By John San Filippo
On April 29, 2024, Jack Henry published the results of its sixth annual Strategy Benchmark, a survey of credit union and bank CEOs from institutions running one of Jack Henry’s core processing platforms. Each survey covers a two-year period. This latest edition addresses 2024-2025.
On that same date, the Finopotamus TechSolutions4CUs podcast published its latest episode, featuring a discussion with Jack Henry’s Senior Director of Corporate Strategy Lee Wetherington. The initial premise of the talk was a preview of the Strategy Benchmark results, which served as a jumping-off point for a much broader conversation about credit unions’ most pressing tech topics.
“This year we had 127 CEOs respond to the survey,” Wetherington told Finopotamus during the podcast. “That means we are within the margin of error for a statistically representative sample of Jack Henry credit unions and banks.” The survey was open to all credit unions and banks running a Jack Henry core processing platform, a group that totals approximately 1,600 institutions.
The Difference Between Credit Unions and Banks
The first question of the survey asked CEOs to list their top three strategic priorities for the next two years. According to Wetherington, while credit unions and banks aligned on the top priority – growing deposits – they varied in the second most important priority. While banks indicated increased efficiency as the second most important priority, credit unions focused on growing membership.
“It seems that growing deposits and acquiring new members and/or customers would go hand in hand. You get more customers, you get more deposits. I'm surprised that the banks and credit unions didn't align on those top two,” noted the podcast host.
“This is why it's such a juicy survey year in and year out, is that you get these differences,” said Wetherington. “My anecdotal take on that is that banks are generally more defensive on the deposit front relative to credit unions who are more on the offensive. Credit unions are especially concerned about being relevant to both Gen Y and Gen Z members.”
Becoming More Efficient
Asked about how credit unions can achieve greater efficiency, Wetherington said, “There are two ways to affect that efficiency ratio, two parts to that equation. One is materially reducing expenses; the other is materially improving revenues. But expenses are where the fiercest focus is right now. And this is what segues us into a conversation about generative AI (artificial intelligence), the promise of generative AI, its applications in the back office, what it can do in terms of streamlining processes what are otherwise manually intensive and cost inefficient.”
Data Wars
“The urgency around the need to gain orders of magnitude more efficiency in the back office, along with the concurrent advent of generative AI in the popular imagination, has forced all credit unions to get really, really serious and sober about data strategy,” warned Wetherington. “Credit unions have been sitting on what you could argue is one of the most valuable repositories of data that exist. We are in the middle of the most aggressive data wars our species has ever been involved in. You've got these data wars raging between Google, between Microsoft and between Amazon, but what are the wars about?”
Wetherington further explained that “the wars are about who can get their hands on the most and best data with which to train the large language models of those respective public cloud companies.”
He added that credit unions are engaged in these data wars whether they realize it or not. “The value of the highly structured, highly labeled data that credit unions are sitting on can tell you definitively what matters to a member because it definitively quantifies [members’ spending habits],” he explained. “That's the holy grail of data. The fact that it's proprietary and that it's sitting behind secure walls at the credit union, the value of their data relative to this data war that is about to finish ‘hoovering’ up all non-proprietary publicly available data means the value of the data that credit unions are sitting on is skyrocketing.”
To hear more about small language models, the potential role for CUSOs in helping credit unions fight the data wars, insights on open banking, and more, listen to the full episode on the TechSolutions4CUs website or your favorite podcast venue.