. Army Community Service with fleet and family readiness groups that do home buying seminars, do budgeting to establishing credit.
(11:23):
What is healthy credit, saving for the future? That collaboration is important. We understand that fees, service and a digital experience probably makes sense to us. So that's why we lean into bringing back free checking. Early April, we launched access freedom checking, no frills attached, no gotchas, no bells and whistles to it. Let's eliminate the fees and let's have someone be able to move his or her money seamlessly. And we have to make sure that the digital solutions work for them too, whether it's shutting down a card or making sure they got transaction alerts set up so they know that their cards are not compromised somewhere. Knowing what their balance is, knowing what their transaction history is, so that when you see those three, how do you come rise to the surface about no fees, great service? Well, especially with the client base that we have that's as mobile and as portable as they are when they move to duty stations every two or three years that we are not going to physically be there for them, but we better be there both on the back end if they pick up the phone or through a digital solution at two in the morning.
(12:32):
So we've just got to make sure that we're on top of our game as a financial institution to deliver the services when they want, how they want, where they want.
Jodi Vickery (12:39):
And I would just echo everything he just said, but I'd also say he mentioned our access freedom checking account. We also pay attention to things like those fees on the consumer credit side of things. We have a secured credit builder credit card that has no annual fee, no application fee. There's no application fees associated with their personal loans. We really want to make those. I think responsible choices when people need to borrow money, that's a fact of life. We've all had to do it, but we want to give them good choices when they find themselves in that position. And then I think with the digital one, that's also to me not a surprise to see it at the top of the list as a bank, that is one of our lead strategic focus areas, making sure that we can deliver products and services wherever they are, whenever they need those products and services delivered.
(13:35):
And so if they're worrying about finances at two in the morning and we have something on our website that can help them solve that problem, take care of it and go back to sleep and rest easy, we want to be able to do that for them. Especially when you're thinking they literally could be anywhere in the world. They could be like, my family was separated, so how do we communicate about finances when one spouse is in Kentucky and the other's in Kansas, and we both can't see the same thing? Well, they need to be able to see the same things and have the same access and ability to do things so that you don't mis-communicate and wind up doing, getting your checking account overdrawn because one hand wasn't able to see what the other hand was doing. So all of those things are important, and yet they're all three at the top of the list, but I think they're pretty evenly weighted in terms of percentages too. So three strong things to focus on and lean into, I think as a military bank,
Penny Crosman (14:31):
When you look at the industry as a whole, do you think banks and credit unions are doing enough to kind of meet these needs, especially for military members?
Tom McLean (14:42):
I do think, I mean, there's some outstanding financial institutions out there, whether you're Andrews or PenFed or Navy Fed or USSA or Roger. You think about all these banks, you think about the competition. It's healthy, it's an important client base. It's an important acquisition for dedicated military banks or that have arms within their bank that are dedicated toward developing solutions, support for that targeted client base that will there ever be enough, the perfect widget for the perfect need. I don't know. But the number of choices available out there and the opportunities for efficiencies in the system to allow low cost solutions for people, I think that's getting better all the time.
(15:29):
I think the pathway to good credit or the understanding if you're eligible for a VA loan, I mean, some of those things to me are almost table stakes for a military bank to make sure that we are providing the financial readiness for them. I mean, they're worried about military readiness, emotional readiness, but it's incumbent upon us to have partnerships, collaborations, do a podcast to educate and inform people to make those kinds of decisions that we take for granted as we live in this banking world every day, because it's easy for us. But until you can impart wisdom or give them guidance or put guardrails in place to help our service members, men and women on a better path, I think there will be enough choices out there. It's really up to us to tell them whether better choices out there and let's give them better choices.
Jodi Vickery (16:22):
I think what I was going to say kind of lines up with that. At the core of it all, my hope, and I am a hopeful person most days—
Tom McLean (16:32):
We've heard that, Jody.
Jodi Vickery (16:34):
I know. But my hope is that if you're a bank or a credit union and you've chosen the path of serving this military community that there's at some root level, the why will unify what we're trying to do, whether it's our banks and other banks and other credit union, these families deserve, quite honestly the very best we have to give as a community of banks and credit unions. And I know we're focused on that. I don't know that it's ever done right. So we continue to evolve, we just rolled out a new evolution of a checking account. We continue to assess products all the time, and I suspect that's the same at other banks and credit unions. But again, my hope is that at the root of it all, I know it's true when we talk to all these nonprofits on our podcast, they all serve the community in different ways, but there's some unifying thread there that says, you know what, we need to do right by these families. So I think that's how I'd answer your question, penny.
Penny Crosman (17:30):
That does sound hopeful. Tom, I think you mentioned combating predatory lenders before, and I was just wondering, what do you think you do about that? I remember reading an article probably a year ago about how many military bases are just surrounded by payday lenders, pawn shops, used car or dealerships, places like that, that do take advantage of these young recruits? And you did mention education and offering affordable loans, but is that the answer or are there any other answers to that whole predatory situation?
Tom McLean (18:15):
I've always been of the opinion that it is, it's one client, it's one service member at a time, and you can only hope that you provide the service and the products and the value where they tell other people, especially in that, as Jody talked about, the family and the unification, the tight bond they have with communicating with each other. And I really can't speak on the regulatory front. I can't speak on from a competitive standpoint what makes sense and what's available out there. I think the market dictates a little bit of that. But what I've found in my 35 years of banking too, as we've operated inside Walmart's before my previous life with a low moderate income household, that you need to just provide the tools, resources and education to make those decisions. And you mentioned that earlier, Penny, about is there more that can be done? Market share and penetration and profitability.
(19:09):
All those things come into the equation when it comes to the viability of a business. And if we can continue to grow our business and take care of the needs of our military service members, then that's what we're going to focus on doing, making sure that we take care of one at a time. That's probably not a very direct answer, and Jody may add a little bit of flavor to that, but I think, again, it's a competitive world out there, but we certainly know that we're doing the right things and we're developing the right solutions.
Jodi Vickery (19:42):
There has been, excuse me, legislation to make certain establishments like that off limits really for military members supportive of that, certainly. And then I think to Tom's point, focusing on our sphere of control and what we can do, whether it's through how we engage with them on consumer credit education, I also think for us it's also just because somebody comes to us for believing they have a credit need doesn't mean they're all going to get that need fulfilled necessarily. It's about being okay saying, this maybe isn't the best right financial choice for you right now. I'm not going to loan you that money, but here's why, and let's make a plan to get you out of the spot that you're in so that maybe that's a different answer six months from now, nine months from now, or even better that you have an emergency fund than and you can borrow from yourself. So I think it's all of those things layered together, and I know that's all a hundred percent within our control on how we interact with our clients and then how they communicate to others, how they were treated here. But I think that's where our focus is and probably will remain, but certainly supportive of activities that would cause certain obvious establishments to continue to be off limits or even more so.
Penny Crosman (21:08):
I don't know if this is something you've thought about at all, but I wonder if AI could play a role in any of this. For instance, Google is testing using Gemini to read incoming emails and listen to incoming calls, and maybe not everyone wants Google listening to their calls. That's a different question, but listening or in reading for signs of some kind of scam, for instance, and then sending an alert saying, this looks like a scam. Be very careful or something. Do you think something like that could be harnessed to help some of these young military members or even older military members to make good choices and to help them navigate some of their financial decisions?
Tom McLean (22:01):
Sure. It'd probably, holistically too, I think every financial institution or type of finance company is working either with the regulators or with circles of influence in the AI space to figure that out. I'm not sure, it may take a couple more years to get to a point where we're all comfortable with it and testing those waters. I do think because we're kind of a leading edge company, we're kind of one of those challenger banks, right, that we want to get out there. That's why we have someone that's in charge of robotic process automation for us, RPA, we've got a director of fintech partnerships that works for this company. We've got a solid information technology team that is working with reputable organizations to try to develop after probably further investigation, further research, develop solutions that will do that. Fraud is a big issue in this country, and cybersecurity issues related to that and protecting of the deposits and the assets of our clients is pretty important to us. And if we can make sure that technologically we are protecting them and we're giving them notification and informing them of the risk of a transaction or the risk of opening an app or spearfishing stuff, the spoofing, all that stuff. If we can do that part and AI can even be just ahead of that, then I think we're going to be trying to stay ahead of the fraudsters to try to protect them and not get them down that path of going down the scam route, like you mentioned. But Jody, you wanted to add something?
Jodi Vickery (23:43):
No, I think that was well said. We all have, I don't know. I think I get increasingly more and more on my cell phone, random odd calls that come in. I've become quite good at just pushing them to voicemail and then reading or listening to the entertaining messages that get left. But we see that as consumers ourselves, and so as consumers that also are representatives of our Armed Forces Bank, as we see those things maybe as a precursor to AI, being able to lend a hand there for all the reasons Tom mentioned. We certainly do communicate to our clients things to be on the lookout for and how to protect themselves to the best of their abilities. Some of those scams are pretty darn good, I got to be honest.
Penny Crosman (24:28):
They get better all the time for sure.
Jodi Vickery (24:30):
They do. They do, unfortunately.
Penny Crosman (24:33):
Well, this has been great, and Tom and Jody, I want to thank you so much for joining us today and to all of you, thank you for listening to the American Banker Podcast. I produced this episode with audio production by Adnan Khan. Special thanks this week to Tom McLean and Jody Vickery at Armed Forces Bank. Rate us. Review us and subscribe to our content at www.americanbanker.com/subscribe. For American Banker, I'm Penny Crosman at Thanks for listening.
Transcription
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.