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  • Writer's pictureJohn San Filippo

Assessing the Intuit Threat with Jack Henry’s Lee Wetherington

Updated: Feb 8

By John San Filippo

 

In recent years, financial services company Intuit has made a number of moves that have gone largely unscrutinized in the credit union space. However, according to Jack Henry’s Senior Director of Corporate Strategy Lee Wetherington, Intuit represents a significant threat to community financial institutions of all sizes. Finopotamus spoke with Wetherington to learn more about this trend, as well as suggested countermeasures.

 

One Giant Neobank 


Jack Henry's Lee Wetherington

The Mountain View, Calif.-based Intuit acquired personal financial management platform Mint in 2009 for $170 million. In 2020, the company acquired Credit Karma, another financial management platform with a greater focus on credit, for $7.1 billion. Then in 2023, Intuit announced that it would shutter Mint by January 2024, migrating popular Mint features to Credit Karma and encouraging Mint users to make the move to Credit Karma. As of early February 2024, Mint still has a presence on the Intuit website, but all mouse clicks eventually lead to Credit Karma.

 

While this may seem like a natural corporate consolidation unworthy of much consideration by credit unions, Wetherington sees it as one more step in Intuit’s quest to become a major neobank and, as a result, a serious threat to the credit union industry.

 

“Intuit has so many sub-brands,” Wetherington told Finopotamus. “You've got Mint, you've got Credit Karma, you've got TurboTax, you've got QuickBooks. People tend to focus on those sub-brands individually and don't remember that all of those brands are owned by one company. I think what's going on with Intuit is that they're finally putting together and getting aggressive with being a full-fledged neobank that is competing with every credit union, and for that matter, every bank in the country,” he continued. “That doesn't get said almost anywhere, that Intuit is a neobank competing with and against every other financial institution in the country. I think it's important to say that out loud.”

 

According to Wetherington, Intuit’s greatest interest in Credit Karma is not strictly for its 130 million users, but for the data those users generate in and around Credit Karma. “The reason that data's important is now becoming obvious” said Wetherington. “They're using that massive Credit Karma-based dataset to train and tune generative AI (artificial intelligence) to do more and more amazing things.”

 

Wetherington noted that in the past, most companies – Intuit included – used a more rules-based form of AI. Now generative AI has become a real game-changer. He added that generative AI, coupled with large language models built from massive datasets, is both more powerful and much cheaper than previous iterations of AI. “What we're looking at is something that should be at the top of every competitive threat intelligence vector for every credit union and for that matter, every bank in the country.”

 

Know Thy Members

 

Wetherington noted that Intuit is well-positioned to serve the financial needs of both retail and commercial accountholders. “Intuit has a very robust retail set of offerings now, almost entirely through Credit Karma and also TurboTax,” he observed. “But that's balanced out by them having in QuickBooks the accounting system of choice for the average small business in the United States.”

 

According to Wetherington, many credit unions currently serve small and micro businesses without even realizing it. “In the average credit union, somewhere between 13 and 35% of the retail share draft accounts are actually camouflaged micro and small business owners,” he explained. “Most are sole proprietors, freelancers, gig workers, etc. So a lot of credit unions who consider themselves just retail focused don't realize that they have a considerable base of micro and small businesses because there's so much overlap. Most small businesses are owned by people that present as retail members.”

 

The problem, he added, is that even though many of these members would prefer to do all their business banking with their credit union, they can’t. One fundamental question that credit unions can’t answer for these members is: How do I get paid? “That’s when these members turn to Block or to PayPal or to Intuit to collect payments,” said Wetherington. “The other part of that story is that only one out of every $8 collected by those third-party providers ever makes its way back to the credit union. This is happening at a time when all financial institutions have made deposit growth a top strategic priority. It's a blind spot, but it's a blind spot with a heavy price, because this displacement of deposits is largely invisible to these credit unions.”

 

Leveling the Playing Field

 

Finopotamus asked Wetherington what steps credit unions should take to defend themselves against Intuit and similar interlopers. “Number one, as a credit union you want to make sure that you've surfaced the 13 to 35% of your retail members that are actually running small and micro businesses,” he explained. “Number two, you need to understand the state of financial fragmentation in the United States, in which every member has relationships on average with 15 to 20 different financial service providers, with 14 financial apps on his or her phone.”

 

He added that due to this fragmentation, a credit union’s internal data may only represent at best 10% of a member’s total financial picture. “So the priority here is make sure that your credit union is fully plumbed into the open banking ecosystem as it stands today,” said Wetherington. “You want to make sure your digital platform is plumbed into Plaid, Finicity, Akoya, Yodlee, and MX [among others]. Those are the big financial data exchange platforms. Why? Because once you're plumbed in, a couple of really powerful and beautiful things happen.”

 

First among them is the replacement of inbound screen scraping with permissioned application programming interface (API)-based financial data sharing. Even more important, however, is the ability to aggregate a member’s financial information via those same open banking rails. “Now the credit union can gather the data from those disparate 15 to 20 other financial service provider relationships that each member has,” explained Wetherington. “Once that is done, you have solved for financial fragmentation and you can give your member a complete picture of their money across all of those disparate providers and apps. And, by the way, you no longer have to guess about what other financial services your members are using and who is providing them.”

 

All this provides actionable information for a credit union’s product strategy. “Now you've got definitive competitive intelligence based on that API-based open banking data aggregated back to credit union,” said Wetherington. “That provides a feedback loop to the credit union's product strategy. What products do we need to offer natively that we're not? Or do we need to strike a fintech partnership and embed a fintech or two to get a native set of services to make our digital layer more compelling to our members in ways that matter? And here's the kicker,” he continued. “With all of that data aggregated back to credit union, now the credit union has a preponderance of their own members' financial data with which to tune large language models, to do jaw-dropping things with generative AI,” as he noted earlier Intuit is already doing.

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