News from CULytics Virtual Summit 2021: A CEO’s Take on Digital Transformation
By W.B. King
During his presentation, “Digital Transformation: Lessons through the Eyes of a CEO,” at CULytics 2021 Virtual Summit, Launch Credit Union’s President and CEO Joe Mirachi said that 20 years ago there were more than 10,000 credit unions in the United States. Today, he noted that half that number exist. And in 10 years, the number of credit unions in operation will likely be cut in half yet again.
“This is an alarming trend,” said Mirachi. “One key factor is the accelerating rate of technological change.”
Credit unions, he added, are not only facing competition from “mega” banks, but companies like Facebook, Amazon, PayPal, Rocket Mortgage and Venmo, among others.
“Welcome to the world of digital disruption. We are under attack from new and existing competition as technology enables for the disruption of our business model," he noted. "Competitors are using the new technologies to better serve our members,."
A CEO Perspective
Mirachi, who joined Launch Credit Union in 2012, feels that “digital disruption” and “member disruption” are interchangeable terms. He noted that the only way to combat competing external forces is to start an internal technology transformation within the credit union.
Rebranded from Kennedy Space Center Federal Credit Union in 2014, the $890 million Merritt Island, Fla. –based Launch Credit Union currently serves more than 65,000 members.
With the confidence and support of the credit union’s board of directors, Mirachi started on his digital transformation journey two years ago. The first step was developing a new strategy, which included defining the business model, target market and his credit union’s unique value proposition.
In an effort to be better informed, he read extensively on the subject of digital transformation, but was having trouble devising a plan until he came across “What’s Your Digital Business Model” by Peter Well and Stephanie L. Woerner. Both authors are research scientists at MIT’s Center for Information System Research.
“Their book is excellent for learning how to shape a firm’s digital transformation,” he said. “I recommend it highly.”
The book, in part, covered various digital business models and value chains, including omnichannel, ecosystem drive, supplier and modular producer.
“Omnichannel is not a new term for credit unions; however, understanding that it must be a focus of our digital transformation rather than a passing fad is critical,” Mirachi reflected. “Omnichannel is important to our strategy because it is important to our members.”
To underscore his point, he shared statistics from The Financial Brand that found credit union members’ access services in the four following ways: website (37%), branch (35%), mobile (22%) and contact center (6%).
“The member’s journey crisscrosses channels. For example, about 70% of members who start their journey on mobile move to another channel before the transaction is completed,” he said. “We need to make the member journey and how they choose to interact with us a frictionless or seamless experience. Omnichannel has to drive our digital transformation plans.”
Determining the Right Technology to Invest In
Deciding on a sound omnichannel and digital transformation platform strategy is important, but choosing what technologies will be integrated is an equally serious undertaking. Since technology investments are expensive and long-term in nature, a wrong step could derail operations. Mistakes are also costly and not easily undone, said Mirachi.
“Do overs can cost a CEO his or her job,” he noted, adding that the best technology to invest in is the technology that supports a credit union’s digital strategy. This approach requires an open API infrastructure that seamlessly accepts third party plugins.
“APIs are critical to companies and IT organizations for opening doors to innovation,” he said. “In terms of credit unions, APIs make it easy to seamlessly integrate the member experience as members move between mobile devices, desktop computers, telephones and even in-branch visits.”
Mirachi explained that until 2019, Launch Credit Union was operating on an “old legacy” system that was in use for almost 30 years. It had limited functionality,“clunky” middleware, and it didn’t connect well with other systems.
“It wasn’t flexible or scaleable. It was a major barrier to implementing our strategies and building member relationships,” he said. “Similar to many credit unions, as we added products over the years, we also added additional systems to support those products. The result was a number of subsystems tied to the core for processing mortgages, credit cards and other products. All too often data was trapped in the subsystems rather than shared between them.”
By adopting a flexible, data-rich, analytic API digital technology platform, Mirachi said a retail banking strategy that marries market innovation with member expectations was realized.
His approach included what he referred to as the “technology trifecta”: core system (primary data base of member information and accounts), digital banking (member accesses account information for transactions), and debit/credit cards (how members pay for goods and services).
The reason this “trifecta” model is viewed as one system to the member is due to a winning API infrastructure, he said. But while an open API framework is critical to a successful digital platform, not all subsystems and ancillary plugins work in the same manner.
“I found the integration between our current digital banking and card systems disappointing. Both systems are increasingly driven by payments and the systems are building redundant solutions for the same problem. This increases the cost to the credit union and the redundant solutions do not integrate well,” said Mirachi. “This is a lesson I learned the hard way as having selected the wrong provider back in 2016. We now enter 2021 with another digital banking conversion on the calendar.”
Progress not Perfection
While Mirachi shared many digital transformation tips and best practices, he said that in hindsight he should have engaged experienced consultants sooner instead of trying to do much of the heavy lifting himself.
“You want to crack the riddle and make it happen, but the biggest lesson for me, not just in learning and figuring this stuff out, is that I have to rely more and more on others—even outside the organization,” he said. He noted that an undertaking like a digital transformation is more about progress than it is about perfection.
“I found that the less I think I have the answer the more effective I am. I give the framework of the strategy and what we want to accomplish and give parameters, but it’s really up to my leadership team to develop their recommendations,” he continued. “My job is not to have [all] the answers but to create an environment where the best answers emerge.”
From an organizational viewpoint, Mirachi said that when acquiring a new technology platform, the credit union as a whole has to learn how to interact with those tools otherwise the tangible benefits of the technology might not be fully realized.
“New skills are needed for a digital transformation and this directly impacts our people. In order to succeed in digital transformation, a transformation must be matched in the skills of your people,” said Mirachi. “It’s relatively easy to change your technology, but much more challenging to change the way your people use the new tools.”