Get, Set, Digitize

The race to future banking glory between banks and credit unions has the makings of a David versus Goliath contest. And the reason the credit unions are in with a chance is that the (American, but globally representative) millennials have leveled the playing field by proclaiming (in the Millennial Disruption Index study) among other things that one bank is pretty much like the other, that Google, Apple and Amazon are likely to come up with more exciting financial offerings than banks, and that they don’t really care about big banking brands.
Technology has leveled the playing field some more by fragmenting the banking market into little disruptive-innovation niches, and threatening to disintermediate banks from their own business.
Clearly, size no longer matters as it used to.
But before credit unions can sneak past the ruling champions, they will need to reinvent themselves for the digital age. Here’s a summary view:

  • With the balance of power in the banking relationship swinging towards the end points, credit unions will have to put customer need and interest ahead of all other considerations. They must recast business processes, strategies, decisions, and even their business models, to reflect this shift. Digital tools and technologies will be key to implementing this.
  • As financial services continue to splinter, banking customers will start banking with an ecosystem of providers, rather than a single entity. Credit unions need to integrate and collaborate with this ecosystem and get it to work on their behalf. The use of APIs will be key to achieving this.
  • Customization and context are redefining the consumption experience. To succeed, credit unions must replace generic commoditized offerings with insight-driven products and services that are personalized and relevant to the immediate context. Advanced analytics will be key to creating these.

While this may sound like a tall order for credit unions, most of whom still lag the industry in digital adoption and budgets, they can take confidence from the fact that they already possess some of the core values required to succeed in the digital age – they have always worked in the interest of their customers; they know what it is to be part of a larger community; and their intimate knowledge of customers is second to none. Read more in our recent survey report, conducted jointly with Cornerstone Consulting, about digital capabilities in credit unions

Focusing on experience to drive revenue

Credit Unions are fully invested in the potential of digital channels like mobile and online to transform their member experience. But their focus has predominantly been on enabling self-service and ensuring security. Success with more advanced opportunities like cross-selling, targeted marketing, member education or ensuring a consistent cross-channel experience has been rather limited.
All this according to our new study on digital capabilities among credit unions.The convenience of self-service is a fundamental expectation of the digital customer. It is not a redeeming feature, it’s hygiene. Just like security has always been.
Customers expect a personalized experience from their digital service providers, be they retailers, banks or credit unions. They expect the delivery of content, products and services that are tailored to their unique context and preferences. They expect financial service providers to invest in their financial well-being and create access to PFM tools and experts that will help them plan for and achieve financial goals and objectives.
For credit unions, responding to these expectations is the key to building deeper, more long-term member relationships. This, not coincidentally, is also the route to opening up new revenue opportunities and gaining a larger share of wallet. According to the credit unions featured in the study, targeted ads are currently the most effective revenue generation tool for both online and mobile banking! Many advanced digital opportunities – like social media integration and graphical tools & simulators in online banking and location-based services and customized applications in mobile banking – have been relegated as ‘relatively strategically uninteresting’.
It is definitely true that building digital capabilities requires an approach that is practical and prioritized. But the phasing should be based on a deep understanding of the needs and expectations of the digital customer. From a customer’s perspective, personalization is the key driver of the digital experience. From a financial service provider’s point of view, the experience should monetize as incremental income or new revenue streams. Quite happily, the capabilities required for realizing both opportunities are broadly the same. Both require credit unions to build a unified cross-product cross-channel view of customer relationships in order to identify patterns that can trigger contextual experiences as well as new revenue streams.