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Disruptors positioning to take on traditional financial services
Discovery Conference Participants Hear of Potential Problems and Options for Fighting Disruptions
MADISON, WI (October 15, 2014) — It would behoove credit unions to take an eyes-wide-open approach to the potential for disruption in the financial services sector by upstarts, as well as established players, attempting to displace traditional banking, Discovery Conference attendees were told Wednesday.
John Lass, SVP, Strategy and Business Development, CUNA Mutual Group, told participants in the daylong conference there is a lot of money – and smart people – attempting to get financial products and services into the hands of consumers using alternative business models and delivery systems.
“Lending Club, one example of a potential disruptor to credit unions, is on a path to originate more than $4 billion in unsecured personal loans this year,” Lass said. “They aren’t content with personal loans and will expand their reach. They are already looking at getting into business lending.”
Lending Club is a peer-to-peer online loan marketplace that matches borrowers with investors. They don’t fund the loans, Lass said. They pair up borrowers with investors, who want to buy the loans.
“The whole notion of better and cheaper is something credit unions need to be wary of,” Lass said. “A real concern is the disruptor that does it all, one that offers lending, investments, insurance, deposits and checking better and cheaper than banks and credit unions.”
Lass also recommended guidelines for fighting disruptors and among them are being alert and paying attention to the clock. “When disruption occurs, it happens fast,” he said. He noted how GPS devices were replaced by smartphones and how digital technology replaced traditional camera film in just a few years.
Lass also cited defensive and offensive strategies credit unions can employ to fight the disruptors.
Mounting blocking challenges against a disruptor is a defensive strategy, Lass said. When Walmart sought banking status in 2005, public outcry, led by a coalition of banks and credit unions, forced them to withdraw their bank charter application in 2007. “Being a fast follower and acquiring the disruptor are other defensive approaches,” Lass said. “Create a credit union answer that mimics the disruptor, or if you see a disruptor as a threat, buy them. A Texas bank saw ‘Simple,’ an online checking account alternative, as a threat and bought them.”
Offensively, Lass recommended re-examining priorities to preserve your core. “Credit unions should identify where they have pockets of non-consumption. For instance, who isn’t using your products or services. Are there barriers for Millenials and how do you fix it?”
Lass also advised credit unions not to be afraid to cannibalize their own business because others are trying to do it. “A classic example is iPod vs. the iPhone. iPhone is burying the iPod Classic.”
In fighting disruptors, Lass urged credit unions to realize the need for collective action, much like airlines did when they collaborated to create Orbitz to compete against Priceline’s and Expedia’s online booking tools.
“Collective action is the key to fighting disruption. Otherwise, we risk fragmentation,” Lass said. “No single credit union solution will get the scale needed to take on serious disruption. It’s going to take industry leadership, vision and commitment to create a truly disruptive credit union model that competes against disruptors.”
Discovery Conference is an annual online event supported by CUNA Mutual Group that attracts a national and international credit union audience of more than 1,300 registered participants. This virtual, no-cost conference helps credit unions remain relevant to members, manage compliance risk and drive growth. Attendees view sessions, ask questions, visit booths and network with peers from the comfort of a computer without expense or time away from the office.
CUNA Mutual Group was founded in 1935 by credit union pioneers, and our commitment to their vision continues today. We offer insurance and protection for credit unions, employees and members; lending solutions and marketing programs; TruStage®-branded consumer insurance products; and investment and retirement services to help our customers succeed. More information is available on the company’s website at www.cunamutual.com
CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Life, accident, health and annuity insurance products are issued by CMFG Life Insurance Company. Property and casualty insurance products are issued by CUMIS Insurance Society, Inc. Each insurer is solely responsible for the financial obligations under the policies and contracts it issues. Corporate headquarters are located in Madison, Wis.