Redefining innovation for FIs in 2024
The financial industry has been through unprecedented challenges over the past year, from economic fluctuations to inflation and interest rate hikes. As we navigate this ever-changing landscape, it’s crucial for credit unions to not only establish priorities but also remain agile enough to adapt to changing circumstances. Allied Solution’s EVP and Chief Growth Officer, Mark Bugalski recently sat down to discuss what innovation means and looks like for 2024.
Key priorities
One of the key priorities for financial institutions is leveraging innovation and technology to enhance their operations and customer service. This includes incorporating AI, digital solutions, and robotics into their business models to improve efficiency and client experience. Allied, for example, is investing heavily in technology and data, expecting to spend around $75 million in 2024 alone. This focus on innovation is essential for staying relevant and competitive in the industry.
Financial institutions are also looking for ways to maximize non-interest income while enhancing the consumer experience. This involves finding a balance between increasing revenue streams and adding value for consumers.
Mergers and acquisitions (M&A) activity is another key priority for many financial institutions. M&A can be a strategic way to build capabilities and expand market reach, either through building proprietary solutions or acquiring existing ones.
Overarching themes
There’s an opportunity in portfolio diversification and higher yield lending, especially as investments made in the past few years start to mature. This allows financial institutions to take advantage of higher yielding investments and free up liquidity, which was a significant concern in the previous year.
The inflationary environment has put pressure on financial institutions to focus on Return on Assets (ROA) management and expense control. With inflation impacting income and earnings, there’s a need to be more efficient and effective in operations.
Artificial intelligence is expected to play a significant role in the financial industry’s future, with a projected 37% year-over-year growth rate by 2030. It’s anticipated to boost the national GDP by 21% by the same year. Financial institutions must leverage AI to enhance consumer loyalty, particularly among demographics like Gen Z and Gen Y (millennials), who prioritize convenience and instant gratification. However, the adoption of AI comes with regulatory complexities, integration challenges, and cultural shifts within organizations. Financial institutions need to ensure compliance with state and federal regulations, integrate AI with existing technologies, and manage cultural changes to adopt AI successfully.
Innovation’s Big 3
Innovation is the lifeblood of progress, driving companies to evolve and adapt in a constantly changing landscape. When we think about innovation organizationally, it can be broadly categorized into three main areas: product innovation, office culture innovation, and technology innovation.
- At the core of product innovation lies the goal of improving the member experience. This means finding ways to incorporate digital, mobile, and remote banking into the way people prefer to be served. In today’s world, where Gen Z and Gen Y dominate the market, ease of use, seamless experiences, and instant gratification are key.
- Office culture is often overlooked but plays a significant role in driving innovation. As companies evolve and technology becomes more prevalent, enabling team members to make decisions quickly and based on relevant data is crucial. This requires a shift in how we think about day-to-day office functions, moving away from traditional hierarchies towards a more agile and data-driven approach.
- Digital and technology innovation is at the forefront of driving change in today’s business world. Companies are constantly exploring new technologies to improve their products and services. Embracing these innovations can lead to increased efficiency, reduced costs, and a competitive edge in the market.
“Innovators are thought leaders and thought leaders innovate.”
Innovation and thought leadership are not just buzzwords in today’s business world; they are essential qualities that set successful companies and individuals apart. What do innovators and thought leaders have in common? They provide intelligent insight, innovative ideas, and perhaps most importantly, they keep going. Simply showing up is no longer sufficient—persistence is key, especially when clients expect and demand nothing less.
Credit unions have a challenging but exciting year ahead in 2024. By prioritizing innovation, technology, and consumer loyalty, they can position their organizations for growth and success in the rapidly evolving financial landscape. Embracing AI and other emerging technologies, focusing on core strengths, and maintaining a member-centric approach will be key to navigating the challenges and opportunities that lie ahead.
