Panelists
Credit Unions have unique challenges and pressures in offering the best products and rates to their members. In this episode of The Testing Show, Matthew Heusser and Michael Larsen welcome Dmitriy Melnik from BCU, Sri Aravamudan from Qualitest, and Mike Mokrzycki to talk about the importance of automation and cloud technology in reducing costs and improving scalability. They also highlight the differences between commercial banks and credit unions in terms of resources and investment in technology and the importance of staying relevant and providing a high-quality member experience.
Michael Larsen (INTRO):
Hello and Welcome to The Testing Show.
Episode 142.
Digital Transformation in Credit Unions.
This show was recorded on Monday, September 11, 2023.
Credit Unions face some unique challenges and pressures in offering the best products and rates to their members. To that end, Matthew Heusser and Michael Larsen welcome Dmitriy Melnik from BCU, along with Sri Aravamudan and Mike Mokrzycki from Qualitest, to talk about automation and cloud technology in reducing costs and improving scalability, as well as differences between commercial banks and credit unions in terms of resources and technology investment.
And with that, on with the show.
Matthew Heusser (00:00):
Welcome back to the testing show again. This is Matt, and this week we’ve got what I think is a treat. It’s a deep dive into a particular subject matter area that’s being radically changed through digital transformation and in particular that’s banking and credit unions. This week’s guest, we’ve got a few of ’em this time. I know as an audience, people are not excited when I say, “We were working with a global 50 automotive company. I can’t tell you the name of the company.” That’s not a lot of fun, and we have a customer to visit us and talk about digital transformation and banking, particularly the credit union space. Dmitriy Melnik from BCU. Welcome to the show, Dmitriy.
Dmitriy Melnik (00:46):
Thank you.
Matthew Heusser (00:47):
Let’s start with a little bit on your background. You went to DePaul, so BCU is in the Chicago area. You’ve gone up through the programming ranks, so we’re going to not just be talking about testing, but really software engineering quality and delivery this week. How did you find credit unions? You’ve been there for 11 years now.
Dmitriy Melnik (01:06):
Yeah, yeah, that’s been the longest I’ve been at any company and I’ve had I think four jobs since college. The longest before that was five years, so yeah, I would consider BCU as my home now and definitely for the foreseeable future. I really like being here.
Matthew Heusser (01:24):
Well, welcome to the show. We got a couple of other people I want to get in before we dive in deep. Next, we’re going to add Sri Aravamudan, who is a director at Qualitest and came in through the Olenick acquisition. Longtime listeners, remember Olenick, they were testing for utilities, particularly electrical systems. Had them on a couple of times and in that time you’ve moved around a little bit. You’re back in Chicago now, you were in Belfast, Northern Ireland. Sri’s done a lot of things. Where do we even start with your bio, Sri?
Sri Aravamudan (01:58):
Yeah, thank you, Matt. So I started off at Purdue University in Indiana where I ended up pursuing a bachelor’s in the field of information systems. As soon as I graduated I landed a job with Olenick and the rest is history. I’ve been with the company for about 12 years now and out of these 12 years, I think the last seven have been in the credit union space working on digital transformation initiatives.
Matthew Heusser (02:21):
You’ve got quite a few certificates as well. So you’re a scrum master, but you’re a TMMI professional. Do you want to talk about that for a little bit and how you fell into that?
Sri Aravamudan (02:32):
Sure. For those of you who aren’t familiar, TMMI stands for Test Maturity Model Integration. What it is it’s basically a framework that provides guidelines and best practices for assessing and improving the maturity of an organization’s quality assurance practice. I’m very proud of this certification and I worked very hard to achieve it. As QA professionals, we have a lot of industry certifications that we can pick from and I wanted to pursue something that was more process-oriented, which looked at organizations to understand the maturity level of their QA practice and gave them the tools and guidance needed to refine their processes.
Matthew Heusser (03:08):
Again, if you’ve been on the podcast a lot or if you want to go back, we had one on the Agile approach improvement with Janet Gregory, and TMMI, from what I recall, it’s a lot more data backed, a lot more statistics and measurement. I think it might be worth dusting off for folks that like you say, it’s a lot of effort to get certified. It’s impressive. And finally, we have Mike Mokrzycki, who’s more of an account management role at Qualitest. You know, account managers have to deal with any time a customer’s unhappy. They have to deal with new initiatives, they have to find ways to make the budget fit. There’s a lot there. I think in testing land we tend to be a little critical of the role and we shouldn’t. I’m really excited to have you here and bring your perspective. Thanks, Mike.
Mike Mokrzycki (03:51):
Yeah, definitely Matt and glad to be here as well, and I definitely would agree. Account management at times can get kind of a little flavor of everything, but I will say I do still consider myself a quality engineering and quality assurance specialist as well. I’ve been in the industry for over 20 years now and overall lead up Qualitests Credit Union practice, and we’ve had a long relationship with BCU now, I think for over the last 10 years or so. I’m definitely excited to have them hear with us in a podcast today.
Matthew Heusser (04:19):
Thanks, Mike. One thing I will say about Qualitest, in general, is that when you’re talking to people, they usually come up through the testing ranks. That’s how the organizational structure works. Nearly anybody you talk to is going to have that shared background, which makes these conversations just a whole lot more interesting and a whole lot more fun. For our first question, we want to dig into the credit union space in particular within finance. You’re doing a lot of these. For me, the biggest broad challenges I see are moving to the cloud, automating/automation, and digital conversion. I don’t know much about the credit union space. Now Dmitriy is the senior director over there at BCU for both software development and quality. So you’ve got really that technical perspective. How are things changing for you and what are the competitive pressures you’re seeing?
Dmitriy Melnik (05:07):
So I’ve been, as mentioned before, I’ve been 11 years with BCU and in the credit union space. I’d never been before, kind of didn’t know anything about credit unions. It’s an interesting niche. Credit unions don’t really because of how they are set up and the laws, they don’t really compete with each other. It doesn’t happen often, but real challenges and pressures come from trying to offer the best products as possible to the members, members are the owners of the credit union, and our job is to give them the best possible rates and to achieve that, one of the ways we can do this is by reduced costs. And for me, transformation to the cloud is one of those paths to achieve scalability. Cloud is really scalability. It allows credit unions to grow, but over time still save on more resources. Managing technology. In terms of automation, that’s again another scalability play where we are able to provide integration automation of the processes, where we take people, and employees out of the manual work, and as we see membership grows, we’re able to rely on technology to keep the employee numbers down. Humans are the most expensive cost, really it’s the biggest cost, and technology really, in my opinion, allows us to keep that cost down.
Matthew Heusser (06:45):
If I can ask, can you give me a couple of examples of things that I’m sure self-service has taken off, but we’ve been doing self-service since we launched ATMs? What are the kinds of repetitive manual processes that we’ve just made go away in credit unions in the past 10 years?
Dmitriy Melnik (07:02):
When you say in credit unions, that’s a bit of a grand question. Just staying at my level and at BCU, we work and deliver a lot of small integrations and automated processes, financial processes, some related to audit, posting, dividend, performing ACHs, performing various financial operations which are repetitive and happen every day. We are able to automate it and once it’s automated, if we have a hundred members or we have 3000 members, so for example, we have about 4,000 ACHs a day. Once the computer handles it, once the program handles it, the only employee has to maybe review it once in a while and make sure that everything kind of goes smoothly, but they don’t have to do it manually.
Matthew Heusser (07:59):
In this particular example, the sort of self-service bill pay, instead of physically taking a check into a bank and getting them to do the deposit.
Dmitriy Melnik (08:08):
Self-service means a little different to me. Self-service is offering functionality directly to members and we do that also, we use of course technology and microservices to offer self-service functionality through our digital banking platform, through our phone banking platform. Here I’m more talking about employees, internal BCU employees not required to perform something manually, some kind of financial operations when we have some software do that for them. Daily software batch jobs, which perform constantly kind of minutiae work all the time, which when in the past would be manual.
Michael Larsen (08:47):
Very cool, thanks for that. Hey, I’m going to approach this from the angle of, I joke on this show a lot of the time that many times when we have experts on a particular topic, I’m not necessarily an expert on that, but I am an expert at being a credit union user because I’ve been a credit union member for almost … actually for 30 years through various initiatives. And there is one thing that I’ve noticed, and again I realize that whenever you talk about credit unions, that’s painting with a very broad brush and I recognize the fact that you represent one, but maybe you can still help answer this for me. When I use a commercial bank and I use their applications and their systems and I use a credit union’s applications and systems, you can tell the difference. Now granted, I respect that because credit union money is held within the group and so because of that it’s not a matter of, “Hey, we can spend whatever the heck we want to”, that’s the member’s money and they’d like to say, “Hey, we’d like to have a say in that.”
(09:47):
So I realize that you’ve got to strike a balance between time, cost and quality while you’re trying to deliver a good member experience with the things that you work on like for site development and apps and anything like that. But I do notice that there is a distinct difference a lot of the time between what a commercial banking app looks like and what a credit union app looks like. Is that a fair statement and do you feel that that’s a fair representation or are there things that you do to, maybe for yours, that’s not true at all? And you can give me an example of how I might be misjudging the situation.
Dmitriy Melnik (10:24):
You do not. I think it is a fair statement. Resources, big banks invest in their platforms, their technology, is just exponentially larger than what we can do with our resources. With the credit union resources. I don’t think it’s just us. Yes, there are bigger credit unions, there are smaller credit unions, but I think overall you are absolutely correct. It all comes down to investment in platforms and banks have, compared to credit union space, unlimited resources to invest. We are trying to bridge the gap. Of course, we bring in vendors who can help us bridge that gap and make the gap smaller. But overall your observation is correct.
Mike Mokrzycki (11:16):
Yeah, and I would just like to add there, Michael, that from Qualitest’s perspective and having partnered with BCU for the last decade or so, we kind of understand some of those challenges that a credit union can face and especially we understand also the importance of your NPS score, net promoter score, and providing, even though it may be on a different scale compared to a commercial or retail bank, but still providing that kind of high touch experience to the members and assuring that the systems that are out there for the members to interact with directly have that high level of quality. That’s something we’ve seen from partnering with BCU over the years that they really understand that and that quality is really important to them and having that good member experience is a key aspect for them as well.
Matthew Heusser (11:58):
Thanks, Mike. So speaking of which, if we can just dive one level deeper, Dmitriy, you mentioned automating manual processes. What are the top IT initiatives you’ve been working on lately? What are the changes? What are the processes you’re getting rid of and how are you doing it?
Dmitriy Melnik (12:15):
So in the past couple of years, or maybe when we start real transformation move to the cloud with our implementation of Salesforce, in a couple of years we revamped our new member application platform with the help of a vendor. We also brought in a new digital banking platform with the help of another vendor. Those are really big initiatives which pretty much we’re trying to bridge that gap between us and banks. The platforms have APIs, they have event-driven capability that helps us integrate. It helps us expose more functionality for self-service to our members and a move to the cloud allows us to do it faster in terms of development of the custom components, and custom features for the members.
Matthew Heusser (13:12):
I totally see when you’re talking about moving to the cloud, both a scalability piece and that we can add extra resources that we would grow as a company. And also the software development piece. It’s interesting, you’ve got two choices. You can be a big organization like a bank. You can be a large bank with maybe a thousand programmers or if you’re a software company you can sell to the little banks and if you have a thousand customers, you can have a lot of developers. So there’s an interesting dichotomy there. Dmitriy has been really careful to give his perspective, spending a long time at one company, don’t want to leave out the broader perspective that Sri and Mike Mo can add. Sri, can you talk a little bit more about what you see in digital banking?
Sri Aravamudan (13:55):
Sure thing, Matt. Over the last decade, transformative digital banking has been top of mind for a lot of leading credit unions. If you look at what members are asking for, they’re looking for superior platforms with services that are either on par or exceed those that are provided by large banks. So as you start to dissect this, three trends start to emerge. Members are looking for a platform that enables ease of access, one that has intuitive navigation and convenient ways to transact, a performant mobile app with a comprehensive range of features, and then the latest and greatest security measures to help protect their privacy. We understood that this was a high-visibility program with two important cornerstones. The first was delivering unparalleled member experience and the second was driving net promoter score growth. So our team of architects and engineers partnered with BCU’s delivery team to plan and execute the QA process for the program. As QA experts, we understand the importance of detecting defects early in the process and we’ve been taught that the cost of a defect increases exponentially the later that’s found in a software development lifecycle. So when we think about it, the shift left mindset was ingrained in us from day one and we adopted this critical path approach to prioritizing target key components first and eventually, this helps us seamlessly transition the new platform to BCUs members.
Michael Larsen (15:15):
Okay. So there are a bunch of different approaches that you have a build approach, a buy approach, and a hybrid approach. And my question is does that apply to credit unions? I know that banks use that model and what are the benefits or disadvantages of either one of those and which ones would you choose?
Dmitriy Melnik (15:35):
All three approaches make sense, depending on the situation. It’s not really one is best and one is worst. It’s really based on where the credit union is in their journey, how big of a financial freedom they have in terms of how much money they’re willing to spend and what’s their direction, what’s their strategic direction. If you have just kind of standard requirements, let’s say for a digital banking platform where you don’t… not that you don’t want to differentiate yourself, but you just want to offer standard really good, yes, easy access to members’ financials through the digital banking, you might decide that buy is the best approach because the vendor will provide you with all the basic functionality you need and it’s most likely going to be cheaper than building yourself. On the other hand, if you want to differentiate yourself, if you have very custom requirements, you have some financial features which you offer and no other credit union offers or potentially different, it also might be different from the bank and you have actual resources to spend.
(16:51):
The build would be the best option. It would be more expensive, but you would be in total control of your strategic roadmap for the, let’s say digital banking platform or phone banking platform, new member application. And then there is a third approach, a hybrid approach where as long as the vendor offers some ways for you to plug in and offer custom functionality to your members, then you could go with a vendor. The vendor will give you all the standard functionality, but you also have the ability to add your own features, expose your features to the members and not worry and not wait for the vendor to catch up, not wait for other credit unions, let’s say, wanted the same feature so the vendor would implement it.
Mike Mokrzycki (17:46):
I think it’s also interesting to look at that from the QA lens as well. And when you talk of more of those three different approaches from a build perspective, that’s going to be a lot more time-consuming. Obviously from a QA perspective, having to build automated regression scripts and all those activities that need to be done when you’re doing custom development, while if you go more the buy route, we really going to rely on your vendor or your platform that you’re implementing to do a lot of that regression testing and assure a bit of a higher quality application. And really then you’re just going to more focus on the integrations into your ecosystem as a credit union. And then from a hybrid approach, which we actually do have a number of customers in the credit union space that we see going this route, it is that nice middle ground if you will, where you have some development being done in-house as well and you can customize your solution a bit more to meet your needs and your members’ needs. But yet at the same time, you always have that vendor there to fall back on and partner with heavily. From a QA perspective, there is still some work to be done around the integrations and whatnot and really only focusing then on your custom development work as well that you’re customizing from your vendor there. So there is always that interesting QA perspective or QA lens to look at when you’re having those decisions to be made as well.
Sri Aravamudan (18:59):
So if I were a credit union that’s looking to upgrade my digital banking solution that I provide to my members, hybrid is what I would end up picking, just because I feel like it gives credit unions more so the mid-sized ones and the lower sized ones, the best of both worlds. A lot of these third-party vendors that are digital banking providers have taken the time and the resources to build out base features that are common across many credit unions and they also offer SDKs or software development kits that they can hand over to their credit unions that they can build off of. So it gives you the base features that are common amongst many credit unions and you get to build on top of that. So best of both worlds.
Matthew Heusser (19:38):
Yeah, a long, long time ago we used to talk about the, was it the software engineering factory where you would get the base classes that you needed to do all your specific expertise, whether that was healthcare, health insurance, or life insurance. The idea was that you would have this base stuff that would do most of the things and you could customize it. And I think through the selective use of vendors with very strong integration points to the sort of evolving cloud standards, we’re actually getting there today, which I think that’s neat. Would you agree with that or am I a little bit off there, Sri?
Sri Aravamudan (20:14):
I agree. If you look at the credit union digital banking landscape, there are a lot of third-party integrations at play. If you stop and think about why this is the way it is, cost efficiency comes to mind first. Building and maintaining features within a digital banking platform can turn out to be pretty expensive. A second major factor I think can be attributed to speed to market. Today’s consumers are asking for state-of-the-art features to be available as quickly as possible. To accommodate this and still be relevant, what I think is happening is credit unions are taking advantage of major players in the market who have ready-made solutions available as plug-and-play software.
Matthew Heusser (20:52):
One thing that has come up a little bit that we’ve sort of hinted on, we’ve kind of covered it, is staying relevant, but I’d like it if we could to get a little explicit for a minute. What’s new and exciting in this space? How’s the industry reacting? How are you reacting specifically? And how does that show up for your customers?
Dmitriy Melnik (21:09):
I would say as more and more vendors/providers develop the APIs and it seems like it’s industry pressure for any new software to have an API, public API available, that gives us the opportunity to integrate, automate, provide self-service to our members. I think this is the biggest thing. It gives me as a software developer, a lot of opportunities to again scale kind of taking us back to the first question, and really staying relevant. We pick for example Salesforce platform for our customer service platform, but the platform doesn’t work unless I can integrate all of my financial vendors into that platform, our financial core, our phone banking, and our digital banking. And that’s all possible because of APIs provided by those software companies, by the vendors. I really think this is one of the biggest moving parts in my view.
Mike Mokrzycki (22:19):
Yeah, I would just add Dmitriy there that I think the microservices architecture that you and your team have built, starting with Salesforce and expanding to the broader credit union ecosystem over the last four or five years has really been, from a Qualitest perspective, we think is pretty cutting edge and definitely moving into the right way and a leadership role within the credit union space. So I think just seeing that all come together and our involvement with that has been something that we’re pretty excited about and we think is definitely a step in the right direction for future-proofing your environment.
Dmitriy Melnik (22:50):
Thank you.
Michael Larsen (22:51):
Alright, I want to say thanks to everybody for your time. I realize we could probably spend all day talking here, but unfortunately, Qualitest likes to have these shows at a certain length of time. So we’re going to go ahead and wrap up here, but I do want to ask all of our guests, Dmitriy, Sri, Mike, any key takeaways or if you had to boil everything down to one comment that you want to leave on a high note, let’s say, what would you want that to be? And if people want to get in touch with you, how can they do that?
Dmitriy Melnik (23:21):
Probably the best way to connect with me would be on LinkedIn, should easily be able to find me. Dmitriy Melnik at BCU.
Sri Aravamudan (23:30):
I encourage credit unions to take advantage of the latest and greatest advancements in digital banking technologies. Here at Qualitest, we’ve developed something called a credit union digital banking factory model, which uses tested processes and accelerators to assure quality in your digital transformation project. So please reach out to us if you’d like more information on this factory model and we look forward to working with you to determine how we can add value in your endeavor to positively impact your member experience.
Mike Mokrzycki (23:59):
Thanks so much for that, Michael. And I would just add we definitely appreciate the continued partnership with BCU over the years and the number of additional credit unions that we heavily partner with and deliver quality assurance and quality engineering services to. And we do have a dedicated credit union page up on the Qualitest website. You can always get more information about the services we offer. I would also like to add that Qualitest will be having a booth this year at the CUNA Conference out in Denver, which I believe is the first week of October. So we’ll be there. Sri and I will be there for sure. We’ll have a couple of other folks with us and we’d be happy to have any additional or further discussions around credit unions, where we see the future going, services we can offer, and basically how we can help anyone in this space.
Matthew Heusser (24:45):
For those who aren’t in the credit union space, who are listening for general testing tips, if I had to pick up on one thing, I’m speculating, but we do know that most credit unions serve a local geographic audience. There are credit unions that focus more on a particular demographic like people in the military, but broadly speaking, they compete regionally, and geographically, and they have very similar use cases, which has allowed them to have similar software which can be extended and they’re going into the cloud. So if I were in a similar field like a hospital for instance, or a utility, I wonder if there are similar use cases to sort of piggyback on technology to have this smarter hybrid approach. And that’s something I’m going to be looking into personally. If you want to talk about it, maybe we’ll do a show on that. And I think with that we probably have to let these folks get going and say goodbye. So thanks everybody for being on the show today. Really appreciate it.
Dmitriy Melnik (25:45):
Thank you for having me.
Mike Mokrzycki (25:47):
Thank you. Definitely, Matt and Michael, that was a great experience, and thanks so much.
Michael Larsen (25:51):
Thanks so much for joining us. Greatly appreciate it.
Michael Larsen (OUTRO):
That concludes this episode of the Testing Show. We also want to encourage you, our listeners to give us a rating and a review on Apple Podcasts. Those ratings and reviews help raise the visibility of the show and let more people find us. Also, we want to invite you to come join us on The Testing Show Slack channel as a way to communicate about the show. Talk to us about what you like and what you’d like to hear. And also to help us shape future shows, please email us at [email protected] and we will send you an invite to join the group. The Testing Show is produced and edited by Michael Larsen, moderated by Matt Heusser with frequent contributions from our many featured guests who bring the topics and expertise to make the show happen. Additionally, if you have questions you’d like to see addressed on the testing show or if you would like to be a guest on the podcast, please email us at [email protected].
