John San Filippo
Industry Leaders Forum: Digital Transformation Advice, Part 1
By John San Filippo
Finopotamus has assembled a panel of experts in a new recurring series, The Industry Leaders Forum (ILF). Each month, we’ll ask the panel a broad technology question and share their informative responses. Due to tremendous response, we’ve divided the first ILF installment into three parts. Respondents are presented in alphabetical order by company.
Part 1 includes responses from:
For February 2023, Finopotamus asked our panel:
Digital transformation is a tough topic because every credit union has a different starting line and there is seemingly no finish line. What’s your most essential advice for credit unions regardless of where they are on their digital transformation journey?
Chris Cox, COO, Apiture
Digital transformation must be about solving member problems and not about solving technology problems. Start with figuring out how to make your members’ lives better — and then see where legacy technology and/or missing digital capabilities prevent you from solving those problems.
A continued focus on exceptional member service is imperative as your organization evolves digitally. When developing a digital transformation strategy, keeping the member experience at the center of each technology decision will help you attract new members and better support existing ones in a climate where in-person interactions continue to decline.
Providing a modern, intuitive digital banking solution is table stakes. You also need to seamlessly merge in-person and digital member support by taking advantage of newer technology to offer a range of support options, such as voice, chat, text, video, and screen sharing. In addition, you should be able to offer member experience-enhancing services from third parties that are seamlessly integrated into digital banking. For example, offering more modern financial health tools — such as credit score analysis, reporting, and simulation features — will drive engagement.
Business members are looking for easy-to-use digital banking solutions that are intuitive and are seamlessly integrated with their consumer banking solution. Credits unions offering a business banking solution that supports businesses of all sizes, ranging from the smallest microbusinesses to large commercial clients, can evolve with business members as they grow.
A digital transformation strategy should also evaluate how the use of data can support the member experience. New, no-code, highly intuitive data intelligence tools are available, for example, to help you better understand members' online activity and drive engagement within digital banking. Insights can be used to segment different audiences and deliver targeted pop-up messages, such as notifications, tips, and tutorials, resulting in a more personalized experience.
Credit unions’ digital transformation efforts must be ongoing as both technology and member expectations evolve, so it is critical to work with providers offering flexible solutions that can evolve quickly as needs change. Institutions focused on enhancing the member experience and making banking easy for their members through technology are most likely to continue to thrive.
Landon Glenn, CEO, ASA Technologies
Most credit unions’ approach to digital transformation typically requires them to heavily rely on partners, since many don’t have the time, resources, or budget to build technology in-house. However, these one-to-one fintech integrations are also extremely time consuming and burdensome, plus tack on liability and risk to the credit union.
I’d advise credit unions to carefully consider what their digital transformation plan is. Will the technology they’re adopting appeal to a majority of members? Do they have the staff and resources to maintain ongoing vendor management? Are they prepared to research, vet and onboard new fintechs every time technology or member preferences evolve?
Credit unions are under a lot of pressure, and there historically has not been a good way for them to effectively bring innovation to members at scale and still retain their prominence in members’ financial lives. Right now, there are 10,000 banks and credit unions that have similar apps. Digital transformation has typically been adding the same features and functionality as everyone else. True transformation comes from changing the playing field. The only digital players that are competing and winning against the biggest banks with billion-dollar budgets are affinity-based fintechs.
True digital transformation can make credit unions future proof by turning their biggest competitors into partners and building a model where the newest, best tech flows in from the crowd. I firmly believe the path forward is to embrace embedded fintech with a collaborative banking model. In this approach, credit unions and fintechs are connected via a third party’s application program interfaces (APIs), which tokenize, normalize and anonymize all member data before it’s shared with fintechs. The result is a secure, compliant member-facing marketplace of fintech apps, providing members with access to digital solutions that can compete and win against the biggest banks. For the first time, members can try out the latest technology they crave without sharing any PII data.
Such an approach solves the liability and risk that often prevents credit unions from fully embracing digital transformation. Because an embedded fintech platform manages member identity, privacy, consent, data anonymization and security, unprecedented innovation is unlocked, and credit unions are free to expand their digital channels and transform how they meet their members’ unique needs.
Michael Duncan, CEO, Bankjoy
Credit unions were formed as a response to the needs of various communities, each with their own specific goals and requirements. As a result, credit unions must carefully align their digital transformation efforts to serve the unique needs of their membership base, whether they are retail or business members. This approach creates differentiation from the big banks that typically target larger segments, as credit unions have the advantage of a more focused and personalized approach to serving their members. By leveraging their deep understanding of their communities, credit unions can deliver tailored digital services that truly meet the needs of their members, providing a valuable alternative to the larger financial institutions.
Additionally, as we see interest rates continue to rise, competition for deposit growth will likely intensify over the next 12 months and these trends should influence your credit union’s digital transformation efforts. Credit unions will be challenged with attracting new members and unlocking access to low-cost funds to drive loan growth moving forward. Therefore, digital transformation as it relates to account opening will be more important this year.
Today, only about 13% of individuals that visit a financial institution’s website will complete an application to open an account, according to research from Oliver Wyman. To improve conversion rates, credit unions need to think about the onboarding process and how members can engage digitally with your credit union – from the time they complete an application to their use of mobile and online banking channels.
Beyond onboarding, credit unions should review their overall digital banking experience, as mobile banking apps have a direct impact on member satisfaction. Research from Deloitte reveals that frequent mobile banking users, defined as individuals who accessed mobile banking at least once in every two weeks in the last year, are more satisfied with their primary financial institution than non-users.
To ensure digital transformation success, especially as it relates to online account opening and digital banking, credit unions should identify what success looks like early on. This ensures every decision along the journey is rooted to something measurable. Keep in mind that digital transformation is a marathon, and it requires commitment to stay the course. By deeply understanding your membership base, clearly defining success, and tracking toward key milestones, credit unions can continue to grow their market share.
For digital banking transformation, credit union leaders should also take some time to identify the must-have integrations that will benefit your members most while supporting your own institution’s growth. From there, ensure there is a closed feedback loop with your members, which will offer real-time data and insights on their experiences, not just with your credit union’s mobile app or digital platform, but with in-branch touchpoints as well. Lastly, it is worthwhile to stay engaged with your credit union’s technology vendors and become familiar with their product roadmaps. This will ensure you stay current on new features and ultimately, new opportunities to enhance your member experience.
Brian Kaas, President, CMFG Ventures
My advice is to develop a robust three-to-five-year corporate strategy for your credit union before embarking on your digital transformation journey. Digital transformation, taken by itself, is not a strategy and fails to provide a roadmap for execution. In fact, digital transformation is destined to fail if developed in a vacuum. Instead, utilize your credit union’s corporate strategy as the framework from which to launch your digital transformation plan.
In anchoring digital transformation around your corporate strategy, management can better identify and align on the steps necessary to execute this plan. While this may sound obvious, the steps necessary to execute a digital strategy focused on attracting new members will look different than a digital strategy centered around growing “wallet share” with existing members. Yet in many cases, credit unions fail to implement digital capabilities that align with the broader corporate strategy. Instead, digital transformation occurs in an ad hoc fashion with limited coordination across the broader organization.
If a credit union adheres to its corporate strategy, management can:
Better assess current digital capabilities relevant to this strategy,
Problem-solve for existing technology gaps,
Identify digital needs with specificity allowing management to source the best solutions, and
Ultimately develop a digital implementation plan that provides a full blueprint from start to finish.
This coordinated approach should result in the best utilization of time and resources. As importantly, it will greatly reduce the risk of creating the “Frankenstein” of digital assets for the next generation of leaders to untangle.
Digital transformation is an ongoing journey, especially in today's ever-changing business environment. Credit unions’ technology must be nimble enough to respond quickly to new requirements and changes in the market, as well as modern member needs. Nimble technology also enables organizations to experiment with new ideas and business models, allowing them to test and refine new services quickly, improve member engagement, and explore new revenue streams.
Credit unions should continuously operate with a future-ready mentality and evolve their strategies to remain competitive in today’s evolving marketplace and a roadmap is a key enabler in delivering digital transformation.
Samantha Paxson, Chief Experience Officer, Co-op Solutions
Today’s market and digital transformation journey calls for an extreme focus on member centricity, meaning how are we making strategic investment bets to increase utilization of the credit union through the engagement of the member. To make the most of people, processes and technology strategies, the credit union industry must invest in capabilities that center on longitudinal member value rather than a product-centric delivery model.
Digital transformation should focus on three pillars: lifestyle enablement, primary financial interactions and digital ecosystem acceleration – all to improve market share and differentiate the credit union value proposition.
For decades, financial institutions have served their customers well by anticipating and supporting their needs at macro life moments: getting a car loan or buying a house. This worked until fintech competitors found loyalty among the millions of micro moments, like paying for coffee or splitting an Uber. Enabling lifestyle, not life stage, is how PayPal has become as the most trusted payments brand in the world.
Primary Financial Relationships (PFRs) are Now Primary Financial Interactions (PFIs)
Too often, PFR is viewed as a mythical unicorn, something credit unions dream of but can never quite manifest in real life. In fact, PFR is well within reach. It begins with optimizing data to know the member like never before so that credit unions are their choice for every micro moment. Omnichannel payments delivers on both fronts, generating data for modeling prescriptive growth. Payments also put a credit union square in the sights of its member many times in a single day, driving usage and primacy to capture macro financial moments.
Digital Ecosystem Acceleration
Consumers have come to trust brands that anticipate their everyday needs and solve them through elegant technology. Big tech and fintech have risen to relationship primacy because they understand this and integrate use cases into platform delivery. They have intentionally designed their businesses as holistic digital platforms that thrive on connectivity and integration. Credit unions, on the other hand, have had to patch together and maintain a complex stack of analog and digital systems. It’s been a bumpy road, but as an industry we are making the right investments to smooth that path to member engagement – winning the moments that matter and not being disintermediated by fierce competitors. Co-op Solutions, for instance, has recently enhanced its middleware developer portal with tools that make integration of mobile experiences, servicing apps and data easier for every credit union, regardless of its IT skill level.
Credit unions are on the right path. Let’s reframe our value around ease, convenience and financial well-being for all to keep the member as our true north. Following the new member centricity agenda, we’ll earn back our place as our members’ first choice for every financial moment.
Rob Landis, President, Corelation
A commonly held fallacy of a “digital transformation journey” is the idea that it’s the same for every credit union, when in fact each organization has different membership needs that must be met. And to add a degree of difficulty, those needs will inevitably change as the members’ demographics and the credit union’s own profile evolve over time. Therefore, the best advice I can give is to build a flexible framework that can support different product and service mixes, and especially one that empowers the credit union to decide what and how they want their members to be able to self-serve, as opposed to being dependent on the technological or business limitations of their software providers.
Once such a framework is in place – one that gives the credit union the ability to choose and change what features are made available to their members – all that remains is for the credit union to do what they do best: Get to know their specific membership. Drill down into the wants and needs of each of their own market segments, translate that information into targeted features and digital experiences, and achieve a level of satisfaction that could never be replicated with a one-size-fits-all model. After all, the ability to tailor financial services to a unique cohort is a credit union’s greatest advantage.
Kirk Drake, President/CEO, CU 2.0
It is no longer digital transformation; it is now 100% digital. You don’t have time to “transform!”