Next Steps for Credit Union Tech
By Roy Urrico
How do digital card issuance, data, cloud computing, and fintech partnerships fit into credit union tech strategies going forward? Bill Hampton, division executive, credit union division, at Jacksonville Fla.-based financial technology powerhouse FIS provided insight on transforming credit unions’ tech landscape.
Hampton’s outlook takes into account credit union operations affected due to the pandemic and possible residual plans necessitated by a more digitalized membership.
“Credit unions throughout the past 12 months prioritized around member needs and ultimately the needs of the staff to serve,” Hampton said. “Coming out of that, credit unions then shifted to sustainability in this new operating model, not knowing how long this might last and ultimately got back to looking for opportunities to advance member experience.”
Digital Card Issuance Becomes a Demand
Hampton pointed out digital card issuance, which allows credit unions to provide a card digitally for immediate use, became a membership demand. He noted that while this was part of a long-term credit union strategy, the pandemic created opportunities.
The reason why this is so important, is digital issuance provides convenience for members, promotes loyalty to the credit union, and provides greater efficiency and security. Hampton explained, “The credit union is definitely looking at the reduction of costs, and the improvement of overall card security. Taking much of the human interaction out of card deployment reduces error and definitely increases speed.”
It makes very good business sense as well. “When you think about it, obviously member retention being so important, the loyalty comes from convenience,” Hampton noted. It is also a highly scalable delivery method, he added. “We see 70% of digitally issued cards become active within the first five days after being delivered.”
Hampton further explained there are various landing spots for digital cards. Either they would go into a proprietary digital wallet, or an open-sourced or readily available digital wallet operating in conjunction with a credit union's digital platform. “We have been focused on making sure that we can deliver across all the channels.”
FIS’ Digital Issuance enables cardholders to provision their card immediately into a mobile wallet for the accelerated and increased cardholder loyalty that helps win “top-of-wallet” status. Hampton added there are some 2 billion wallets and growing with one interesting trend. “The demographics no longer skew just towards younger members, but across all segmentation of membership, all the way up to baby boomers who are approaching 50%-60% of digital acceptance.”
FIS, Hampton noted, has seen a high percentage of tokenized digital cards going into wallets, which is also a “good thing” for the credit union because having cards on file helps card usage. “It ultimately allows (credit unions) to participate in, if not drive, some of the acceleration and how technology enhances the value proposition.”
FIS’ approach is to be wallet agnostic. “It is the best way for us to drive this, if you think about the scale of FIS with 200-plus million cards on file out in the marketplace globally. We’re at the forefront of meeting the demand for members and getting these out digitally, being flexible and open to where these cards ultimately are deployed.”
Hampton suggested many credit unions had digital issuance on their roadmap but the market, driven by the pandemic, accelerated demand and changed how members operate in their daily lives.
“We've seen it make its way to a top one or two priority for most of the credit unions that we serve, which is why we've taken a lead role here with being very agnostic and improving our processes to deploy this as fast as possible,” Hampton said. “Now the credit unions have begun to act in mass to embrace this technology.”
Data Strategy Keeps on Moving
Data goes hand in hand with digital issuance of cards in that credit unions must leverage meaningful data to better understand how to best serve their members and develop and deliver digital-first products. Hampton said, “The concept of the credit union needing to be able to identify trends and have the data points necessary to make decisions gets more important every day.”
Data strategy often revolves around each credit union’s mission or mandate. “That's going to look different obviously from credit union to credit union,” Hampton said. “Consistently it is about being where the member wants to meet.”
Hampton recognized the acceleration of the many digital tech products and services over the last 12 months, but some trends are not unique to the pandemic. “Data has been a source of a great opportunity and great challenge over the last several years at credit unions.”
Plus, he added that many members now embrace fintechs and somewhat disruptive technologies that deliver value and expediency. Therefore, credit unions face challenges from new competitors and member demands. To respond credit union's need to develop the right team, processes and the partner connections. “The further you dive into data, the more questions it should cause you to ask.
“I believe most credit unions are seeking value from outside partners like FIS,” said Hampton. A main reason is the ability of partners to collaborate in the data acquisition process such as supplying data sets and tools. “Access to the right data in conjunction with the mission and the process are key.”
The Jacksonville, Fl.-based organization uses a centralized engine and an open architecture platform that allows for the importation and utilizations of datasets. “It includes the ability to easily link to internal data sets and solutions within the credit union itself that fall outside of what we provide at FIS,” added Hampton. “Then of course we can pull from across our solutions and enterprise and our partners to bring it together. We need to make it easy and flexible to be able to find the meaningful data that can be actionable.”
Fintech Partnerships and Cloud Computing
Due to the pandemic, Hampton emphasized that it’s never been more important for credit unions to seek alliances with financial technology companies such as FIS. He cited data from across FIS’ immense global operations that claim movement of nearly $10 trillion annually and billions of transactions. FIS offers customizable data sets and sources, which can incorporate supplementary and tangential data, for credit unions.
Potential FIS partnerships also include putting clients’ systems in the cloud. “There has been more conversation around cloud computing and cloud environments over the last couple of years than I’ve seen prior,” suggested Hampton. “Adoption of the cloud goes back to a true north for credit unions, whose mission is to serve members and its community.”
Cloud environments also involve establishing a culture of protection, and wanting to make sure data used in-house is secure, and, obviously compliant, Hampton pointed out. While Hampton believes this culture has led credit unions to move a little more cautiously than other areas of the market, he said the current trend starting to tick up is credit unions partnering more broadly with fintechs and financial service providers.
“It allows a level of acceleration for technology deployment that a lot of financial institutions, maybe most specifically credit unions, might not have the financial or physical scale to do themselves.” Hampton mentioned, “It's very costly to deploy data centers, to run compliance, risk security. Therefore, outsourcing to partners, like FIS, to lead the way and use their scale make sense.”
Hampton said FIS has a robust cloud delivery framework, everything a global enterprise would expect for their cloud native applications. It offers organizations an abundance of cloud-related skills and insights, assessments with migrations, covering all aspects of the transition to an environment in which private and public cloud services coexist.
Credit Unions and Partnership Acceptances
“I've seen credit unions start to embrace this concept of evolving partnerships. I've really seen this desire to collaborate,” Hampton said. He sees fluidity to credit union’s business model and member needs. “Credit unions value the member and ultimately their mission, but now look at partnerships with fintechs in a much different way. “
Non-traditional providers offer credit unions the ability to quickly deploy digital technology, such as digital account opening, new lending solutions, credit and payments, and card development and monetarization. This approach includes digital cards and contactless transactions.
“Partnerships have evolved and they need to evolve,” Hampton said. “What we're seeing from the almost 4,000 credit unions that we do business with is they need to be nimble. They need to be 100% focused on listening and understanding what the credit union is trying to do.”
Hampton noted FIS has doubled down on its 30-year history of delivering innovative and successful products by putting a deep focus on a credit union-specific market team. This features both go-to-market and support resources centered on the credit union mission.
“This is empowering because we need to eliminate all barriers and noise between delivery of our expertise and solutions and what the credit union is really trying to accomplish,” Hampton maintained. “We simply want to be the premier technology provider and partner to credit unions. We have built a culture around embracing change. The change that the members are demanding from the credit union because of the times we live in are demanding it.”