3 operational changes CUs must consider to remain competitive in today’s environment

Credit unions and their members are gradually coming to terms with the rules of engagement for life after Covid-19. The amount of business transformation and adaptation that has occurred since March 2020 has been truly remarkable. Many consumers have learned that digital commerce, including banking, is not as scary or worrisome as they might have once thought. The financial services industry has seen significant increases in digital channel adoption, even among older consumer segments faced with the reality of branches being closed. 

While digital banking is not new and many already enjoy the benefits it offers, the pandemic increased usage. That uptick made it necessary for credit unions to increase their focus on any gaps that may exist between their digital user experience and member expectations.  

Credit unions may find it challenging to maintain service quality in the face of shifting member demand. Even credit unions that stayed ahead of the curve and have robust digital offerings could face capacity issues as channel demand shifts rapidly – and, perhaps, inconsistently. 

The fundamental challenge facing credit unions is to move to the “next normal” quickly but safely, without breaking the business. As we settle in for the long haul, credit unions should take whatever actions required to consolidate the gains from earlier digital investments into efficient, sustainable processes that deliver operational excellence.  

With this in mind, there are three operational changes credit unions should consider to remain competitive in today’s new environment: 

1. Location Strategy

The role of the branch – how many are needed? how should they be configured? which services should be prioritized? – has been top-of-mind for credit unions for some time. Recent developments offer evidence that, perhaps, consumers are not as attached to the branch as banking executives have thought. There is little doubt that this willingness to bank remotely has been due more to necessity given COVID-19. However, there is a deeper impact left by COVID-19. Members’ concerns about their personal health will remain after the pandemic evolves into an endemic. Actions taken out of necessity will become habits maintained over time. 

Related to the shift in consumer preference for remote banking over branch banking is the impact to how and where credit union teams work. Workplace strategy will play a significant role in the question of how a credit union will modify its physical footprint. Many credit union team members have been working remotely throughout the pandemic with no impact to productivity or performance. The annual cost to house a team member in a commercial office space is materially more expensive that a remote workplace set up. We are in a recession and margins in banking are more compressed than ever, so such math cannot be ignored as institutions consider the location strategy.

The challenge extends beyond physical location. A performance management model for remote work should be designed with unique coaching/training requirements, implementation of collaboration tools, and, in many cases, a greater reliance on key performance indicators. A new set of leadership skills is also required to manage a remote workforce and recruiting criteria needs to be adapted for work-from-home models to be successful.   

2. Operating Model

At the risk of sounding like a broken record, the operational side of the credit union must accelerate its digital transformation. The “now” normal and what follows it has made member experience and/or brand differentiation in the digital channel exponentially more important for the credit union that is seeking a competitive advantage in the marketplace. It’s possible parity with competitors’ offerings may have been deemed sufficient in the past and that assumption was questionable, if not dangerous, as a long-term strategy prior to the pandemic. Now, such thinking is fatal.  

On a related note, marketing decisions will play a critical role in the operational health of credit unions. Determining a list of markets suitable for entry or retreat – whether based on geography, product, or member segment – will have new layers of complexity, as branches are closed and repurposed, and services in the digital world become more sophisticated. Dollars will need to be shifted between channels or products to align with a new set of member and prospect needs.

3. Organization Redesign

While historically the notion of organization redesign is equated with downsizing, in the “next” normal this is not the most likely outcome. The remote working model and digital channel decisions will necessitate the redeployment and re-skilling of staff across a variety of functions. Reporting lines, spans of control, and even geographic parameters for managerial relationships may benefit from a fresh look.    

The ultimate goal is to ensure credit unions remain successful, which, in today’s world, will require some adjustments. Teams must also be empowered with the mindset and tools to respond nimbly to the frequent and unpredictable challenges posed by the new environment. As SRM’s survey of banks and credit unions reveals, most leaders expect COVID’s operational impacts to persist at least into 2022. While we as an industry have been successful to date in keeping operations running uninterrupted, it’s now time to ready business for the next chapter.