Whether you realize it or not, your credit union is already in the technology business. You offer all sorts of technology tools – online banking, mobile apps, personal financial management, debit cards, etc. – to help consumers manage their money and interact with your credit union. But while you’ve loaded up your retail members with all the conveniences that technology has to offer, many of your business members are struggling to remain relevant in a world dominated by major chains with major technology budgets. In this respect, business members are clearly underserved, and credit unions have done very little to change that, instead taking a “that’s not our problem” approach. But the economic stability of the community is your problem – and your responsibility.
Consider your local pizza parlor.
Every pizza aficionado knows there’s a trade-off. If you want a fast, predictable pie, you order from Domino’s, Pizza Hut, Papa John’s or one of the other big chains. If you want a truly delicious pie – one that you know will taste just as good cold the next morning – you order from a local independent parlor. I don’t know enough about the pizza business to know why the big guys all put out pizza that tastes like old shoes, but I suspect that the success of the local pizza shop has a lot to do with passion, family, and traditions, all of which are interwoven with the story of the community – more than likely right down to where they source their ingredients.
From 2014 to 2015, U.S. pizza revenue actually dropped .05 percent. However, you wouldn’t know that looking at the big pizza chains. Leading the pack, Domino’s enjoyed 9.2-percent year-over-year sales growth. (That was apparently enough to bankroll the development of Domino’s new DXP pizza delivery vehicle.) The other big guys weren’t far behind either.
So where was the lost revenue lost? You guessed it. From the independent pizza restaurants. Collectively, independent pizza restaurants experienced a greater than five percent loss in year-over-year sales. Perhaps even more alarming, some 2,500 independent pizza restaurants shuttered their doors for good in 2015 alone.
Why is business booming for the purveyors of sub-par pizza while the true maestros of mozzarella barely manage to make ends meet? In a word, technology.
According to a recent report by Aaron Allen & Associates, a leading global restaurant industry consultancy, big pizza chains are beating their independent counterparts not with better pizza, but with better technology tools for their customers. In other words, in 2016, it’s much easier to buy a second-rate pizza than a premium pizza – and consumers are apparently willing to trade taste for technological convenience.
Think of where your credit union would be if it couldn’t offer online or mobile banking, or if it couldn’t participate in an ATM network, or if there were no shared branching networks. Credit unions are able to thrive, at least in part, because they’re able to go toe to toe with Chase and Wells and Citi by employing comparable technology while tapping into a unique collaborative spirit.
The same can’t be said of your favorite pizza joint, though. Technology as a critical component of a pizza restaurant’s success is a brand-new phenomenon, so it’s not surprising that the mom-and-pop shops are having a hard time keeping up. That’s where your credit union comes in.
Think about this for a moment. Why do credit unions exist? I know that’s a big question, so here’s a big answer: to function as a collective of resources (financial and physical) that benefit a shared interest group. In other words, credit unions should exist to serve as an engine of the local economy by providing affordable access to tools that aren’t readily available elsewhere or to a single organization or individual. Or put even more simply, credit unions exist to level the playing field for the little guy – to ensure that local businesses don’t lose their slice of the (pizza) pie to the big national chains.
This fundamental dynamic was true a century ago, and it’s still true today. The purpose of the community financial institution is the same; the tools and commodities required for businesses and individuals in the community have changed. And if you happen to have the owner of a pizza restaurant (or virtually any other business) as a member, their required tools for success now include cutting edge technologies (mobile apps, mobile payments, mobile CRM, mobile cash registers, etc.).
Some credit union executives will scratch their heads and wonder what the point is. After all, credit unions offer checking accounts and member business loans, not technology solutions. Others will recognize that local economies are changing and, therefore, the definition of leadership in the local economy is changing. The role of the community financial institution is being rewritten by technology and so too are the products/services it must supply to function as an actual engine of the community economy.
I had the privilege of participating in two merchant focus groups recently, one in Colorado and one in Utah. The premise was simple. Credit unions invited local merchants to preview a technology platform that they’re rolling out that can, among other things, equip each merchant with their own fully branded, world-class mobile app. This includes mobile payments, prepaid balances, rewards programs, electronic gift cards – the whole shebang.
The locations were different, but the results were the same. These credit unions discovered that many of their local merchants are paying more – to companies they don’t really know – and getting less. In a word, the idea of getting great, affordable financial technology from a trusted local partner like their credit union got these business owners excited.
Technology ’s recasting of the trajectory for community financial institutions will provide a convenient moment of reawakening for credit unions and their fundamentals as collectives for community economies – that is, if credit unions are willing to seize the moment. The champions of tomorrow’s credit unions will realize today (or hopefully realized yesterday) that the technology challenges currently faced by local businesses represent nothing but opportunity – opportunity for the credit union, opportunity for the businesses, and opportunity for the resurgence of local economic collaboration as a whole. Sooner rather than later, I hope to write a follow-up to this article called “Credit Unions and the Rebirth of Good Pizza.”