We do not need a crystal ball to figure out what tools financialinstitutions will need to compete in the 21st century. The internethas disrupted many business models, including the credit unionbusiness model. While the internet provides credit unions with theopportunity to connect to their members remotely, the internet hasalso enabled credit union competitors nationwide to access members.Some of these competitors have technology that is extraordinary andimproving every year. The latest example is Rocket Mortgage byQuicken Loans. While the eight-minute approval it advertises israrely a reality, its approval process takes a fraction of the timefor conventional underwriting.

The bar on what constitutes swift, effective and convenientservice keeps rising as do the expectations of consumers. Thistrend is irreversible. If a financial services provider cannot keepup the pace, it will be left in the dust. You remember Kodak,Blockbuster and Borders. Advances in technology and their refusalto react to change in a timely manner turned their business modelfrom vibrant company to business school case study.

The ability to acquire, store, analyze and act on data is also agame changer. Credit unions have an image of themselves that theyare close to their members and know their financial needs, but thatimage in most cases is just that – an image. Today, Google andAmazon likely know much more about a credit union's members thanthe credit union. If a credit union's competitor has the ability toleverage data on a credit union's membership better than the creditunion, there is little doubt what the outcome of that competitionwill be. Leveraging data enables a credit union to provide productofferings that are relevant and timely to particular members,anticipate loan pay-offs and provide modifications to keep theloans, ask fewer but more relevant questions in the underwritingprocess, and undercut the competition on loan rates with betterdata on credit risk.

It is imperative for credit union management and boards to askthemselves a series of questions. What technology and data tools dowe need to remain competitive and relevant to our members? Can weafford to buy or develop these tools ourselves? If not, can weacquire the tools either through a merger or collaboration andremain independent? Note that if you do not elect to collaborate,you are on a path to merge – you just don't know it yet.

The good news is there are existing CUSOs and CUSOs in theplanning stage that will help credit unions acquire the necessarytechnology and data analysis tools at prices most credit unions canafford. But credit unions are not the only entities in the creditunion community that need to change. The regulators need to changewith the times as well.

To the NCUA's credit, the agency is undertaking a study of howit can better leverage technology and resources to make theexamination process more efficient and less costly, but there is noindustry-wide initiative for the use of collaboration andinnovation.

Interestingly, the Office of the Comptroller of the Currency hastaken a lead position on collaboration and innovation – yes, thecommunity bank regulator. For a number of years, the OCC has beentouting the benefits of collaboration to its banks. Bank culturehas resisted the advice, but the OCC is pressing ahead nonethelessas it can read the tea leaves and knows that most community banksdo not have the scale to successfully compete in the long-run. TheOCC is reorganizing its internal structure to promote collaborationand responsible innovation to its banks.

The credit union culture tends to follow the lead of theregulators. We are conservative and compliant as a group. If theNCUA sent signals to credit unions that innovation andcollaboration are important to the future of credit unions, morecredit unions will be willing to make the leap into the evolvingcredit union business model.

The competition gap between the traditional credit union modeland providers using high-tech solutions and big data is widening.If a credit union cannot respond with sufficient technology anddata analysis tools to meet the competition, it is only a matter oftime before that credit union has a “Kodak moment” and disappears.The time to act is now.

Guy A. Messick is a Partnerat Messick Lauer & Smith P.C. He can be reached at610-891-9000 or [email protected].