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Credit Union Digital Transformation in the Age of COVID-19

The era of neighborhood branch gathering places may no longer be tenable as a new era dawns of self- and curbside-service, constant online connectivity, and conversation in virtual spaces. In partnership with State National, Filene’s Center for Emerging Technology is exploring the future of digital financial services.

What will be the lasting impacts of the lingering coronavirus pandemic and the broader social, economic, and political changes that have accompanied the pandemic? At the Filene Research Institute, we don’t see the pandemic initiating new trends so much as accelerating, deepening, and intensifying new ones. Among the most important is the rapid expansion—and reinvention—of digital financial services.

Online and mobile access to financial services is nothing new. But as the pandemic has taken hold and deepened, everyday life for many Americans has become increasingly mediated by digital technologies. According to a recent McKinsey Global Survey of executives, the average share of consumer interactions that are digital has jumped from 41% in December 2019 to 65% in July 2020, and the average share of products and services that are fully or partially digitized increased from 41% to 60% over the same period.[1] And with greater consumer acceptance and adoption of digital channels comes new consumer behaviors and higher consumer expectations. Those behaviors and expectations evolving based on experiences with non-financial businesses.

For credit unions, digital transformation is also here with a vengeance, whether we like it or not. As one credit union executive put it, “What does curbside delivery for financial services look like?” Credit unions are finding out the answer to this question in real-time, seeing massive growth in online and mobile traffic, investing in member education and technical support, accelerating digital service and sales integration, and growing capacity for personalization and relationship management.

At the same time, many financial institutions are seeing increased demand for non-digital service interactions, too—evident in dramatic spikes in contact center usage, long lines at branch drive-throughs, and (for some) surprising demand for appointment-only branch visits.

What behaviors and expectations will prove the stickiest in the post-pandemic world? As we have written previously, there are a spectrum of possibilities and opportunities in credit union digital transformation. At one end of that spectrum, consumers continue their embrace of digital life, embedding technology deeper in the ways they work, shop, eat, connect with one another—and yes, do their banking. Automated self-service becomes the norm. At the other end, consumers find they miss in-person experiences and seek out valuable “human-first” interactions, including in retail environments. Neither of these worlds is unlikely—and neither is inevitable. More likely we end up with some mix of the two, with players specializing in particular experiences (rather than product sets or market segments).

So what can credit unions do to prepare? Here’s what we know. Digital deposit-taking and payments are relatively advanced, although not ubiquitously so; digital account-opening and onboarding, end-to-end digital lending, and enhanced digital marketing are all on their way. Many organizations are looking to robotic process automation to find efficiencies in an increasingly revenue-strapped environment. These are quickly becoming table stakes. So too may be contactless payments, although novel payment form factors have historically been additive rather than substitutive—not replacing cash, for example, but simply being added into the repertoire of ways to pay.

Some of the next top opportunities and challenges for digital financial services include the following:

  • Faster, more transparent, and more intuitive money movement and management through digital personal financial management tools and treasury services
  • AI-based chatbots or conversational agents and other forms of voice and video banking
  • Identity solutions, with enhanced and responsive security
  • Advanced analytics, backed up by solid data management and governance and open, interoperable systems for data sharing and third-party partnerships

With the enhanced focus onto digital services, credit unions should:

  • Lead with trust
  • Our research at Filene (see here and here) has shown that technology adoption and use in financial services is deeply shaped by trust consumers have in their financial services providers. How can credit unions build and maintain that trust? Safety and security—especially when it comes to member data—provides an important foundation. For example, credit unions have invested heavily in technology-driven fraud prevention initiatives, and these investments should be communicated clearly to members. A successful messaging strategy should include three elements: (1) reassure members the many ways credit unions are protecting their data; (2) remind members this is a joint effort, and they play a crucial role; and (3) in the event fraud concerns arise, the credit union has a transparent process in how to process such claim. If that process can be made entirely and seamlessly self-service, all the better.
  • Recognize that excellent service is all about fit.

  • New Filene research also emphasizes the importance of “member compatibility” to achieving service excellence. Member compatibility refers to the fit between member needs and expectations with credit unions’ offerings, delivery design, and operational model. It requires centering your service strategy around the demands of your target members—and being ready to say “no” to those who won’t be best served by your strategy. This framework prompts credit unions to assess what service attributes are most important and which can be left aside. You can download a Filene workshop guide to help your teams evaluate your current digital service offerings and explore what elements are critical to best meeting the priorities of your target members.
  • Move towards operational transparency.

  • Members rarely see behind the scenes at credit unions. But research suggests that member satisfaction, their perception of value, and their trust all increase when they are able to understand the work that is being done on their behalf. Transparency is especially helpful for self-service solutions. A real-time service tracker displaying the different phases and milestones generates a sense of progress and control for members replacing long silences and pauses found in some service experiences.
  • Combine human service and technology with the adoption of a telemedicine model.

  • The telemedicine model does not attempt to replace humans with technology, but to augment human service through technology. By emulating elements of this service model credit unions could benefit from its many advantages. It allows people the flexibility to address their needs at convenient times, reduces face-to-face exposure for both parties, and could reduce the total length of the interactions by connecting asynchronously.
  • Partner Strategically.

  • No financial institution can confront the complexities, uncertainties, and costs of digital transformation alone. Credit unions are especially skilled when it comes to leveraging their cooperative experience to build valuable partnerships. Today, many credit unions are looking to expand their partnerships, opening up their systems and services and building their own tech stacks to provide their members with the best options available.

Ultimately, digital transformation must do more than simply convert business lines to new platforms and interfaces. Digital transformation must reimagine what is possible in financial services—that that may require organizational restructuring, resource reallocation, new partner and new talent identification, a broader strategic vision, and the courage to act on it.

[1] “How COVID-19 has pushed companies over the technology tipping point—and transformed business forever,” McKinsey & Company, 10/5/2020, https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-covid-19-has-pushed-companies-over-the-technology-tipping-point-and-transformed-business-forever
Taylor Nelms, Filene
Taylor Nelms, Filene
As an anthropologist, Taylor sees the chance to join Filene’s research team as the perfect opportunity to fuel his passion for understanding people and culture. Taylor is dedicated to building a groundbreaking research agenda—and to translating that research for consumer finance professionals, policymakers, and the public to see what kinds of positive impacts it can have. When it comes to finance, Taylor’s method is to take a broad view across time and space, positioning new developments in social and historical context.

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The Difference Is in the Details: Secure Texting

State National’s Partnership With Solutions by Text Is a Secure Way To Reduce Borrower Noise    When was the last time you wrote or received an office memo? Or had stamps handy to mail a letter? Have you dialed the operator to make a phone call lately? Or eavesdropped on a party line? Some of you may have never experienced these “old school” methods of communication — and although each of these had their charms (eavesdropping on your neighbors over a party line was sometimes just as entertaining as watching drama unfold on General Hospital!) you should probably consider yourself lucky that those days are mostly behind us. Communication has evolved to become faster, easier, and far more convenient over the years, and here at State National we are no stranger to the incredible efficiencies technology has gifted us.     Whether business or personal, emails and texting have drastically altered how we connect with each other and share information. 89% of adults check emails daily and 98% of all text messages are read within three minutes! (When was the last time you checked yours?) Both are instant and can be read and responded to at the convenience of the recipient as opposed to interrupting them with a phone call, which many people report causes them a certain amount of anxiety nowadays. Both email and texting is where it’s at these days, and each have their particular strengths. While emails can provide a little more space to respond at leisure, texts create a sense of urgency. Receiving a communication from another channel also helps reassure borrowers of the authenticity and validity of the message by adding another touchpoint communicating what is needed.   Adding Email Notifications In 2016, State National implemented email notifications to borrowers as part of the notice cycle. This provided a quick and efficient way for borrowers to respond with their insurance information through the MyLoanInsurance.com website or by replying to the email with their insurance information. On average, we saw 23% of borrowers log into MyLoanInsurance.com from the email. Considering that 2% to 5% is considered a good click-through rate for email, this result was an immediate success.   Next, Text Messages Then, in 2019, State National added text messaging to the notice cadence to further increase ease and convenience for borrowers while also instilling an urgency to submit their insurance. Like our email notifications, these text messages have a secure link into the MyLoanInsurance.com website a recipient can effortlessly access from their smartphone — which, let’s be honest, is always inches from their fingertips at any given moment. So far, we are seeing an average of 18% of borrowers log into MyLoanInsurance.com from a text they’ve received and we expect that number to continue to climb. Overall, of those who log into MyLoanInsurance.com from the email or text, over 70% are submitting their insurance!     But Is it Secure? Of course, scams and phishing are unfortunately a reality and very prevalent in the world of emails and texting and, rightly so, have everyone on high alert. Let’s face it, receiving a text asking you to provide your insurance information may cause some hesitation, but then when you receive an email a few days later, you start to think it may be legit. Then you receive the notice in the mail. OK, the recipient thinks, now I know this is my financial institution trying to get ahold of me to get this information. We want your borrowers to feel at ease that their information is protected. That’s why we include your financial institution’s logos on the emails and on the secure MyLoanInsurance.com website. If you’re a client of State National or thinking of becoming one, putting the MyLoanInsurance.com website on your loan documents or even on your website can help reinforce the authenticity with your borrowers.   The Proof Is in the Results So how does all this translate to your CPI program? Well, we have found that clients who utilize our email and texting programs are experiencing an average penetration that is 34% less than before they added these enhancements to their program. In addition, the "flat cancel" rate (the percentage of certificate placements resulting in a full refund) has decreased as much as 11%. That means fewer unnecessary certificates placed and refunds processed — which translates to less work for your staff.   The Difference Is in the Details State National’s texting and email programs are completely free of charge and State National does all the heavy lifting for you. You simply provide us the email addresses and phone numbers associated with the loans and we’ll take it from there — only reaching out to borrowers we haven’t yet received insurance information from. Should one of your borrowers no longer want texts, they can easily reply STOP and they’ll immediately be opted out, with their opt-out immediately reported back to your financial institution. We’ve worked diligently with outside legal counsel and partnered with Solutions by Text, a compliance-first provider of enterprise texting solutions with a proven track record with the FCC, TCPA, FDCPA, CFPB, CTIA, and MMA to ensure that our program is fully compliant. And since there is no advertising of a product or service, our emails are exempt from the CAN-SPAM Act. We continue to closely monitor any and all regulations surrounding these programs so you can keep peace of mind.   See what our partner Solutions by Text has to say about financial services users and texting!   There’s no doubt that the borrowers we serve are enjoying the convenience — and responding to these more modern ways of both receiving and sharing information. Who knows what the future holds for even better communication techniques? Whatever it is, you can count on State National to be ahead of the pack in offering it to our clients!

How to Explain CPI to a Borrower, Part 2: Simple Answers to Common Borrower Questions

CPI expert and Sr. Client Executive Kathy St. Clair shares her insights on how to educate borrowers about CPI and what to say if a borrower has questions about a CPI certificate placed on their loan. In Part 1, Equipping Your Staff, she shared the value of informing borrowers proactively and the multitude of resources and support State National has available to assist you. If you do not know what CPI is, we recommend first reading What Is Collateral Protection Insurance (CPI)?   Borrower Questions Covered in This Article Will I receive a refund once I show proof of insurance? I submitted my insurance, but have not received a refund Can I keep CPI as my only car insurance if I want to? How do I rectify my insurance status? Can this insurance be refunded? While you can redirect a borrower to State National at any time to be helped by one of our friendly, highly trained team members, we want to share the answers to some common questions a borrower may ask so you and your staff feel prepared to answer anything.   Borrower Questions: "Will I receive a CPI refund once I show proof of insurance?" "If I go out and get insurance, can I be refunded for what I have paid for CPI so far?" "Will I still have to pay a premium on my loan each month once I show proof of insurance?" Once State National receives proof of insurance, a refund is quickly processed and sent back to your financial institution. If the borrower had adequate insurance for the time period in question, a full refund will be issued. There may be a charge for any verified lapses in coverage. How quickly we can issue a refund will depend on the agreed-upon process, such as ACH or manual check. The refund is then posted to the borrower’s loan. In many cases, this can be done through an automated process, eliminating any manual administration for your staff. Along with quickly processing a refund, we send a notice to the borrower to let them know that their refund was processed.       "I submitted my insurance — why haven’t I received a refund?" or "Why am I still receiving notices?" This is where InsurTrak can once again come to your aid. If InsurTrak indicates that we have sent a borrower an impairment notice, you can let them know that we did receive their insurance but that the information they sent us was not complete. Through our tracking, we are making sure the borrower provides full-coverage insurance, both comprehensive and collision, with you listed as lienholder. Making the borrower aware of this can help them understand what additional information they need to submit for quick rectification.   "Is CPI considered insurance? I may want to keep CPI because it is cheaper and more convenient than my previous insurance." "Can I keep CPI as my only car insurance if I want to?" Some of our CPI partners have shared that borrowers occasionally ask about keeping their CPI insurance instead of purchasing their own auto insurance. A borrower should understand that CPI is not an equal alternative to car insurance they can buy on their own. By educating a borrower on what CPI is, you can deter them from keeping CPI. CPI is meant to cover only the cost financed by you as a lender — it is intended to protect your loan portfolio, not the borrower. While CPI provides comprehensive and collision coverage on the automobile, it does not cover the driver. CPI will not assist a borrower in covering any damages to another individual’s property. Most states also require drivers to carry liability insurance in case an accident occurs and there is another party or property damage involved.   Not realizing the specifics of their insurance, a borrower with CPI coverage will sometimes return to their lender after an accident or other loss and ask for a copy of the policy. You can let them know that even though the insurance policy is mainly there to protect the lender, and excludes damages outside of their vehicle, if they have damage to their own car they can file a claim so that they will remain in good standing on their loan. If they are not delinquent by more than 45 days, we will accept a claim directly from the borrower to repair that collateral and get them back in the driver’s seat. Please encourage your borrowers to get and maintain their own insurance.     "How do I rectify my insurance status?" "Can this insurance be refunded?" The quickest way a borrower can have a CPI certificate removed is to submit proof of insurance to their lienholder — your financial institution — or directly to State National. We use a variety of methods to collect borrowers’ insurance on your behalf, and we make it as simple as possible for them to comply. Options for borrowers to provide evidence of insurance include calling into our Contact Center, or mailing, emailing, or faxing their Declarations Page to our Service Center. But text and email notifications are the fastest and most convenient way for a borrower to provide us with insurance. Each text and email notification we issue includes a link that takes the borrower directly to our self-serve portal, MyLoanInsurance.com, where they can easily upload a copy of their insurance information. This portal features notice-specific videos walking borrowers through their solutions for verification. Alternately, they can choose to reply to the text or email with an image of their coverage details. Borrowers also have the option to provide us with their insurance company name and policy number, and we'll reach out for verification on their behalf. Our goal with this multichannel approach is to make it as easy as possible for borrowers to submit their information in the way that is most convenient for them.   Informed Staff Deliver a Better Borrower Experience All staff members who handle loans at your institution should have a basic understanding of what collateral protection is doing for you and how it works. We offer ongoing training and resources to your staff members. Your staff should also understand the premise and benefits behind the product — mainly, that it is there to protect your financial institution against uninsured losses. Here are some additional resources to build your knowledge about CPI: Short State National Animated Company Explainer Video What Is Collateral Protection Insurance (CPI)? Understanding the Differences Between CPI, Blanket, and Self-Insurance Remember, your financial institution’s dedicated Client Executive is here to help you with any of your CPI questions or needs!   To read the first article in this SNC Spotlight series, visit Part 1, Equipping Your Staff  

How to Explain CPI to a Borrower, Part 1: Equipping Your Staff

At State National, we recognize that collateral protection insurance (CPI) is not a term every borrower knows. Here, CPI expert and Sr. Client Executive Kathy St. Clair shares her insights on how to educate borrowers about CPI and what to say if a borrower has questions about a CPI certificate placed on their loan. If you do not know what CPI is, we recommend first reading What Is Collateral Protection Insurance (CPI)?