Taking a Phase Zero Approach to Digital Transformation - Underpinning Technology with Process

Guest Editorial by Robert Zondag, Senior Manager, Wipfli


For many credit unions, key lending categories like auto and mortgage are increasingly volume driven. In today’s market this requires loan originations to be processed as quickly as possible, while retaining the personalization and member focus that often fuels credit unions’ competitive advantage.

Robert Zondag

Pressure is mounting not only from traditional bank competitors, but also from disruptive fintech innovators leveraging digital channels and automated decisioning to deliver fast, convenient lending services. The rapid emergence of peer-to-peer lending poses another looming digital threat.


Many credit unions rely on longstanding technologies and processes designed to serve members through decades-old models. Accommodating today’s member expectations for an effective and efficient origination process within these self-imposed constraints can be challenging, if not impossible.


Credit union leaders are increasingly embracing digital transformation as a necessity for effectively competing in today’s environment. Too often, however, this exercise jumps prematurely to the technology and vendor selection phase. Appending a new tech solution to legacy processes is a recipe for a suboptimal outcome and a disappointing return on investment.


The true key to any successful digital transformation project is to start with a phase zero approach, delving into and modernizing underlying processes before proceeding to the technology solution itself. This involves taking the time to thoughtfully consider the shifting paradigms of member service, and only then re-designing processes to align with how today’s member expects to be served.


The digital lending market newcomers currently eroding credit unions’ market share undertook this very exercise, dissecting key customer persona and re-imagining workflows to suit their needs. These disruptors had the luxury of starting with a clean sheet of paper, unencumbered by legacy processes or tech stacks. On the other hand, credit unions enjoy an incumbent’s advantage as well as a data-rich window through which to understand member needs.


Historically, credit unions have rarely invested management time and effort into the valuable endeavor of journey mapping; fortunately, we see signs of this changing. Journey mapping involves placing the member at the center of the process, bringing stakeholders together in a room with no goal beyond understanding each step of the lending journey from a member perspective. It can be tempting to jump ahead to fixing what’s broken, addressing compliance concerns or proposing new technology. Those opportunities can be addressed later- journey mapping merely involves documenting the current state.


Journey mapping is not a one size fits all undertaking. Some credit unions may choose to look only at auto or mortgage loans. Others may focus on specific parts of the process. There can also be a distinction between personas for current members and prospective segments for which deeper engagement is desired. Having a resource skilled in the mapping process - whether internal or external - capable of keeping a lively conversation on track and managing scope, can be extremely valuable.


Once the existing member journey is documented, the team should outline the desired member experience and identify all gaps between the two. Only then is the credit union ready to engage in the digital transformation discussion. This step involves creating a digital roadmap, which will serve as the master plan for the remainder of the initiative.


In terms of setting priorities, digital road mapping is very much like strategic planning. Once gaps are identified, some can be quickly addressed through a fairly simple change to processes. Others will be long-term goals dependent on technology implementation. The roadmap becomes an essential tool for communicating the institution-wide vision. Functional groups will inevitably disperse to execute on specific tasks; a written roadmap can ensure all remain aligned regarding the overarching priorities.


For a truly successful project, digital transformation should be approached from the perspective of people as the top priority, followed by the process and the technology as the final, and ultimately, least important piece of the equation. This is in no way intended to minimize the role of technology, which is essential to any modern financial services solution. Arguably it is even more critical for credit unions, where the key is to limit human intervention in back office processes without compromising the human touch in the member experience. The point is that technology is not an answer in itself – it is not a magical panacea nor a silver bullet. It must be surrounded with - and preceded by - an appropriate environment of aligned processes and human capital in order to deliver the desired results.


Digital transformation involves a significant capital investment as well as commitment of precious labor inputs. Demonstrating a favorable return on technology investment is a perpetual challenge in banking. Applying a Phase Zero approach to any digital transformation initiative greatly enhances the outlook for a favorable outcome. At the end of the day technology will play a role in its success, as will digital delivery. But there will always be a service component, and a role for the human touch that plays to credit unions’ strengths.


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