When Member-First Means Digital First: Part Two

In part two of this two-part Q&A, based on an interview conducted in December 2021, Harry Zhu discusses Alliant Credit Union’s profit-building strategy, his leadership philosophy and how the role of the credit union CFO has changed in recent years. Zhu, who served as CFO for the Chicago-based Alliant ($14.6 billion, 620,000 members) for seven years, is now the credit union’s chief retail lending officer.

Read part one here. Responses have been lightly edited for length and clarity.

CU Times: Can you list a few of Alliant’s biggest recent accomplishments when it comes to increasing revenue and profits (in addition to commercial real estate and RV lending, which CU Times recently covered)?

Zhu: As part of our model, we intentionally have low noninterest and fee income because we don’t want to charge fees to our members, so the lion’s share of our revenue is really from interest income. That means having a strong origination engine and high loan balances relative to deposits is important. [In 2022], we expect to originate about $9 billion in loans, and that number is going up year over year.

We’re also opening up alternative revenue channels by partnering with fintechs. We’ve always been pretty active on the fintech front. One perspective I hear is that fintechs could be competitors for existing banks and credit unions, but I think more importantly, they can be partners. One example is Happy Money – we partnered with them a number of years ago, and we originate consolidation loans via Happy Money. So basically we provide a balance sheet and funding mechanism for them to lend. But we didn’t stop there, we kept partnering with fintechs, and there are a number in the works at this point. We have $800 million in originations planned for [2022] just from partnering with fintechs.

CU Times: Regarding the fintech partnerships that are in the works, what areas of fintech will they focus on, and what types of capabilities will the partnerships give to members?

Zhu: Auto loans and HELOCs – those are the more traditional ones – but the one that is most significant is solar loans. It’s relatively new in the lending space for banks and credit unions, but if you look at the newest originators in that space, primarily those are fintechs. So we have a number of fintech partnerships that are currently being explored, and solar loans is one of those frontiers. There are also well-established fintech players that we’re planning to purchase loans from.

CU Times: How would you describe your leadership style?

Zhu: Instead of going through a leadership style of being strategic or analytical, let me give you one example of how I think about building processes. This is actually something I picked up from a book by Jim Collins, and it’s the role of being a clock builder. Especially when an organization is in a growth mode, it probably has some individuals who are very smart, capable and have been with the organization for a long time, and they can tell time just by looking at the moon and the sun. That’s great, but at some point an organization has to grow to a point where it will need processes, and not everybody will have the same institutional knowledge these individuals have. So at that point, you’ll want to build clocks so that anybody can tell time and you won’t have to rely on one or two heroes or fire fighters to solve problems. That’s been one of my leadership beliefs, and it’s proven useful on some occasions.

CU Times: What advice would you give to young credit union professionals aspiring to become CFOs?

Zhu: I’ve always believed in a T-shaped career development model. On the top of the T, you have a general coverage of a variety of different functional areas – strategy, marketing, operations, customer or member service – all of the above. And then you have one or two deep spikes. I would say this T-shaped development model is not only applicable to the CFO, but to any other leadership roles that you’re aspiring to – CEO, CMO, CLO. For a CFO, that spike or two might need to be in things like finance and accounting, but the general T-shaped career model is widely applicable to all leadership roles.

CU Times: In what ways has the CFO role changed over the years?

Zhu: I would say the scope of the CFO job has changed dramatically over the years. Especially if you take a zoom lens and zoom out, say, to a decade or two ago, the CFO roles were more focused on the technicalities of accounting and finance – the planning process, the budgeting process – those are still in the scope of current CFOs, but there is a lot more to it now.

One is the role of being a strategist. It’s not that the CFO needs to be a strategist, but they need to know strategy enough so they can facilitate strategy development. Second is that the CFO needs to have a strong growth mindset. And it’s not just an expense or cost control mindset, especially given the amount of technology and disruption nowadays. The CFO needs to be able to facilitate exploration or experimentation of new things, and be able to come up with a framework so that these small experiments can not only happen, but also thrive when they’re successful. How you think about success, failure, experimentation, being agile – these are all newer concepts and part of an evolution of the role over time.

The third one is the partnership with technology. And I don’t just mean with the IT functional group, because technology is everywhere. We look at technology in lending, member engagement, branches, the call center, online and mobile banking – it’s everywhere. So the CFO needs to know technology enough to be able to partner well with others, and to innovate and disrupt the leveraging of technology. Technology can be a driver and enabler of different types of disruption, and that’s highly important, especially when you look at the newest creations coming out of the big banks and the fintechs as well.