A credit union’s technology strategy is important to its success. However, knowing what technologies to choose and learning if they are effective can be a difficult task. The most common approach to a technology strategy seems to be “if it’s not broken, don’t fix it”. This can be a dangerous tactic, as ‘broken’ technologies are not always easily identifiable. A system may work, but it could be creating inefficiencies that are not obvious.
As we head into 2017, credit unions should consider a review of their technology systems and architecture and look to make changes where they add value. Here are 3 quick metrics to help identify if your technology is doing its job.
- Efficiency Ratio – Bill Gates said, the first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency. Efficiency ratio is a key metric when it comes to measuring a technology’s effectiveness. The efficiency ratio is essentially a figure that reveals how much operating expense is required to create a dollar of revenue. The lower your efficiency ratio, the better. The right core system technology for instance should help your credit union achieve an efficiency ratio at or below 70%. This would mean it takes $0.70 to generate $1.00 of income. A 70% efficiency ratio is possible and would put your credit union in the top 10% of all credit unions nationally.
- Members per Employee – Another indicator that can help identify technology inefficiencies is calculating the number of members per full-time employee. Do more with less, isn’t this the reason we justify our technology expenditures in the first place? If you don’t know your member-per-employee metric, you should, it’s easy to calculate and understand. If you are adding staff to existing processes or hiring without seeing membership growth, your technology strategy needs to be reviewed. 383 members per employee is the credit union average, the right technology can help you more than double this number.
- Loan Originations per Employee – The size of your membership is irrelevant if only a small percentage of members are borrowing. If your credit union members are not adopting your loan products, you’re not doing your job. A great way of identifying technology gaps is to measure loan originations per full-time employee. With the many loan channels available today (in-branch, web, mobile, indirect, etc.), your credit union should be able to increase the number of loans originated per employee. The average credit union originates roughly $1,000,000 per employee. The right technologies can help increase this number by streamlining process, improving routines, making calculations such as debt-ratios and loan-to-value automatic and moving to electronic documents & eSignatures.
Start your technology analysis now so you can resolve to make changes when 2017 arrives.