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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 volume of information at a very high level that someone can obtain by joining the CAC is wonderful." ~ John Cotner, VP of Commercial & Mortgage Lending, Horizon Credit Union, Boise, ID “When it comes to topics like innovation and technology and AI, I think I've learned more from the CAC than I have by going to conferences and things like that, because you can really have more intimate conversations with your peers at the council, and State National does a great job of bringing in great presenters that really position the topics well, so it's easily understood as we're reviewing certain new innovations.” ~ James Bolin, SVP & CMEO, Silver State Schools Credit Union, Las Vegas, NV “One of the benefits of being on the CAC is not only meeting some of the participants from different parts of the country and having discussions, but I have also been able to take away two specific strategic business initiatives that directly impact the credit union that came about through my participation on the CAC, including one that is a multi-year strategic initiative.” ~ Steve McIntire, SVP, Enterprise Risk & General Counsel, SELCO Community Credit Union, Eugene, OR State National is a great partner. I'm glad they asked me to join the CAC because it gives me an opportunity to keep that partnership active and very vibrant. And I enjoy the fact that I get to see what State National is doing and what’s on their horizon and how it’s going to benefit not only my credit union, but the credit union industry. So it’s been really awesome.” ~ Karen Hoeppner, Chief Lending Officer, My Credit Union, Minneapolis, MN A Real-World Example of CAC Value The council’s 3rd quarter 2021 meeting provides an illustration of the tangible benefits of this ongoing collaborative sharing of ideas and insights. The council met in August in Irvine, California, headquarters of Filene Research Institute. Filene is an integral thought leadership partner for State National, and that partnership further extends directly to our CAC members. The business portion of the event was held at Filene’s innovative West Coast outpost. 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Then, the next day, it was time to head back to their credit union homes, bringing knowledge, insights, advice, and inspiration with them as they work on their findings and look for openings within their institutions to leverage what they’ve learned. Discover More Are you a curious credit union professional, always looking to grow and give back to your organization? Do you enjoy bouncing ideas off like-minded people in your industry and get a little thrill when you see these synergies expand what’s possible for you and for them? Are you a believer in true connection with those you work with and mutually beneficial partnerships with your service providers? Contact Heather Clyde, State National’s Client Advisory Council Program Manager, at HClyde@StateNational.com to explore the possibility of council membership. “The CAC has exceeded my expectations. On a fun note, the group is great. My colleagues on the CAC and the staff at State National are all very enjoyable and very professional. State National does a wonderful job of putting the events together. They’re well thought out, well organized. I think it’s a great two-way relationship, the CAC. I think we’re benefiting State National, and they are certainly benefiting us.” ~ John Cotner, Horizon CU   “State National has always considered our clients as more than just clients — we truly do see each and every one of these connections as an authentic partnership. Our goal for client relationships is always more than transactional; we’re always going for a win-win situation and strive to evolve all of these partnerships to serve the long-term strategic business goals for both parties. Our CAC is growing to be a vital component of State National’s overall corporate strategy, and it’s very gratifying to see that it is already helping to serve the long-term strategic interests of our CAC members and their credit unions.” ~ Heather Clyde, Client Advisory Council Program Manager