Credit Unions Well-Positioned to Lead in Technology Innovation
Having worked in banking for nearly four decades, I’ve seen firsthand how technology has transformed our industry. Over the span of a couple generations, banking has evolved from all-paper transactions and face-to-face interactions in bricks-and-mortar branches to a cloud-based enterprise requiring neither paper nor physical locations.
Although some customers will always prefer face-to-face interaction, a growing number of younger customers see paying bills or transferring funds as just one more thing that can be done on a smartphone, a financial “status update.”
To attract these customers, banks work to make virtual banking faster, more efficient and accessible with a broad range of tools or apps. My experience suggests credit unions are well-positioned for this new landscape, and may be able to lead their older, larger competitors.
Although big banks were first with technology such as computerization and ATMs, today it is smaller banks that have the advantage when it comes to adopting innovation.
Not only is technology better, less expensive and more widely available than ever, more important, smaller institutions like credit unions are simply more agile. The enterprise-wide IT systems big players installed 20 years ago were cutting edge then, but today are legacy systems, often with outdated architecture that is difficult and expensive to upgrade.
With the ability to innovate quickly becoming increasingly important for attracting and keeping customers, there are several trends and technologies that should be on the radar of every credit union. Some may be obvious – and you may already be doing them – but they will be permanent parts of the landscape going forward.
In much the same way the Internet has changed how we buy goods and read the news, online banking has changed how consumers do their banking. The Internet has not only lessened the need for bricks-and-mortar locations, but also for people to staff them.
Consumers like online banking for the convenience it provides. To maximize convenience, it’s important to offer every service online that is offered at a banking center, such as loan and credit card applications, funds transfers and more. Of course, the more you move business online, the more you need to be able to ensure security; even the most tech-savvy customers are likely to flee if their accounts are compromised.
This technology moved swiftly from check clearing verification to the ATM to mobile devices. Image capture lets customers deposit a check from anywhere in the world simply by taking a picture of it with their smartphone.
For credit unions looking to offer the full suite of online services, remote capture is a must-have. Fortunately, the technology is getting easier to implement and is available from numerous vendors at affordable prices.
The most successful financial institutions focus on what they are really good at and what’s most important – deposit gathering, making loans and earning fees – and outsource other things. As a correspondent banker, I am a firm believer in the convenience and cost savings that expert, third-party vendors offer.
The fact is, vendors can supply the technology to provide virtually any service you want, but require much smaller initial investments than building or housing the technology yourself, allowing you to better manage costs.
For example, underwriting your own credit card is very expensive and includes a lot of risk. But a card service vendor lets you provide a branded credit card with competitive rates while reducing your risk exposure. The strategic use of vendor services can help you meet rapidly changing customer demands without “breaking the bank.”
Banking is a highly regulated environment and the regulations change frequently. Online training offers a convenient and cost-effective alternative to traveling out of town for in-person training from regulators or state credit union associations.
Online training may only include reading and testing or can also include video seminars or live interactive sessions. For cost savings and convenience, explore every opportunity for your staff to participate in training online.
The most profitable institutions are those best able to control costs while providing customers convenience and a range of services. Credit unions have long been recognized for offering services at lower costs than larger banks, and passing those savings on to members in the form of lower interest rates and fees.
As technology continues to revolutionize the banking industry, credit unions are well-positioned to leverage their cost advantage and small-size agility to be in the forefront of technology innovation, being first to give customers the services they want at competitive prices.