Disruption in financial services has been a topic for as long as I can remember. I can vividly recall sitting in a Board room at New Jersey National Bank in ‘ 86 listening to one of our senior executives discuss how ATMs will disrupt financial services. Tens of thousands of ATMs later, we’re still talking about disruption in financial services, at the hands of fintech “disruptors”. I remember in the mid-90s at Summit Bancorp hearing about how online banking will forever change the role of the branch. Yep, 20 years later, we’re still talking about the demise of the branch. In the late 90’s at Affinity FCU we spoke about how “alternative delivery” would level the playing field for credit unions competing against the “big banks”. That’s still a theme, 17 years later.
Technology continually disrupts everything and every industry. Perhaps it’s been slower in the credit union industry but I believe that’s because banking for the vast majority of Americans is a chore. Most consumers don’t give banking much thought so there has not been much consumer thirst for new banking technology. Traditionally the industry has not had to respond. However, slowly the appetite is changing, driven by evolving demographics and the advent of mobile technology. Are we entering a new era of banking disruption? Not so fast.
Think about it for a moment; what drives disruption? If we break everything down to its essence, we’ll find there is typically one thing that drives disruption in any given industry. It’s information. Information that’s communicated through our shared economy in which we all coexist. These days there is certainly no shortage of information and I could argue there is too much. Let’s also consider that pundits make a living leveraging hype and creating a sense of urgency because it’s a great way to sell books and gain social media followers. Don’t get me wrong, thought leaders are critical to our space and keep us focused on the future and shifts in demand. But let’s keep some perspective.
Is there a sense of urgency to “drive disruption” at your credit union? Should there be one? I’d suggest a measured response. Member needs are continually evolving and America is more diverse, younger and now remarkably mobile. These can be seen as opportunities or threats, depending upon how you look at it. To survive, credit unions need to keep evolving, lead by management that is able to embrace change and develop a clear plan for the future. They also must have a way to put the credit union on the road toward delivering on that vision. Innovation can’t be siloed in your credit union. Innovative thinking must be brought into every process in the organization and this includes the need to reconsider every process in your organization.
We were told to fear the neo bank challengers. Simple was bought by a bank and Moven, whose founder declared they’d be “the Facebook of banking,” now tries to work with banks through integration. Hey, if you can’t break the banks you might as well join them. Even venture capitalists are now looking at fintech players that work with banks, not against them. Bankers have begun to disrupt the disruptors, so while your real threat may not be a fintech startup, it will be the bank of credit union down the street, or across the country, that is continually innovating and making innovation and fintech, part of its strategic DNA.
In my banking experience, disruption never changes, only the disrupters do. Keep an eye on the future, invest in ways of making banking easier and more relevant and always look to differentiate. But always remember, credit unions are first and foremost in the people business.