John San Filippo
Industry Leaders Forum: The Biggest Tech Challenge of 2023, Part 1
By John San Filippo
Finopotamus has assembled a panel of experts in a new recurring series called The Industry Leaders Forum (ILF). Each month, we’ll ask the panel a broad technology question and share their informative responses. Due to unprecedented response, we’ve divided the first ILF installment into three parts. Respondents are presented in alphabetical order by company.
Part 1 includes responses from:
· Landon Glenn, CEO, ASA Technologies
· Kevin Polinsky, Senior Director, Fintech Solutions, CUNA Mutual Group
· Samantha Paxson, Chief Experience Officer, Co-op Solutions
· Kirk Drake, President/CEO, CU 2.0
· Baron Conway, Senior Vice President & Head of Client Relations, CuneXus
For January 2023, Finopotamus asked our panel:
What is the single biggest technology challenge facing credit unions in 2023?
Chris Cox, COO, Apiture
Credit unions are looking for strategies to help them not only survive, but grow their membership in a market that continues to consolidate. Against this backdrop, the most significant technology challenge credit unions face today is evolving their digital banking solution quickly, giving members the features and experience they expect at the speed they need to remain competitive.
Today’s credit unions are challenged to offer the same degree of service and support to members digitally that they once delivered primarily in person. In the pandemic era, digital tools have grown exponentially important, and many credit unions have recognized that their digital banking platforms simply don’t have the capabilities and ease of use needed to attract and retain members in a digital-first world.
Speed to innovation is a challenge across the industry, particularly for community and regional credit unions without large internal technical teams. Fortunately, a multitude of fintechs are providing interesting new capabilities to support this industry and are looking for financial institution partners to take that innovation to market. Digital banking solution providers can play a valuable role in monitoring the complex fintech landscape and integrating third-party solutions to help credit unions deliver a holistic digital experience. Look for solutions with an API-first and cloud-native design to ensure that integrations result in the seamless experience members expect.
Landon Glenn, CEO, ASA Technologies
One of the biggest challenges facing credit unions is the heavy burden of innovation. Partnerships and integrations require credit unions to spend an inordinate amount of time and resources on researching and vetting the many fintechs in the market, determining which ones will solve the majority of members’ needs, contracts, time-consuming core integrations, not to mention the regulatory and compliance risk tied to it. Directly partnering with the wide range of technologies their members crave in a timely manner just isn't realistic.
Instead, credit unions should look to an embedded fintech platform strategy backed by a collaborative banking model, removing one-to-one integrations and enabling partnership at scale. Such an approach will save the credit union time and money, plus alleviate the frustration and headache of ongoing fintech partner management. With collaborative banking, fintechs do not interface with the credit union, do not receive regulated data or sell regulated products, reducing the regulatory burden – and, all while empowering members with wider access to a broad range of technology and tools through individualized choice.
Kevin Polinsky, Senior Director, Fintech Solutions, CUNA Mutual Group
A rising challenge we’re noticing across the credit union industry is project fatigue. While technology adoption should be exciting and invaluable in boosting efficiencies and productivity across the organization, we’re seeing many credit unions hesitate to move away from lesser capabilities due to the amount of existing projects, integrations and staff shortages. A shift in mindset is crucial.
A solution to project fatigue is to implement true end-to-end solutions that allow credit unions to seamlessly support consumers at any stage in their financial journey with little to no manual intervention. These solutions come pre-integrated and are ready to deploy, offsetting the prior human operational steps needed to advance the process forward.
A comprehensive, end-to-end approach can help increase the speed of executing new projects; create more clarity and transparency for the organization, as a single, comprehensive solution is responsible for the process from beginning to end; and it can help credit unions deliver competitive solutions that support their members’ desires to leverage mobile devices and engage at any time, 24x7.
Samantha Paxson, Chief Experience Officer, Co-op Solutions
Straddling a line between the imperatives of new tech investment and cost control will be an intense challenge for credit unions this year.
Leaders across the movement recognize that a diversified earnings mix is key to long-term vitality. As the agents of change within a cooperative pursue that ambition, many will find themselves shackled to an aging technology stack that doesn’t allow a best-foot-forward entry into new revenue streams.
Inconsistent levels of support for tech investment – from senior leaders to board directors – will only complicate matters.
To address these pain points, credit union leaders will have to be highly intentional with prioritization. Credit unions polled at the 2022 Co-op CEO Summit indicated their investments are likely to be concentrated in two key areas: member-facing digital solutions and data infrastructure.
Within member-facing solutions, credit unions will focus on those that drive active engagement, like day-to-day financial management and payments enablement. Notably, these solutions can pull double duty because they are virtual treasure troves of behavioral data – data that can be leveraged to plan future tech investment.
To generate the greatest return on these investments, we expect credit unions will also initiate a series of upskilling programs. This will allow cooperatives to motivate and retain top performers while also getting into peak shape for the next wave of financial services evolution.
Kirk Drake, President/CEO, CU 2.0
Core Systems and the belief that everything must be fully integrated. We work with 50-plus fintechs and all of them hit the same limitation: the core. By forcing core integration under the guise of a seamless member experience and before seeing market adoption from your members, you are forcing your fintech innovators to move as slowly as your core. This won’t help you in being relevant or riding the fintech wave.
Fintechs gain traction by focusing in a key area, disrupting legacy players, being nimble and fast. Choosing fintechs that can iterate quickly, bring you amazing products that differentiate your credit union while developing great member experiences means you probably need to build them outside of the core.
The best innovators start small, measure success, iterate, and expand the beach head. Instead, develop a fintech strategy that makes lots of small bets (outside of the core) and let the market demand demonstrated by your members show you what to double down on.
Baron Conway, Senior Vice President & Head of Client Relations, CuneXus
How do you use data to create a competitive advantage? Consumers today are expecting their financial institutions to deliver a similar digital experience as shopping on e-commerce websites. What makes shopping online on Amazon and eBay so appealing? It’s these companies’ ability to make consumers feel like they know them, providing offers and services that meet their needs anywhere, anytime, on any device.
To deliver this type of service, e-commerce retailers are leveraging consumer data. To meet consumer demands, compete with fintechs and larger banks in their communities, and keep the lights on, credit unions also need to start using data and analytics to drive valuable insights about prospects and members.
Data can help credit unions grow and scale, boost conversion rates and increase member satisfaction, whether it be by segmenting prospects and members for targeting purposes, providing relevant and enjoyable personalized experiences, offering services and products that anticipate needs, expanding the institution’s ability to lend and drive deposits or managing risk. Data can also help credit unions improve their security and fraud prevention systems, making sure they are less vulnerable in the face of a cyber-attack.
This change in strategy requires a significant investment in technology, infrastructure, and talent. Of course, these are big investments that require a lot of lift and can take time to deliver return on investment (ROI). However, these investments are critical for the future of credit unions. The solution is to define your requirements and use cases, think strategically to architect a solution, and then realize it through an iterative and phased approach, measuring your success as you go to help build the case for ongoing phases. Credit unions that fail to focus on data and build a vision, strategy, and plan for leveraging member data and analytics are at a significant risk of not being around in the next five years.