Tradition to Transformation: How Small and Mid-Sized Financial Institutions can Drive Deposit Growth and Future-proof in an Open Banking World

The rise of open banking in the U.S. can feel intimidating (and costly), particularly for community banks and credit unions - but it can also hold the key to unlocking supercharged growth and new opportunities. Leaning into collaborative partnerships can present new growth levers, drive down costs, and turn year-long implementation timelines into weeks.  In this case study deep-dive, join Alliant Credit Union to hear how they partner with Plaid to drive customer acquisition and deposit growth, and reduce identity fraud - while future-proofing for an open banking world.

Transcription:

Ashley Woodroffe (00:10):
Hi everybody. Welcome. My greatest fear was four o'clock. I'm standing between you and perhaps a margarita on the beach, so thank you for coming. Okay, cool. Alright, come have a seat. We got plenty of seats over here. Feel free. No, I'm kidding. You're fine. Okay, we're ready to get started. Hi everybody, nice to meet you. My name's Ashley Woodroffe and I'm here with the Plaid team. I am part of our banking and wealth team and excited to meet you all here today. And I'm also joined by Jigar here who is part of Alliant Credit Union.

Jigar Khatri (00:51):
Hi everyone.

Ashley Woodroffe (00:52):
Jigar Khatri, could you tell everybody what city you're from, what you do with the organization, and then of course how long you were delayed at the airport because it sounds like everybody was going through the same thing.

Jigar Khatri (01:03):
That's a great question to start with. Yeah, so I'm coming from Chicago. I'm working as a Manager of AP and Integration Services team in Alliant. My flight is delayed about an hour, right? So I got in here just about a time when the kickoff dinner was here, so that's great timing. Apart from that, my team is basically responsible for creating an ecosystem, open banking ecosystem where we have close to 20 plus APIs that we manage close to 40 plus common components and packages that we develop in Alliant, which is currently being used across different applications. And that helps us for a seamless connectivity within our online banking applications. Other platforms like new member open application, our lending platform, and just making sure that we have the integration going on with our strategic partners like Plaid so in a nutshell, my team and I are responsible for making sure that we create and manage open banking ecosystem for Alliant.

Ashley Woodroffe (02:16):
Perfect. So much more technical than me, that's for sure. And I'm from Toronto. I work on our Go-to market team and I was about an hour and a half delayed getting in. So we're okay, we're here. There's some seats at the front if you'd like to join us. Okay, so awesome. Really quickly, I want to talk about Plaid. Of course we're here to talk a little bit about Plaid, but I promise we'll hear a lot from Jigar. How many of you have connected your apps through Plaid before? Okay, awesome. I'm going to let our product marketing team, it's about two out of three because two out of three Americans have used Plaid before and we are excited to be an aggregator and a big part of the ecosystems that either you all use or are going to use in the future really quickly. We are excited to be a 75% API forward company and this effectively means that we connect a lot of our data through API and about 25% of that is through screen scraping and we continue to forge the way with different partners to make sure that we are API first.

(03:25):
Additionally, we are the banking and wealth team as I had mentioned earlier. So previously, as you all know, we work with the Venmos of the world, we work with Coinbase, but in the last year and a half or so we've been really at the forefront of working with financial institutions and as of today we work with many, many of them. You can see up here it's about 16 out of the 15 largest FIS and hopefully nine out of 15 at the end of 2024. But again, we're really excited about partnering with fis and our C levels have made a really big effort to make sure that we are at the forefront of product road mapping, working with you all and all the good stuff. And then finally of course we help power 8,000 plus apps. So our ecosystem is quite large and we're really excited to continue to be part of that innovation roadmap with you all. Okay, so we really want to hear from you. Let's learn a little bit about Alliant and then of course we'd love to learn a little bit more about your technology stack and how everything comes together.

Jigar Khatri (04:30):
Sure. So Alliant is fully digital credit union. We don't have any more branches, so we operate through all our ecosystem that we have created in-house. We have various applications that we have created and maintaining right now. One of them is our online banking application, mobile application. We have created our own landing platform. All of this is basically on the Microsoft stack. Recently in the last year or so we started creating our APIs on the MuleSoft platform as well. So unlike most of the financial institutions where you see the systems are not getting upgraded frequently. Usually we work on the legacy platform because there is a lot of history behind it, but aligned credit union is different in a way. So we always invest in the technology, we have great technology team with us, great vision from our leadership team and we always make progress in terms of the stack that we use, all the upgrades that we need to do, bringing in new technologies.

(05:43):
And at the same time the one thing that we always focus towards is how we can improve our member experience. So that's forefront for us. That's what drives everybody in Alliant and I'm very happy that I get to be a part of that. I have been aligned for about more than 12 years now and have seen the progress that we made over a period of time. So having said that, while we built our online banking, so this was about 10, 15 years back, right at that point of time, we did not have a lot of great options available in the market and we did not want to just present or prepare any cookie cutter solution for our members. So we decided to create on our own, making sure that we create an application or a solution that tailors to our members' demand, make sure that we have a streamlined experience, we have more control over the data, we can upgrade and make changes and enhance all the experience, Ui, Ux, when we need it.

(06:48):
So that's the reason we created in-House, but we are in a kind of modernization journey right now. So that's about OLB, but let me switch to a new member account opening process. So again, that was something that we have developed in-House few years back, but I think couple years back we decided to pivot a little bit and work with our strategic partner so that we can have a solution that cater to our needs of our members in a current environment, provide superior ui ux experience. We have worked on creating those solutions on our own, but we wanted to now go, we wanted to strategically focus on our core competencies. So we decided to move forward with our partner solution. So we are using their solution for new member account opening process, but we have our APIs in the backend that that solution consumes. So out of both the solutions we have integrated Plaid. So initially we were using our micro deposits to have our members external account linked to the Allian credit union. But with the help of Plaid and the features that it provides, we are able to integrate Plaid so that we can enable the instant account verification, which is a huge plus.

(08:13):
We always thrive to have superior member experience. And when you talk about the micro deposit, it's a thing of a past. We wanted to really make sure that we improve on that. We heard our member, it was a frustrating experience and that's when we went into market to figure out what are the solutions that we have available right now. So we looked at Plaid, we looked at some of the competitors of Plaid as well, but we had a set of parameters that we were evaluating each of the options. So some of those parameters are seamless onboarding experience, make sure, this is my personal favorite because I work in API space and open banking, the option that we are looking for needs to have a friendly and secure API access. We also wanted to make sure that the solution that we choose has a connectivity to all the fis.

(09:12):
That's big plus for us. Apart from that, we wanted to make sure that we get proper support in terms of maintenance enhancement innovations. So we were evaluating all our options against these criteria and I think Plaid came up as a natural choice for us. So that's a journey from what we have been doing in Alliant to Plaid. So that's an instant account verification that I talked about. But we also in the last couple years, a couple years back, we have introduced a Plaids aggregator, API, which is a core exchange product. As Ashley mentioned earlier, that we used to have a screen scraping a method that our aggregators use to connect to our application gets member account and transaction information, but it's not a clean cut process. We wanted to have something which is more reliable and that's when we bring in a Plaid exchange, API. Right. So now we earlier from a screen scraping, we went into a Plaid exchange, API have that integration done through the API platform that we have developed inhouse in Alliant and that helped us to get a real time access to member data. Now member can go to different platforms powered by Plaid of course, and make sure that they can get their latest and greatest account details with all the transactions and everything.

Ashley Woodroffe (10:44):
Thank you for that summary. So it sounds like just to kind of summarize, you have your online account opening, I understand it's with mantle today, and so you decided to outsource that. It was previously you implemented Plaid's account verification and then you have online banking, which is also in-house where you've already had Plaid integrated there. And then finally with 10 33 regulations coming down, a lot of the things that folks will have to build, financial institutions will have to build. It sounds like you were a very early adopter of those Plaid API connectivities. And by the way, for those who don't know what we're talking about, I'll go into it in a little bit, but it sounds like from an API connectivity standpoint, you built that out with Plaid at a very early stage. So can you tell us a little bit about why be an early adopter? What was kind of behind that decision making on the open banking side?

Jigar Khatri (11:40):
Sure. So as I mentioned earlier, Alliant is a little bit different. We always have a member engagement. There's satisfaction as a top goal for us. So before even this regulation came out, we have been working in the APIs for space for about five, six years now. So we have all our APIs built, we have APIs to connect members, account information, their loan information. So we have been working in this space for a long time so it doesn't make sense to use these APIs or use the capabilities of our APIs that we have created over a period of time and naturally transition into some of the FinTech integrations that are available into the market. So that's again the main driving focus for us. We have been working on this for some time now and it's time for us to find out the strategic partners that provide the solutions and make sure that we ace in the member experience. That definitely drives a lot of deposit growth and also gives us a competitive advantage.

Ashley Woodroffe (12:52):
Awesome. Okay, well we're going to want to hear more about the competitive advantage in a second, but I'll kind of flip over here to the next slide because some of the things that we're seeing in market from a Plaid perspective is it costs financial institutions about $925 from a marketing perspective to acquire a new customer or member. So that is a very expensive endeavor as many of you probably hear from your treasures. And about only 65, about 65% of those go unfunded. So you put on in all this money, you do a lot of the work, but you don't necessarily get the deposits. And sometimes that can take five to seven days if you're using micro deposits. And so the penny deposits, you need your customer to sign in, you need them to put in their account and routing number in a couple of days.

(13:40):
They'll get that penny amount added to their account and then they got to come back and they got to verify how much that is. So there are a lot of steps in between. Now Plaid's solution here that jagar was speaking about both from the online account opening as well as the external transfers on online banking is something that takes five to seven seconds. So here, just for those who the other portion of the room that didn't put up their hand when I asked if you use Plaid, this is that five to seven second experience, you are co-branded with Plaid at the top. It pops up this screen that is a UI owned by Plaid and once the customer hits continue, they go and they select the bank that they want the money to come from so they can select any of them. And because we are, to Jaguar's point earlier, we're about 75% API, that's 6,000 plus FIS that we are on from an API perspective.

(14:37):
And that 25% in the rest of that volume will be screen scraping. We have excellent connectivity with this ecosystem. So you select your institution and you go in and you put in your credentials, but because of that API connectivity, many of these fis will also give you the opportunity to do face id. So rather than even having to remember your login information, we're continually evolving this experience. We're an engineer first organization, so this allows for folks to connect in quite quickly. From there you select your bank account that you want to allow for the FI that is using this application powered by Plaid.

(15:17):
They select the account and then voila success. So from there in the backend, what are you getting with account verification? You're getting an auth endpoint that's account routing number from this externally linked bank account, you're getting identity which is the name, phone number, email address, and address of this individual from the external FI. So this is allowing you not only to get that information instantaneously, but you're also able to confirm their identity. So this is mitigating a lot of risk and fraud. So for FIs that we get to work with and I get to personally speed date, we're seeing that you're actually getting, you're not only meeting the needs of what the risk team might want, but you also have the opportunity to potentially increase the limit. So you're widening your net of how much money you feel comfortable allowing customers to move in. Okay, so that is account verification in the case of folks, dunno what we're talking about. Now again, we'd love to talk a little bit more about Alliant here. So for the first part of the use case, no more micro deposits, that's kind of your fallback flow. You're using Plaid at the forefront for both your online account opening as well as your online banking for external transfers. Now tell us a little bit about the results that you've seen from this. Yeah,

Jigar Khatri (16:38):
So our member base is all digital and so they are very much vocal on the social media as well. So if we put a foot wrong, we will hear from our members for months. So for the fact that when we went live with our integration with Plaid, we did not hear a lot and that's a great sign for us. In opposite, we got a lot of comments from our members because earlier experience was very frustrating and now it's seamless, it's instant account verification and what you showed earlier which was taking five to seven business days, now it's right away. So that made a huge difference. So believe me when I say that there is not much coming from our member, that's one of the best news that we get in Alliant. So again, this is a continuous improvement that we strive for and the integration play with Plaid helped us in at least those couple areas that has to do with the account verification and the API space. So

Ashley Woodroffe (17:45):
On an average jagar, and when I say this, we work with a lot, lot of different partners. I think Jigar earlier spoke about how Plaid is integrated with Mantle, which is an online account opening platform. A lot of credit unions will have the opportunity to decide do I have enough dev resources to build this out or should I outsource this to a company like Mantle? There's a lot of others out there and Plaid partners with many of them. But what we're seeing on an average and numbers that we get from the thousands of banks that do work with Plaid for account verification is that they're seeing a 30% lift in conversion. So moving from micro deposits to instant account verification, they're seeing 30% more go through as a result of shortening those days. Familiarity with using Plaid before, what kind of numbers are you seeing on your side?

Jigar Khatri (18:38):
Yeah, so there are a few things that I can definitely talk about on this. So prior to integration with the Plaid, we were having our digital care center, were getting a lot of calls because whenever, if it's not an instant account verification, if you're relying on a micro deposit, that's kind of a manual step and with Manual step it's an error prone process. So earlier we were getting a numerous amount of calls regarding, Hey, did you get my deposit? I'm not able to see the deposit in my micro deposits in my account. So where are we in the process? And I need to do this sooner because I'm getting late for some payments. So we have been hearing about a lot earlier and after we went live it was a tremendous decrease in calls. So I can definitely tell that we are about 20 to 30% if not more reduction in the complaints that we are now seeing that in our member contact center. So it was a huge improvement on our part, but also by reducing the number of calls coming to our digital care center, that also helps us more from a cost and operational efficiencies because now we can focus on things that we need to focus on and not worry about the manual steps in the process. Got it.

Ashley Woodroffe (20:06):
And so one of the things that we always think about is implementation. So when I speak to a lot of financial institutions, it's about well what does it look like to build that out? And you uniquely have the experience of both building a platform as well as able to outsource it to another platform. So you kind of have a taste of both. Can you tell the folks in the room a little bit about your experience on both sides from an implementation standpoint?

Jigar Khatri (20:34):
So as far as the implementation is concerned and that's applicable to anything that you develop, right? It's always an ROI attached to that. So anything you are building, you compare against what you are building, how much efforts you need to put into what the cost factor looks like, and then you compare against what are the solutions available in the market. Specifically when I speak in terms of the products that we have implemented and integrated using Plaid, those are already available widely used. It's basically a industry standard. So it gives our members more trust. They can also rely on the mechanism that we use in the backend, making sure that it's a secure process. So as far as the building is concerned, it was a no-brainer for us to adapt versus build. And that's the reason we went with Plaid. Just yeah, obviously there is an integration in place, there are APIs you need to call, but it's all fun things, right? It's no UI experience Plaid already has the experience ui ux that we wanted, which is Seamless, which was providing seamless onboarding process. We also had outreach to more financial institutions member with a click of a button can add external institutions into their accounts and at the same time we can get an access to real time data that gives us more personal insights. So that's a piece that we wanted to focus on versus just building things.

Ashley Woodroffe (22:18):
And that's such a hot topic. I'm sure those in the room here we talk about the deposit gathering, really great interest rate market to be focused on this. And then of course there's personalization. So we'll talk about that more in a couple more slides. Let's talk numbers. So you guys have about 800,000 members. How many of those are active on your application today?

Jigar Khatri (22:44):
Sure. So before we started with Plaid in terms of those API integrations, I believe as part of the screen scraping, we were about 30,000 members using Plaid, using the screen scrapping after we implemented the integration with Plaid using the APIs on our platform, that number base has increased from 30,000 to about 130 140,000 and it's growing, right?

Ashley Woodroffe (23:10):
That's awesome. And I didn't pay him guys, so this is really exciting stuff. And so what about the average size deposit because we should probably do a comparable, and for those in the room who are heavily focused on the deposit side of the business, what do we see as an average size deposit for both your CDs and then also for just opening up a bank account? Yeah,

Jigar Khatri (23:33):
So I think we went live with Plaid sometime in earlier mid of 2022. And since then, based on the data and the statistics that we have on our side, each time a new member account is created, we are close to a little bit more than $8,000 on an average. And as far as the CDs are concerned or certificates are concerned, we are seeing about I think a little bit about $36,000.

Ashley Woodroffe (24:03):
That's exciting. That's really exciting. And that also means a very high amount of transfer on average. So if we go back to that previous slide, $925, that's massive return on that marketing. So very exciting to see. So let's jump over to the open banking side of the house. What do we see from a customer journey or a customer need? 80% of consumers use digital finance apps and services. 50% of Americans use FinTech apps daily. That engagement on your online banking becomes so important, but also its ability to kind of have conversations with other applications out there such as the Venmos, et cetera. And then of course 63% of consumers would consider switching banks if their primary bank cannot connect to other financial applications. We all know the world where once my parents as an example, majorly loyal to their FIs and never switch. Now in a world where there are less barriers to opening up new bank accounts, but also much less barrier to make them your primary financial institution.

(25:20):
In other words, I now have my direct deposits going into there, et cetera. We're learning that ability to connect out is very important in the consumer journey. So Plaid is created core exchange. Core exchange is an interoperable FDX compliant for those of you who are following 10 33 regulations and perhaps why you're here so that you can easily build these APIs to connect to Plaid, get the check mark from the regulators, and have access to 8,000 plus applications that consumers use. Now as we heard from Jaar earlier, Alliant Credit Union was a very early adopter of this. So can you tell us a little bit about the results that you saw as you've now implemented this open banking API connectivity with Plaid?

Jigar Khatri (26:12):
Sure. So as I mentioned earlier, so from 30,000 we grew to about 120, 130,000 members actively using Plaid. So what that basically tells us that member, the engagement were definitely getting impacted due to the frustrated experience. So as soon as we did this implementation and integration with pla, I think it was very seamless for members, it's easy for them to just go on a platform, whether it's PLA or some of the aggregator, which is powered by DO authentication, which is secure behind APIs specifically, we are using the OAuth Open ID authentication protocol behind the API access. So knowing that it's easy, it's secure, you can get an instance access to your data, you can look at your latest and greatest account information, your transactions. So that definitely helped us to have all our members start using the Plaid Exchange API that we have developed as well as making sure that they can move away from the screen scraping process. So we are still in a process. Not everything is migrated over to this API based platform, but I think that's where we are going. Yes.

Ashley Woodroffe (27:32):
Okay, thank you for that. And just to kind of play back some of those numbers, so earlier you said you have 130,000 members that are active on your app, sorry, that have connected through Plaid of a total of 400,000 members that are active on the application. So that's a huge level of adoption where you're getting folks connecting from your accounts outward, but all time connection, I think there's about 700,000. So in other words, every single one member is connecting to two or three applications out of Alliant Credit Union, which is a really interesting stat because then now we're thinking about the fact that okay, a single customer might have multiple bank accounts with multiple banks, but then they also have all these applications they want to connect to. So Alliant has been an early adopter and now you're seeing that those folks are connecting out to multiple applications, increasing your chances of being their primary institution, but you also get insights is what you shared. So can you tell me a little bit more about what you guys are doing with that insight now that you know what your customers are connecting out to?

Jigar Khatri (28:45):
That definitely helps us to cater to our members' need. When you have that kind of data available, it's an opportunity to make sure that you come up with the financial advice to what member needs. That also helps you in upscaling or scale cross-selling your products. Apart from that, with that having available all the benefits and opportunities that helps you to focus on a core competency where for all aligned, it's mainly making sure that we are providing to the best member experience, focusing on creating a product which our member wants. So these are the few advantages that you can get. So when you talk about the personalization insights, it's all about making sure that you have the data available from your customer, their spending habits, their income pattern, their debts, and based on that you can create an experience for your customer.

Ashley Woodroffe (29:47):
That's cool. So you're creating that experience, creating the marketing, and this comes from the ability to connect them to other apps in this open making journey. Awesome. They told me 30 minutes was going to go by fast, but I didn't know it was going to be that fast. Thank you so much for being here with us. Quick audio pause.

Jigar Khatri (30:04):
Thank you.