Behind the Brand®

Jeff Adamson [00:00:08] Welcome to Behind the Brand presented by Neo. We take an inside look at the leaders behind today's most influential brands. I'm your host, Jeff Adamson. As co-founder of Neo Financial and SkipTheDishes, I'm fascinated by what it takes to build great companies. On this podcast, we'll learn from leaders that are reimagining, transforming, and innovating in the financial and retail industries across Canada. Let's get going!

Today on Behind the Brand, I’m excited to introduce Ian Burns, President and CEO of Servus Credit Union. With over two decades of experience in finance, entrepreneurship, and relationship management, Ian is a trailblazer who challenges industry norms in business and finance. He has a deep understanding of credit unions and their role in the financial sector and as CEO, he leads Servus Credit Union, an organization that is dedicated to its members and rooted in history.

Founded in 1938, Servus Credit Union is a member-owned, community based financial institution. With over 100 branches and close to 380,000 owners, it is currently the largest credit union in Alberta.

Thanks for coming on the podcast, man. We've met a few times before, but it's really good to kind of sit down and talk a little bit about what you guys have going on at Servus.

Ian Burns [00:01:16] Yeah, it's just great to be here. Looking forward to it. Thanks.

Jeff [00:01:18] Let's go back to the beginning here. Did you grow up in Alberta or where did you grow up?

Ian [00:01:22] I was born in New Brunswick, Jeff. I grew up mostly in Alberta, so, uh, I was an army brat. Got a brother and two sisters. We were all born in different parts of the world. My oldest sister [was] born in Germany, my brother and I [in] New Brunswick, and my younger sister in Toronto. And we moved to Alberta in 1977. So, I grew up almost entirely in Alberta. It's been a great place to live and to work.

Jeff [00:01:42] Tell me if you agree with this, but I feel like the Maritimes and, and maybe anyone from the Maritimes who's listening to this is gonna gonna hate me, but I feel like the prairies and the Maritimes are like, there's a lot of similarities in culture in some ways despite the fact that we have very little like access to water. Would you agree with that statement? And, and if you do or don't like why?

Ian [00:01:58] Yeah, I think I do. Um, so for some of my relatives that they all sort of hail from the East Coast, I think there's this natural affinity between the prairies and Atlantic Canada. It's just my view, I don't know that everyone would agree with that so this could be quite controversial when people listen to it. But I think there's a truth in that and I really feel that there is this genuine sincerity and perhaps this you know, informality that comes from our relationships and how we interact with people. And it's really, I think there's this genuine, almost humanism that comes from the culture, if you will.

Jeff [00:02:27] Yeah, like you hear this in business, ‘Prairie Values’. In doing business, I feel like that is something that I don't really hear. I hear people actually in, in larger centers outside of the prairies, talk about that, that integrity, that way of doing business where your reputation matters, your word matters. Is that something that you have seen as well?

Cuz I mean, you, you've worked across, you know, a variety of industries, but like, do you feel like your values growing up have really translated into the way that you do business?

Ian [00:02:56] I think so, Jeff. I think that's the case for most people, or at least that's my view. So it's, if you think of the Canadian business community in its entirety, it's not that big. And if you give the example of maybe the prairies and Atlantic Canada, like these communities feel small, the business communities aren't huge, and I think you probably run into this a lot too. I run into people from, you know, many careers ago and everyone knows someone you know, so there's this element of your reputation precedes you and how you do business and how you show up. I think makes a huge difference on your ability to be successful and to engage in the business community.

Jeff [00:03:28] It definitely is something that I think that the younger generation has a harder time understanding because it, like everything is a lot more instant gratification. But that idea of like things that you do today are gonna kind of either help you or hurt you kind of many years from now.

I wanna talk about your career though, Ian, cuz I'm always fascinated by how people kind of end up where they are, especially people who kind of moved across industries. You started your career at Telus. You're now the CEO of Servus. What's the, the, kind of the quick story on kind of how you got to go from Channel Manager over at Telus to being the CEO of what's going to become one of the largest credit unions in Canada?

Ian [00:04:04] Yeah, thanks Jeff. You know you don't write stories like this, so I don't know what the lesson is here. I don't know if this could be replicated or quite frankly that it should be, but you know, I actually started my career at Costco. So when I was taking my undergraduate degree at U of C, I worked at Costco. Kind of 35 or so hours a week, put myself through university and did kind of every job you can do in a warehouse.

Left Costco after about seven years because, even after I graduated, there wasn't a lot of work in the early nineties and, you know, it was a good well paying job. And I left there and just went traveling and spent about a year traveling Europe and Central America and came back.

My wife now, girlfriend then was working at Telus. And she said, “Well, Telus is hiring you should, you should apply there.” And I actually got hired as a telemarketer, if you can believe that. So I was a telemarketer on the phone for a few months. I was really good at it. So that was both exciting and, you know, maybe a little disturbing for, you know, folks that have a great love for telemarketers [laughing].

But I became a manager within a few months and ultimately ended up in marketing and setting the targets for the consumer division of Telus and working in the channel management area there for several years. Then ended up after that, getting my first job in the credit union system. And I was actually on a plane from Vancouver to Calgary after one of our many Telus reorganizations and flying back and sitting beside a Telus colleague on my left and the gentleman who ended up being my boss at CUETS, which was Credit Union Electronic Transaction Services. It was a MasterCard and merchant services provider to almost all the credit unions in the country. So we were landing in Calgary and talked for about 10 minutes and at the end he handed me a card and said, “I think I have a job for you.”

I'm like, “Well, that's great. You guys are based in Calgary?” He said, “No, it's Regina.” You know, a series of events took me and my family, we sort of did the opposite migratory pattern to a lot of people from Saskatchewan and we went from Alberta to Saskatchewan for two and a half years, and, a great opportunity. Like we supported over 400 credit unions, I had this national team I've been into over, it's almost 200 credit unions across the country. They're all different, but there's something you feel about going into a credit union that is just very different than a bank. So I can tell you that that exists everywhere.

And Servus was one of my biggest clients. And at that time, this company was owned by Alberta Central, who became my employer prior to this job at Servus. I had a stint running the Alberta Real Estate Association, doing sort of lobbying and supporting the 11,000 realtors in the province.

And then most recently at Alberta Central, which is a central bank and a trade association for the credit unions in Alberta. So managing about 3 billion in assets. And I think of them like a mini central bank. If something goes wrong in the credit union system, their job is to manage liquidity. So I did that most recently.

I’m just about to hit my two year anniversary here at Servus and yeah, so that's the short story there, Jeff. I think if there's a lesson in all that, it's, your skills are transferrable. So for people coming up within their careers, it is incredible the things you learned across different organizations that can be transferrable.

Jeff [00:06:46] What, what have you found to be transferrable though? Cause I feel like a lot of people kind of look at, especially banking too, like banking is probably one of the industries that has kind of the most asset knowledge. There's a lot of deep understanding. It's incredibly complicated. What have you found that you kind of carried over from other careers that have served you the best in banking?

Ian [00:07:04] I think there's bits of everything that you pick up. So if you look at really all businesses, they're fundamentally focused on this element of sales and customer service and delivering well and understanding the financial impacts of the business you're in. So I think that really translates across industries. It was certainly the case when I was at The Brick supporting their financial services teams there. So I think it's, yeah it, there's a lot that does translate.

I would say if you look across my career, and one of the threads is that these are all regulated industries except for Costco at the very beginning. All heavily regulated industries either federally or provincially. So I think that those skills and abilities to deal with regulated institutions that are linked to financial services were very transferable, or at least up to my experience.

Jeff [00:07:47] Yeah and it's really interesting too because there's a lot of this trade off between, okay, they talk about hard skills, they talk about soft skills, but I mean, the reality is like you have to have both. Like some of the greatest CEOs [and] leaders I've ever met, it's not like they're just hard skills people or they're just soft skills people. It's kind of the way that those skills show up and the way that they kind of treat other people around them. It's the way that they understand kind of appreciating some of their weaknesses, kind of mitigate those by building kind of a strong team that really enables them to succeed in your career.

Are there people who kind of were really, really important for you in order to make it to where you got to? Or was it, did it feel like pretty, like a pretty lonely journey getting to where you are?

Ian [00:08:26] Well, I think it's all about people, Jeff. So I think it's really, it's about the relationships that you have and the ones that you build. And there's this concept, and I think you touched on it, of surrounding yourself with people who you know, I joke about them being smarter than you, there's an element of that. But they think differently and they bring different skills to the table. And I think that's incredibly important. One of the things that I value most is just people who think differently than I do. So I think there's elements of that.

I think one of the other pieces moving into different organizations and into different roles is finding almost that diamond in the rough, that really talented person that exists within an organization that hasn't been seen. And I've got examples of that from just about everywhere that I've worked. And for me, that's been the most rewarding piece when you see somebody who is, you know, maybe at a more junior level that has this incredible skill set. And you're able to help their career along. That's been, I think, the most rewarding part of it.

I've also been very blessed to have some, just some amazing mentors that over time with diverse careers, you know, coming from different businesses. So I think all of that helps. Yeah, I think I’m very fortunate for the experience I've had and the people who I've had the opportunity to cross paths with.

Jeff [00:09:28] I wanna dive into the credit union side of things cause I think it's, it's extremely relevant nowadays because we've seen kind of the, the Silicon Valley Bank challenges. We've kind of seen that kind of scare that kind of jolted everyone. Now people are thinking about banking again and thinking about, “Hey, is my money safe? Like, where should I be putting my money? Should I diversify?” And I think that, and maybe it's just a generational thing, but I feel like there's a lack of awareness of the importance of credit unions.

So I’d love it if you could go back to kind of the origin story of credit unions, like how did they start? Because it seems like when we think of banking, like you think of the Big Five and just like they've always been there. They're, you know, extensions of the government, so to speak, these kind of pillars of Canada. And then you have the credit unions. Everyone knows that they exist, but maybe they didn't, they don't quite understand the history behind them.

Ian [00:10:12] So credit unions in Alberta and across the country have been around for more than 80 years. So if you think of, sort of the roots of what was going on in Canada at that time, really the need for credit unions came out of the borrowing requirements. You know, in our province of Alberta, a lot of this was rural-based, and the, really it was the banks not meeting the needs of potential customers and in many ways focused on the agricultural sector. And it had created this environment by creating these credit unions in order to allow money to be pooled within communities and being lent out to other members of the community to ultimately help the community grow.

So that focus, I think, is dramatically, you know, different than the banks and has been for the last 80 years. Now, I talked about that job I had working out of Regina with credit unions across the country. It was about 400 credit unions at that time. It's about 200 in the country now. So we are seeing consolidation within the credit union system for sure.

But there is this focus that credit unions have on their members, which is absolutely incredible. So if you think of this term, cooperative banking and in credit union, the members actually own the financial institution. So it's a democracy. So my board of directors is made up of members that are part of our credit union. We have almost 400,000 members at Servus, and they actually pick the board of directors who ultimately, you know, hired me and helps set the strategy for the organization. So it's deeply personal. It's focused on the local needs of the community and even though Servus is becoming, you know, quite a large credit union in the national context. We're still Alberta-based. We're regulated here. And 100% of the decisions that we make are here in the province of Alberta as well.

Jeff [00:11:47] So that's for Servus though. But like even just credit unions more broadly, like credit unions spring up in Ontario and in the Maritimes and in BC. Like were the needs the same across all of them or was it there different needs in Ontario and [the] East Coast?

Ian [00:12:00] Yeah, I think the needs are different, but I think it was still this alternative to the banks that had them grow. So in Atlantic Canada, if you think of sort of what their industries were there, you know, more, more focused on fisheries and those type of things, it was still meeting the needs of individual small communities across the country.

So it's this grassroots effort, if you can imagine that, that was occurring. I don't know what the total number of credit unions was in Alberta, but I know it was over 160 legacy credit unions that made up what Servus is today.

Jeff [00:12:25] Really?

Ian [00:12:27] And I visited some of these places last week.

Jeff [00:12:28] So 160 down to, to one?

Ian [00:12:30] 160, down to one. And there's other, you know, other large credit unions in the province. And you know, I think, you know, consolidation continues, but 160 to one. So you think about that. And I was in some of these places last week. I traveled from Lloydminster to Dewberry Alberta to Mundare, to St. Paul, to Andrew, Alberta.

Jeff [00:12:46] Yeah.

Ian [00:12:47] And all these places that used to have their own individual credit union that still exists today and they're under the Servus brand.

Jeff [00:12:53] Other than the member owned kind of cooperative banking model, like someone could argue, well, shareholders own RBC, depending on the class of shares, like they get to have a vote.

How is it fundamentally different? Like how are the incentives fundamentally different between a credit union and a publicly-traded bank? Or privately-held bank. And why does that matter?

Ian [00:13:13] Well, why does it matter? I think it matters a huge amount. So Servus Credit Unions are for-profit institutions, for sure. We make money, but that's not our number one reason for being. Our number one reason for being is to support the needs of our members, to help them with their financial fitness, to help the communities that we live in and serve, grow. So I think that's ultimately very different from the banks because it is more than just a profit-focused.

I wouldn't say that it's a secondary focus.You know, we need to, to do well and to be prudent lenders, but it is very different at a credit union than at a bank. The needs of our stakeholders are our members, so we can invest money to do a better job for our members in ways that I think the banks, ou know, probably can’t and don't.

Just our entire reason for being is different. We're focused on the financial fitness of our members. Every bank will tell you, we're here to help you sort of grow and to learn. But, but in a credit union context, I think it's, it's just incredibly different because we're not driven by profit. We don't, we don't give products to members that they don't need. We don't give them, you know, too much credit or too big a mortgage. We try to help them manage. So that they can achieve their long-term financial goals and success over time.

Jeff [00:14:21] It almost kind of opens up like a philosophical question of, cuz Amazon would say, well, their purpose isn't just making money.

Their purpose is to be the, you know, most customer-centric company in the world. It's a very capitalistic approach to building a successful company. And the banks, you know, obviously they're driven by shareholder returns and it's kind of like a, they will say that, “Hey, by acting in the best interest of the shareholders, they need to gain market share. They need to make customers happy, they need to be growing, and the only way that customers are going to be giving them their money and trusting them is if they provide better products and service.” And that's kind of like the, how capitalism works.

But then the, the credit union model is, is saying like, “No, no, no. We're owned by the members. We’re not driven at all by profit”, although you need to kind of generate profit to exist. It seems the same in some ways and then in different, in other ways. How do you see the fundamentally difference in the models showing up in kind of the way that you guys make decisions?

Are there examples or stories you can think of that, that really stand out to you? What do you see as some of the superpowers that credit unions have over traditional financial institutions?

Ian [00:15:23] Yeah, I think it's the ability to look beyond the numbers. So I would say that in the cases of all the credit unions that I've dealt with, the relationship that they have with their members is deeply personal.

So it's about understanding the needs and then looking beyond just what your, the numbers say with regards to things like your debt ratio. And I think that's particularly true in small to medium businesses. We have this steep need to help to grow the communities that we serve. So we are, we take chances, I think, on members that go beyond the numbers and, and I've got lots of examples of that.

And our success rate's extremely high as far as supporting. Whether it's young entrepreneurs, whether it's individual members or our agriculture or consumer members in helping them grow their business.

I think part of it, with the regional focus of many credit unions, almost all credit unions are provincially regulated.They're or have a provincial area of focus, even if they're federally regulated. And so when you're operating within that community, I think you have this ability to look at things through a different context. So there is something to the decisions, you know, being made in the province that we serve, which I think is fundamentally different.

And you look at economies in the West, like Saskatchewan and Alberta, and when you see hikes and dips in the economy relative to the energy sector as an example, we live here, we do business here and I think we understand that in a way that, as I mentioned, goes beyond the numbers. There's this deeply personal connection and commitment that credit unions make to their members.

And I should, you know, you talked off the top about some of the challenges in the US and in the banking sector. I should say that I certainly, for the credit unions in Alberta, we have a hundred percent guarantee on all deposits backed by the provincial government. So you deposit money in a credit union in Alberta, it's not a hundred thousand dollars limit. There is in fact no limit. It is backed by the province. So very, very safe place for Albertans to put their money as well.

Jeff [00:17:09] So for listeners, what you're talking about is the difference between kind of CDIC insured deposits, which ensures your deposits up to a hundred thousand dollars. And what you're saying is that credit unions have no limit. Like they're backed by the provincial governments. So if you have a million, $2 million there, it’s safe.

Ian [00:17:25] It varies by province a little bit, but certainly a very strong guarantee in the province of Alberta and in almost all cases, either much higher levels or guarantees supported by the provincial regulators. For federally rated credit unions, they participate in CDIC but like that is a credit union difference as far as the safety of their money. So thanks for clarifying Jeff.

Jeff [00:17:44] There's a lot of media [that] comes outta the US. A lot of content’s created outta the US and, and people might be looking at and saying like, oh, okay, like regional banks are no longer a safe place to put their money.

They're only gonna wanna put their money within banks that are too big to fail, that are gonna get bailed out and you don't need to give, like obviously there's a lot of ways that the US banking system is different than Canada, but what are the kind of the reasons that you think of when you think about how relevant what's happening in the US is to Canada?

Because they are talking right now about how they should just insure all deposits. That is a consideration being made in the US I've heard, but you're already there. So like Canada's already ahead in, in a lot of ways, like, so should people be worried about what's happening in the US or should they actually feel good knowing that things like the fact that their deposits are already insured have already been in place and have been for a long time?

Ian [00:18:32] For me, Jeff, I think that we should never feel good about what's happening in the US. Our economies are extricably linked, so we should, we do need to be aware of what's going on down there, but I think it's critically important for your listeners to understand that the Canadian regulatory environment, either for the banks or for credit unions, is very different from that of the United States.

And in the US I think, you know, any bank who's 250 billion or lower, and that was the case of Silicon Valley Bank and some of the other ones that were challenged. They have a different level of regulatory requirements, which looks very different from what's required of all financial institutions in Canada. So we are, I think, much better regulated than the US in general, and certainly is it really to small to medium financial institutions. So there's just a huge difference there. I don't think it's a good comparison at all.

And I support the credit union sector, that's where I live and work. So I'm, the Canadian banks are my competitors, but I think, you know, even on behalf of them, I would say that I know how they're regulated and the amount of capital they're required to hold and how regulators oversee their businesses. So I think we've got a very good and secure banking system in Canada.

Jeff [00:19:35] It's such a trade off though, like I feel you've been in the banking system for a long time. I think you've been exposed to the regulatory side. How do you think about this trade off? It, it seems like there was a trade off between stability and innovation and like progressing forward? Like do you feel that Canada has maybe been more strongly on one side or the other? Like do you think we strike that balance properly? Or do you think that, you know, it actually isn't a trade off, like you can actually have both?

Ian [00:20:01] The goal is always to try to have both Jeff, but I do think that based on the level of the regulation where you do business, it absolutely has real business consequences with regards to how quickly you can grow, how quickly you can diversify. How you can innovate as an organization within the context of your regulatory framework.

It isn't, I would say, as a regulated entity, it can be harder to grow. I think when we look at the marketplace in general and some of the, the new entrants that are either coming at egacy financial institutions directly or in partnership, and there's a variety of different ways we're seeing that. I think that it's really important that we look at it and look for opportunities to continue to grow. So we're, we're well regulated. I think that there is a direct correlation as well between the level of regulation that you have and your ability to grow in some cases as well.

Have we found the right fit? I don't know. Probably depends on the day and on the initiative, but I think that, you know, from a consumer protection perspective, I think the consumers can feel very good about the support that's occurring from a regulatory framework. And I, you know, I could, would also say that we've got really good relationships with our regulators for our credit union and, you know, dealing with the Department of Finance and I think we have really good discussions about trying to find that right balance. It's a journey.

Jeff [00:21:14] Credit unions and national banks are regulated differently in a lot of ways. Do you feel like there's a level playing field between credit unions and the Big Five?

Ian [00:21:24] Yeah, I, no [laughs]. So I think that's the short answer, Jeff. There's certainly challenges. So I think maybe a couple comments off the top. If you look at the entire credit union system, so I'll sort of separate Desjardins in Quebec, they're a bit of a unique institution. Cooperative values, they’re about 400 million in assets. But if you separate them, this will talk about the rest of Canada. These are roughly 200 credit unions, but we still have almost 300 billion in assets amongst us.

So if you sort of stack ranked us against the banks and if you put, you know, Desjardin and the credit unions together, you wouldn't be that much smaller than CIBC. So it is, there is a lot of assets that exist with credit unions across the country. So I think that's important to note. But I think that, you know, from a tax perspective, and when you look at a credit union, which is effectively funding growth entirely through deposits in almost all cases, that that is an extremely safe way to grow from a consumer or member perspective. But it is, there are opportunities that the banks have relative to their addressable market, which is global that give them some competitive advantage. And with scale, and I can't imagine anyone would disagree with this, with scale comes the ability to compete at a different level and to do what you can to help reduce your cost as you, as you grow and evolve with technology changes.

Jeff [00:22:33] Like, do you see a lot of the consolidation that's occurring in the credit unions? Like you said, I think there were hundreds of credit unions when you kind of first got into the industry. You know, now that's kind of shrunken down by about half. I believe there was actually even thousands, 50, 60 years ago and then, and they just kind of consolidated down.

Has that helped with the scale challenge? Because I know that consolidation mergers often do come with challenges of like figuring out, okay, well, whose technology do you use and how do we actually get the synergies out of this merger? Does the benefit of scale outweigh some of the challenges that you, that come with trying to bring organizations together?

Ian [00:23:07] I think consolidation has certainly helped, but I think there's a trade off with that as well. So I would say, I talked a lot about, you know, even Servus as a large credit union and what, how a credit union is different than a bank. The closest relationship, if you're a one branch credit union and you have a small to medium town and the CEOs living in that town and you're directly involved in that local community, that creates a relationship, which, you know, to some, in some case, gets diluted as even a credit union gets larger.

But to your point, I think it's, it's important to get that scale in order to have credit unions continue to exist and to thrive and to meet the needs of Canadians for generations to come. I do think it's a trade off. There's new banks popping up all the time. I don't think we've had a new credit union since the 1980s, but to your point, we started off with this massive number, so maybe that's okay. Then, I just think there's opportunity for, for us to grow the system and the number of Canadians that do that do business with the credit unions.

Jeff [00:24:02] There's so many commonalities in terms of how the credit union system sees the world. If you've got another credit union, you know, in the same province especially, you both kind of have the same mission and you both have a lot of the same values. You may even share customers. I think that there's a really strong case to be made by saying like, “Hey, why don't we team up and kind of take on these challenges together versus everyone just kind of going it alone.” Have you seen kind of that alignment when you go and talk to other credit unions?

Ian [00:24:33] I think it varies, Jeff. I think there's lots of small to medium credit unions that will remain independent for the foreseeable future. But I think those conversations are increasing. We've seen lots of consolidation in the province in Manitoba, more discussions in Saskatchewan, and I think there's, you know, ongoing discussions here in Alberta as well.

My view is that the cost of regulatory compliance, the cost of technology, the you know, requirement to continue to combat well against potential cybersecurity issues, all of that costs money. And, you know, the ability to go at some of those issues with scale is certainly easier as a credit union gets larger.

And I think of any institution, if you look at your number of transactions and the amount of movement within those transactions that you have, the larger the scale you have, there's a correlation between how much you pay as well for the provision of those services into the payment system and ultimately to the Bank of Canada.

Jeff [00:25:25] I think e-transfer is a good example of that. When you think about the kind of the payment rails that, you know, Canadians use every single day, e-transfer dominates, and I think that e-transfer’s success has been a large part of why you haven't seen kind of Venmo and the Cash App come to Canada.

But it's also quite expensive for smaller organizations, like smaller credit unions have to pay a lot more. It's more costly for them to operate. You know, they either choose to eat that cost. And so for listeners, I don't know, like there's a, there's a cost to every single time that you send and receive an e-transfer. And that cost is either paid for by the banking customer or by the credit union. Do you feel like there's a level playing field when it comes to e-transfer? or does Canada need to have another way for people to move money?

Ian [00:26:07] I guess my view would be the market will sort that out over time. Canada's pretty unique just based on the very few number of large financial institutions that we have. And then I think you talked about Interact specifically and the majority of Interact is owned by the big banks and you know, Desjardin, largest credit union in Quebec and then the Canadian Credit Union system.

So there is, there are certainly some attempts in the credit union space to level the playing field. So we would aggregate all of our volumes that are coming through, you know, credit unions across the country, sort of minus Quebec and looking to achieve the same rate. But with that, it's not a perfect science. You have some larger credit unions that have gone direct on those, and I think as Interact looks to continue to evolve its pricing model that that's unlikely to remain in that format over time. So that could create both challenges and opportunities depending on what happens with other potential entrants into the e-transfer space, or ultimately into the real-time rail through open banking when Vocalink and interact come together to build that on behalf of Payments Canada.

So I think it, it's like only time will tell, but right now we're moving significant volumes through Interact e-transfer, you know, that has increased dramatically over the period of the pandemic as well as we've seen the changes in behavior from, frankly all Canadians and, and sort of how we purchase things and in many cases from our homes and you know, wherever else that we are on the move. So there's been, I think this huge change in, in how Canadians sort of want and need to bank and another noteworthy sort of piece to our previous discussions that you look at more elderly, older segments of the Canadian economy, just the pandemic as well, and, and moving people to things like internet banking where that never would've happened before.

So we are seeing these changes in con in consumer behavior. Which will evolve but no, Interact I think is meeting a lot of the needs of Canadians right now. But you're right, it's, it's not cheap. Are there other cheaper global examples on how to move money? Yeah, there absolutely are. So, how those markets evolve in Canada over time will be very interesting to watch as we, as we look at the market.

So like, we're not a, if you take the US out, we're not a very, we're a reasonable size market. You know, we've got a financial market that's not dissimilar from the UK or other European countries or countries like the size of Australia. So we are a reasonable potential player in the payment space as well.

Jeff [00:28:27] More, more of a direct question, but why is e-transfer so expensive? Conceptually, you're moving numbers around. Like you're not actually, it's not like you're building a house or like, like what are the hard costs associated with actually just moving a dollar from one place to another.

Ian [00:28:40] Short answer is, and just from my visibility and working with Interact but for your listeners for the next few months I'm still on the Interact board. I've been on on their Board of Directors for the last four years and change. And I would say that the history of Interact is it was really set up as almost like a non-profit. So it was designed to, you know, not be making a profit. Its legal structure has changed, but it is still primarily funded by the financial institutions that own it.

So when Interact is investing in technology, there are you know, cash calls effectively coming to the credit union system and to the banks in order to help the fund that. So the cost structure is directly related to the embedded technology, which is making e-transfer work. So whether or not that's, you know, new or modern, I think those are good questions, but ultimately, If you think of the ability to move that technology, like even within the credit union system, I think we have 37 plus different core banking systems amongst the credit unions.

If you think of the digital banking platforms that layer on top of that, that number's continuing to grow, and then whatever the configuration is for all the banks, I would say that it, you know, the connection of those things is likely, significantly more difficult than it would appear off the top.

Jeff [00:29:48] Yeah and it always is a lot more complicated behind the scenes. We talk about kind of modern technology, a lot of people have been hearing the words, open banking coming up more and more. For listeners who don't maybe have a deep understanding of banking. What is open banking and what does it mean to Canadians?

Ian [00:30:04] Yeah. I'll do my best to describe this, Jeff, in, in a short order for your listeners. So for me, I think, you know what open banking is obviously taking huge strides made in other parts of the world on this. But if you think as a Canadian or as a listener, if you think of the ability to open a single application and look at everything that you've got.

So if you're doing business with us at Servus Credit Union, you're doing business with insurance companies, you're using an independent investment advisor, you're able to effectively share your permissions and then have all that information appear in, in one space so you're looking at it altogether.

So that's phase one of open banking. And I, you know, our best guess is probably we're gonna see that in Canada in a meaningful way in the next 18 months or so. There's a few different initiatives and I think they'll ultimately be, you know, two or three different platforms that offer that.

Jeff [00:30:49] So basically you're saying a single view of your data, your financial data is kind of phase one. So you can kind of go somewhere and with the right permissioning show either a new bank, an insurance provider, investment manager, your financial picture.

Ian [00:31:03] Yeah, that's basically right. But you are effectively sharing those permissions. So with that, you just, you know, need to have a really clear understanding of where your data is going. So I think in the read only access portion of this, you know not major concerns. I think this is ultimately good for consumers. I think this has the ability to give consumers more choice, but I think the really exciting pieces come in the additional phases when you can actually start to move money.

If you imagine something potentially as simple as, you know, toggling a button from left to right, to be open to offers on something like a specific mortgage rate, or to be learning more about a specific type of financial institution that could offer you a product, I think that has the ability to offer real choice and ultimately allow consumers to, to make better, more informed decisions.

Jeff [00:31:47] And for listeners too, like I think the average banking relationship in Canada is longer than the average marriage. Now I don't know if that's like maybe we should be staying married longer, or we should be switching banks earlier, but there is just so much friction involved with switching a bank like you have to both of the account opening process.

There's lots of, you know, checks in in terms of identity, confirming identity and checking sanctions list and anti-money laundering, like those are all legitimate things and I don't think there's any blockers in terms of making those things more frictionless. And I think a lot of fintechs have done a pretty good job of making it easy for people to get a new account.

But the challenge comes with if your whole life is over in another FI. So if I'm banking with RBC and I wanna switch over to Servus, I need to basically figure out, “Okay, well how do I move all of my payments? How do I get my payroll moved over?” It reminds me a lot of, you know, and this is dating me, but back when cell phones first came out. Remember you used to get a text message from someone who would say, “Hey, here's my new number,” and everyone would have to go into their phones and then update your number, and then I think the government may have stepped in and said, “Hey, like, no, you own your number and you can bring that number with you to a new provider if you want.”

It seems similar in that where it was like a lot of people would just stay with their telecom provider because they didn't wanna have to go through the hassle of having everyone to update their number and people wouldn't answer their phone calls cuz it was showing up as, as someone they don't know.

And then the same thing in banking is like, “Hey, I may wanna move over to Servus because you guys are a lot more customer-centric than perhaps a Big Five bank. Right now, the Big Five really have no reason to make it easier for anyone to kind of move a lot of those payments, a lot of those, the payroll, investments from where they are to where they want to go. There's a lot of friction there. Do you believe that open banking is gonna make it easier for customers to do that? And how far out do you think that is?

Ian [00:33:37] Yeah, I think so, Jeff. How many sort of versions down the road until we actually get to that future state? I think only time will tell, but I think that the movement will be much easier and the ability to bank, if you will, with different institutions will become easier as well. So whether or not that means you have more relationships or less over time, I think only time will tell. For a smaller financial institution like us, we're actually very excited about this and the ability to access other parts of the market.

We're just over 5% of the Alberta market today and a very small portion of the Canadian financial services market, but we're a large credit union, so we view this as an opportunity to help to grow our market share and to have different platforms to share what we're all about.

Jeff [00:34:21] And you probably watched the recent federal budget. I ‘controlled + F’ for open banking, didn't find it. Voters should definitely be talking to their representatives about open banking and like, we have not done a good job, I think of putting it in grade three English, French, so that they understand how much better their lives are gonna be by having open banking come to Canada. Because right now it just seems like it's an issue that’s kind of 18 months away for the last 18 years.

Meanwhile, if you look at Europe, Asia and Africa are actually kind of leapfrogging in a lot of ways on the technology side. And then you've got the US, South America, like Canada, we're kind of getting left behind from a technology perspective or from a regulatory perspective. Like we have the stability, which is great if the government doesn't kind of step in. There's so much negative inertia of the Big Five kind of just like keeping things the way they are because they have about 90% market share. And if they just continue to make it so painful for people to access the benefits of a better alternative like Servus, then we kind of risk getting frozen in time.

We kind of risk Canadians missing out on a lot of the innovations and a lot of the customer service, like the things that credit unions bring to the table, but people don't wanna manage five different banking relationships. Like I'm assuming people will have a primary and a secondary, you know, the nerds will have like four or five, but like for the most part, it's gonna be one or two.

If you're the primary bank, you're gonna be getting 90% of the kind of benefit. Of the profit of that, of that customer relationship. This is more of a message to people who are listening, is like, talk to, talk to people about, like especially your MPs or your local representatives so that you can make sure this becomes an issue that gets pushed through because it's something that's gonna put more money back into the pockets of Canadian. It's gonna put more time back into your, into your life by being able to, to kind of move over to a provider like Servus who's gonna be offering you better services, better prices, and ultimately make your life better.

Ian [00:36:21] Yeah, I agree, Jeff. I think that's probably a call to action for all your listeners. I think the faster we get there, the better, and there's great examples in other parts of the world where the adoption of open banking has moved much faster than here. So I do think it's a good thing, it's a good thing for Canadians, it's a good thing for consumers.

So it's, um, is it the largest priority for the federal government? I, you know, it's a great example of your search for that word in the budget, that's never a good sign. And I think, you know, I think my colleagues at the banks do an extremely good job of lobbying government as well. And I think, you know, you spoke about this and their, their need to hurry this forward is certainly not, you know, where organizations like yours or mine are coming from as far as our want to have this happen sooner rather than later.

Jeff [00:26:07] Federal budget aside, government aside, what's caught you optimistic about the future of Servus and the future of credit unions more broadly? Like what are you, what are you excited about?

Ian [00:37:12] Well, I think for me, I just see a ton of opportunity because we are, you know, we're, we're effectively the challenger of financial institutions as well. We've got lots of room to grow before the big banks are gonna be worried about us. And I think we have this incredible ability to differentiate in a way that other financial institutions don't.

So for a lot of your listeners, you may not know much about a credit union. I'd encourage all you to go into one, wherever you are in the country. And my challenge you would be, it'll feel different than a bank. I can't really describe it, you have to go and feel it, but, but go check it out because, you know, credit unions in some cases I think are just the best kept secret in financial services. This is a great opportunity to do business local, to have your deposits be very safe, to feel like you're actually contributing to your local community in a way that you just don't with your bank.

Jeff [00:38:00] I don't wanna continue to harp on the reasons why credit unions are great. But it is true though, like when you talk to people at a credit union and I think we're getting close to parity on the technology side too, like I think the Big Five are investing obscene amounts of money in tech. Now a lot of that is just going to maintaining their older systems. But like, I think I saw a stat, and this is more on the American focus, but like Bank of America invests more in technology than like Netflix does. The banks are spending more on technology than tech companies. Like there's more money spent on tech in the Big Five than all the venture capital money that all the startups in Canada raise combined.

And now people are probably thinking about the apps that they're using and I'd say like the Big Five, this is not like maybe their strong suit, but I'd say you're getting close on like between the credit unions and the big five in terms of like if you were to put both apps side to side, I think you're gonna see that it's substantially equivalent. Would you agree or do you feel like, you know, that the credit union system has a bit of catch up to play?

Ian [00:38:57] I think we're materially there. I think that you're right, the experience is very similar. Credit unions, and we're an example of it, are launching new digital banking platforms that look and feel very close to what's happening with the bank. So I think for Canadians out there, how you bank today, the type of transactions that you do online, all of that can be done with the credit union. That technology exists and hey, we found a way to do it without spending those record dollars like the big banks have.

I do think you're right and it's important to that the people know that there's not this material difference in the products or the services or in how the technology works. And I think it's getting better, Jeff. I think that there's a lot of companies out there that are helping smaller financial institutions compete in ways that were more difficult before. So I don't think you need to spend those kind of dollars like the banks are. But yeah, I think, you know, maybe under investment over a long period of time.

The world payment system was created before the internet. So if you think, you know, sort of swift and the movement of dollars between countries, all of that sort of predates the internet. We are needing to update things globally and it is good to see that we're spending dollars and money on that.

Jeff [00:40:04] Yeah and I would highly recommend to anyone just take the time to examine your financial life. Like we work with youth organizations. We talk about financial literacy and having someone who you can go to to talk about this, having someone that you know has your back. I think that there's just, it hits different than talking to someone who you don't know where they are. But like when you pick up the phone, or if you are putting your money and you know that that money is in your community and you know that the people behind the bank are within your community, it's just a different feeling.

And, and it's something that touches everyone too. Like it's finance. Like you need money to live a life. And financial anxiety is one of the biggest sources of anxiety for people. People have been talking about inflation, cost of living crisis. Housing is incredibly expensive. Having a reliable, trusted person or organization that you can go to, I think is something that is extremely underrated. And people kind of just think that they need to live with this anxiety. They're getting used to waiting an hour on hold or the technology not working and that's just not the case anymore.

I really want people to know that there's options out there. There's even organizations, non-profits dedicated to financial literacy, to debt counseling and I'm sure these organizations that you guys are familiar with over at Servus as well. And now we'll just encourage people to explore them and then make that educated decision because taking an hour or two to just look at what your options are.

Hey, how important is it for you to have the money staying in your community? How important it is for you to, to be able to speak to someone that you trust? You know, how important is the technology? How important are the rates? Combine all those together and then say, “Hey, do I still want to stay with my current provider?”

Or maybe it, maybe it makes sense to talk to someone or to potentially make a switch and try it out. So Ian, I'm extremely grateful for you coming on and sharing your story, the Servus Credit Union story. Is there any other final messages you wanna get out to our listeners?

Ian [00:42:05] I just echo what you said, Jeff. I think credit unions are there to help. There is this deep, personal caring. If you have financial challenges, this is the largest stress that people are under. In many cases it's financial stress. So go talk to someone at your credit union and they will do everything possible to help you. We'll just encourage people to, to consider that as you did Jeff.

And really appreciate the time to start this discussion today. It was really good to talk to you and nice to communicate with your listeners as well.

Jeff [00:42:30] Is there, is there anywhere that people can follow you personally, Ian? Are you on, are you on social media? Are you, uh, tweeting out all the time? Or where, where can they, where can they see you?

Ian [00:42:39] Yeah, the best place to see me is actually through LinkedIn. So we'll have Instagram posts and other things but if you look for my LinkedIn profile and follow me there, that's the, the best place to get updates on Servus and all the great things that we're doing and would, uh, love to interact with all of your listeners there. Thank you.

Jeff [00:42:55] Awesome, Ian. Appreciate it.

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Behind the Brand is a production of Neo Financial and MediaLab YYC. Hosted by Jeff Adamson. Strategy, research, and production by Keegan Sharp, Alana Tefledzuk, and Kyle Marshall.