I've spent the majority of my career in the credit union industry and when I reminisce over the past decade, I often think about all the change that has occurred. Who remembers the days of processing transactions on a busy Friday afternoon and the unnerving feeling that occurred when the noisy Okidata printer ran out of paper while a line of members extended to the door? The simple upgrade of a printer made the turnaround time for processing transactions faster while also creating a more peaceful environment because it eliminated the need to talk over a piece of equipment. How about recalling the time of having to run your checks through a micro-film machine before Check 21?

In addition, we've seen the digital channel grow through apps, mobile check deposits, P2P payments and online account opening. We've also seen the transition from magnetic strip cards to micro-chip cards and now contactless cards. While I often hear leaders refer to these changes as process improvements, these are all great examples of innovation as well.

What Is Innovation?

Like change, innovation is constant. Over the past few years, innovation has become a popular buzzword at the forefront of the industry. Not only is it constantly changing, it's rapidly moving – making it difficult for credit unions to keep up, especially when faced with regulatory burdens and a highly competitive market.

At times, innovation is confused with invention; however, they truly have separate meanings. While the definition of innovation is broad, at the end of the day innovating is making changes to something already established by introducing new methods, ideas or products. A commonly used example to distinguish the two is the evolution of the telephone. The first telephone was an invention while the first smartphone an innovation.

Innovation doesn't have to involve groundbreaking technology. Innovation comes down to improving a process or experience for your members/employees. For credit unions to compete, adopting an innovative mindset will help to break the barriers of traditional thinking. There is no time better than now to jump off the never-ending hamster wheel of day-to-day operations and start embracing the ever-changing needs of the economy.

Fostering an Innovation Mindset

While creating an innovative culture doesn't happen overnight, having the right mindset is a step in the right direction. Here are a few tactics credit union leaders are taking to approach the industry with a different mindset:

1. Discussing innovation during strategic planning. Identify where your credit union is at with fostering innovation and strive to make it a core competency. Change starts at the top; be sure to align the executive team and challenge leadership to stop saying, "That's the way we've always done it."

2. Dedicating resources. As with any new process, resources are needed to support the ongoing focus of innovation. Creating a new position dedicated to providing support of the development of innovation is becoming more common.

3. Looking through the lens of their members/employees. When identifying problems to solve, put yourself in their shoes. How can your solutions make the best positive impact?

4. Embracing creativity. There is no such thing as a bad idea; sometimes the best ideas are generated from the crazy ones. Look outside the credit union space and be open to testing new ideas.

5. Failing forward. Failure isn't bad. Leverage mistakes and take those learnings to make your products better.

Leveraging Partnerships to Reduce Risk

Having the opportunity to help push the credit union movement forward has been so rewarding and I continue to do that through my work at the Filene Research Institute. Over the past five years, Filene has worked with more than 100 credit unions to create, test and adopt product and service innovations across the U.S. and Canada, resulting in approximately $200 million in loans.

Our job on the Incubation team is to leverage Filene's research to seek solutions that show promising impact in the credit union industry. We do this by testing different concepts, through live pilots, with 10 to 15 credit unions that range in asset size and reflect a diverse range of geographic locations. At the end of each pilot, Filene reports on the desirability, feasibility and scalability in order to determine if a concept is a good fit for the credit union market.

For the most promising concepts and successful pilots, we package together implementation guides, online resources and in-person workshops. We do this to reduce the front-end risk of testing, and to support credit unions in accelerating decision-making on what to implement and who to partner with.

Building on the success of our Reaching Minority Households Incubator, which resulted in 58,000 loans issued to more than 18,000 underbanked households, we have created an implementation curriculum for two of the concepts tested: Individual Taxpayer Identification Number lending and small business microlending. We documented three credit union stories on how ITIN lending – an innovation rather than an invention – changed lives and built lasting relationships between financial institutions and communities.

Keeping Up With Fintechs

As innovation and change go hand in hand, it's essential in our rapidly changing technological landscape that credit unions keep up with trends so they can swiftly incorporate the best fintech solutions for members. To make this easier, Filene launched the FinTech Catalyst Incubator, in partnership with CMFG Ventures, the venture capital arm of CUNA Mutual Group. The purpose of this incubator is to partner with market ready fintech companies and test promising solutions that will drive innovative change for organizations and members.

The results from our inaugural test with Align's Income Share Agreement (ISA) showed the desirability and feasibility for credit unions to offer this alternative solution to personal loans. Both credit unions and members saw ISAs as a way to help those in need, and the ISA concept showed broad potential for consumers across all demographics and socioeconomic backgrounds.

Our second round of testing is underway with two ideas poised to expand a credit union's product and service innovation, thus creating a more loyal connection with members:

• Steady: Independent work, or gig employment, is a growing category of work that can put pressure on consumers and financial institutions. Steady is a tool that can help consumers identify job opportunities that meet their availability, skills and needs. It also provides a variety of tools to help achieve financial goals and track extra income.
• Finhabits: An increasing number of consumers face financial challenges that prevent them from pursuing strong financial futures. Finhabits is an app specialized in making quality investments and retirement services more inclusive. It allows users to invest and build savings for as little as $5 per week.

Next Steps to Accelerate Innovation

Encouraging an innovation mindset within your credit union can make a positive impact on your membership, employees and financial bottom line. Leverage the cooperative principals to push the credit union movement forward and help each other grow.

• Credit unions: If you are interested in joining a community of testers who will help shape the future of our industry, there's room for you! Reach out to me for information on participating in testing opportunities.
• Fintech companies: Are you a fintech company offering products or services that could fill a gap within the credit union system? I encourage you to contact me if you think your concept is up for the test.

As our namesake Ed Filene once said, "Progress is the constant replacing of the best there is with something still better." As we close out the decade and enter into a new year, I challenge you to create a culture of innovation and challenge the status quo.

Megan Jackson

Megan Jackson is Incubator Manager for the Filene Research Institute. She can be reached at 608-661-3755 or [email protected].