It’s impossible to miss the headlines, and you can see it in the apps on your own phone: Digital disruption is coming from everywhere in consumer banking.
Upstart fintechs rapidly become “unicorns” valued above $1 billion by investors. In the fourth quarter of 2019 alone, eight new fintech unicorns were born. According to CB Insights data, U.S.-based fintechs drew almost $5 billion in venture funding last year.
The biggest banks aren’t standing around with their hands in their pockets. JPMorgan Chase & Co. spends more than 10 percent of its annual revenue on technology, according to Bloomberg Media. Fox Business reported that Bank of America has spent more than $35 billion on high technology in the last 10 years, including $1 billion just on its mobile banking application.
The convenience and capability of digital banking channels — integrated with traditional branch and phone channels — has leaped forward in recent years. The standard gets higher with every app update. And our competitors are harvesting, analyzing and modeling new data in new ways to improve service, manage risk, automate processes and personalize products. Banking in the 21st century is a data business.
If your credit union hasn’t yet felt the competitive pressure of these trends, it soon will. It’s fair to wonder whether we can compete — and win — in this new, expensive digital world. Is there hope for us? My answer is yes! The game is more challenging than ever to play, but it’s a great time to be a member-focused, customer-owned cooperative financial institution. Credit unions have some real advantages:
- We have clarity and integrity of purpose. As customer-owned organizations, credit unions serve one key stakeholder above all: our members.
- We can take the long view. We don’t have to worry about impatient venture capitalists looking for an exit. We don’t need to report quarterly earnings to Wall Street. Our structure allows us to make long-term strategic investments in member service and technology.
- We have collaborative superpowers. Our historically connected industry gives credit unions a unique way to punch above their weight class. We can integrate, partner and cooperate in ways others rarely do.
We can hold our own against big banks and fintechs if we have the courage to exploit our advantages and make bold tradeoffs that focus limited resources where we have a “right” to win. I would put three big key plays in a winning credit union’s strategic playbook.
Target narrow, catch wide. Pick a member segment with a clear needs profile, and commit to intensely focusing on serving that member segment well.
Many banking organizations attempt to offer a full range of banking products to everyone in their trade area across all stages of life. You can’t get away with attempting this anymore.
Member needs must drive digital and data transformation. With a laser focus on a specific member segment, you can configure your technology and data to serve those members. Begin each year with three to five big member-value headlines in mind. Write the press releases in advance. Tell the story of the big member benefits you’ll deliver in the year ahead. These can be service improvements, new products, or better fees and rates.
Draft winning talent. We can’t do new and different things with exactly the same people working in the same jobs exactly the same way. Bring in talented and ambitious people with fresh ideas. And adopt new ways of working — collaboration tools and agile teaming. The capacity of any organization is determined by the capability of the people within it.
The job of a growth-seeking credit union executive isn’t likely to become easier in the near future. But I have high hopes for credit union leaders willing to call up the courage to engage their unique strengths and run these three big, bold competitive plays.
Jason M. Osterhage is the chief lending and member experience officer at Alliant Credit Union in Chicago.
This article was published in the May-June 2020 edition of The NAFCU Journal magazine.
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Related Content:
- The NAFCU Journal: The Credit Union of the 21st Century
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