Using Next Gen Tech to Attract Younger Members

By W.B. King

A recent Constellation Digital Partners survey found that 74% of financial industry leaders say core system integrations are a barrier to upgrades and implementations.

“The application programming interface (API)/middleware structure is flexible, so a credit union can start by offering a few new tools and expand offerings over time. And, when a credit union’s vendor contract expires, it is entirely possible to remove the middleware layer completely,” noted the survey, Attracting New Credit Union Members with Modern Digital Banking Services (despite limited budgets and outdated legacy systems). “Thus, the API/middleware approach not only addresses current problems, it also ‘future-proofs’ a credit union’s digital offerings because new fintech tools can be added via new APIs as requirements change.”

The Raleigh, N.C.-based CUSO counts Farmers Insurance Federal Credit Union, Everwise Credit Union and FCU Community Credit union among its clients. Constellation Digital Partners bills itself as providing financial institutions with a flexible, future-focused platform designed to accelerate digital transformation and enable seamless and innovative digital banking experiences that prioritize member engagement.

Upgrades Lead to Opportunities

Credit union executives, the survey posits, must consider new approaches to legacy systems and thus provide “make or break” technologies geared toward attracting and retaining members of all ages, especially millennials and Gen-Zers. Meeting this challenge in a timely fashion with minimal distribution or costs to existing models requires a new digital delivery paradigm, the survey offered.

“For credit unions, continuing to make do with an old platform is not a long-term solution. But the idea of changing the ‘tech stack’ seems daunting, given the expected cost and complexity, and credit union managers are understandably concerned that doing so could break something that is essential to daily operations,” the survey continued. “Those concerns, along with budget constraints and natural risk aversion, end up being more powerful than the opportunities that upgrades can represent.”

Since “bigger banks” generally have access to bigger budgets, the survey stated that credit unions could be at a disadvantage as institutions that do invest in respective tech stacks have a better chance of attracting younger accountholders.

“Trying to force a legacy system to replicate modern digital banking capabilities is clumsy,

frustrating, and a turn-off to younger potential members,” the survey continued. “The harsh reality is that many credit unions lag behind most banking institutions when it comes to offering modern, intuitive, and appealing digital products, and services. The good news: There is an approach that does not involve building each digital tool from scratch or completely replacing legacy systems.”

Sticky Relationships

For those credit unions that have limited budgets and legacy systems, the report suggested finding API tools that can effectively work with existing systems as opposed to “ripping out” a legacy tech stack and starting from scratch. “This avoids disruption and greatly reduces potential implementation problems, which provides great reassurance to the credit union’s management team and staff that making future changes and upgrades will be easy for credit union members.”

Among issues on this tech enhancement journey is working with current vendors and new third parties on middleware solutions—bridging incumbent tech and new offerings.

“In addition to offering tremendous flexibility, this approach also provides credit unions with real-time monitoring and scalability and reduces system maintenance costs,” the survey noted. “And fintech firms that supply the middleware and APIs provide oversight, monitoring, and maintenance, so that credit unions can plan and budget for these costs.”

While the survey conceded that it is possible to connect APIs to legacy systems without middleware, benefits of the later includes the ability to analyze data, which gives credit unions an “objective, data-driven way to better understand” membership.

“Credit unions could use this data to develop targeted loyalty and rewards programs, which younger, digital-savvy consumers are accustomed to using in retail shops, restaurants, hotels [and the like]. This could allow credit unions to connect with younger members in new ways, through services, products, and planning tools that are tailored to an individual’s needs,” the survey continued. “That makes those relationships ‘sticky,’ supporting and reinforcing the credit unions’ personal connections with its members.”