Financial institutions have operated for decades under the assumption that they offer what consumers need and that consumers will come to them.

Consumers need them.

With the burgeoning popularity of the smartphone, financial institutions have been rocked to their core and they're still scrambling to figure out what their role will be. Consumers are truly now the center of the universe.

Mike Kelly, CEO of PSCU, pointed this out in an interview. Now, in this digital shift, the business has become more about the ability and speed of moving money around. Financial institutions must be able to perform this function without alienating their base.

You don't want to be the next JCPenney, Kelly quipped.

At the same time, you need to remain in business under the stress of regulatory burden, the weight of the existing retail delivery structure, and serving consumers who have never known computers and others who have only lived in a world connected by a mobile Internet. The demand for technological advances can only accelerate.

If you need any evidence of that, look at CUNA Mutual's experience for instance: Mobile loan applications through its app increased from 4% in 2011 to 20% of applications by 2013.

Gens Y and X are clamoring for mobile technologies and nontraditional banking, such as P2P and crowdfunding, and they want to fulfill a mission of social good. Credit unions are the original crowdfunding; we just need to, as an industry, bring it into the 21st Century and beyond, but again, not at the cost of offending the base.

This is the same base that can vividly recount their experience when gas stations switched from full to self-service. The boomers still complain about that but they adapted. And, many boomers are more technologically literate than previous generations have been as they age.

Credit unions can transition to smaller branches with more technological components, such as personal teller machines. Coastal Federal Credit Union has transformed its branches with the help of PTMs and reduced the number of tellers by 40%, while increased teller hour services to members by 86%.

Kelly noted that credit unions talk about trying to match the online experience with the in-branch experience, but instead he suggested matching the in-branch experience to the 24/7 online or mobile experiences: Efficient and always open. Use the technology to make the experience better, not worse.

As CUNA Mutual's newly installed CEO, Bob Trunzo, told me, “Those that will be successful in the future are the ones that can provide not only a multichannel environment, but a quality multichannel environment.”

Credit unions' mobile delivery must be top notch. Anything less is unacceptable. Otherwise the Simples and the Squares and the Starbucks apps will take that consumer connection away from you, and financial institutions become merely a middleman — a wholesale provider. And credit unions have neither the scale nor the statutory ability to succeed in that role.

Aite's Ron Shevlin recently wrote a great blog post on why financial institutions can't be Amazon, essentially the interweb's middleman. Amazon doesn't care whose product you buy as long as you buy it through Amazon. Kindle is Amazon's tablet, one of the few products it creates, yet Amazon still lists iPads at a sweet deal.

Would your credit union do that?

It could. Some credit unions already participate in shared branching, and share HR or compliance executives. Credit unions are the perfect financial institutions to band together and cooperatively offer products.

Ten $100 million credit unions could have the scale of a billion-dollar financial institution. Wait a minute, that's called a CUSO!

Credit unions are the original social business, so get back to your roots while reaching for your future. The reality is that if credit unions don't come together in a big way, more failures and closures will follow. So far this year, six credit unions have failed or closed according to SNL. That's on pace with last year, except there are fewer credit unions due to mergers and failures to start with, so really it's an increase.

The jump in asset size of these credit unions is alarming, too. Year-to-date 2013 failures tallied less than $5 million, but in 2014 came to a whopping $63 million.

Many credit unions are stuck in the rut of trying to follow the road map that got them there. It's no way to attack the future.

Respect the past, but, as Kelly told me, “A compass beats a map in today's world.”

Instant Insights /

Technology Tips the Scales Toward Consumers

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