The 3 market realities pressuring credit unions to transform

Credit unions are facing several new market realities compelling them to rethink everything from products and services to entire business models. Three shifts, in particular, are commanding attention:

Digital Emboldens Consumers

Credit union membership is at all-time highs. The cooperative model and its purpose-driven approach to financial services clearly are resonating with people who want to be known and appreciated by the businesses they choose.

Within this contingent, however, are strong expectations for real-time, predictive and hyper-personalized experiences. When they aren’t met, today’s consumer takes swift, decisive action. One in three Americans will consider switching companies after just a single instance of poor service.

Making matters even more tenuous, the rise of digital products, platforms and services has emboldened unhappy consumers. Social media allows them to vent frustrations to thousands. Hundreds of options for financial services create a greater enticement to try something new, and sophisticated switch kits make leaving a financial institution easy.

Technology Shrinks Barriers to Entry

Thanks to the emergence of open banking and the explosion of APIs, you don’t need to be a bank to have access to banking consumers. Regulations like the second Payment Services Directive (PSD2), which essentially commands financial institutions to open their data stores to anyone the consumer tells them to, are further thinning the ice of the traditional financial institution-customer relationship.

All of this makes it easier to build, launch and scale a business quickly and without a lot of resources. In addition, the proliferation of a fail-forward mindset has changed much of the culture of creation. Because the new methodology dictates a “launch before it’s perfect” strategy, the speed with which consumers are encountering new banking and financial options is incredible.

Digital Transformation is Real and Bearing Fruit

Once considered a buzz phrase, digital transformation is now believed to be an incumbent firm’s key to survival. Legacy behemoths with years of profitability have invested millions in think tanks and innovation labs; some are even investing in the success of their disruptors.

Consumers are beginning to see the results of that investment. User-centric strategies mean more big brands are building – and really using – feedback loops. Digital channels are improving exponentially, as legacy firms figure out how to integrate them seamlessly into the consumer experience.

As comfort and delight with these channels and engagements increases, consumers will expect all the brands in their lives to keep pace. In the financial world, consumers already interact regularly with video tellers, virtual assistants, chatbots and other digital banking innovations that make day-to-day financial tasks not only easier, but enjoyable.  

Credit Unions are Uniquely Positioned to Evolve

Responding to each of these market realities will require change. Although change inside most legacy verticals is slow, credit unions are unencumbered by many of the innovation chains that hold back transformation. I can think of at least three ways credit unions are uniquely up to the challenge:

• Credit union people have an innate desire to serve their members exceptionally well, even when it isn’t easy.
• Credit union executives and their teams are eager to experiment to learn.
• Credit union leaders have a passion for knowledge and continuous improvement.

The goal is to become great at organizational ambexterity (just a fancy way of saying keep doing what you do best while exploring ways of delivering more value). Here are a few questions to get started:

• What do we do better than anyone else?
• How does that competency add value to our members’ lives?
• How can technology help us deliver that value in an even richer way?
• What will our members need tomorrow?
• How can we leverage today’s competency to meet those future needs?

By staying true to their roots while also exploring the many transformative technologies and partnerships available to them, credit unions will rise to the challenge of these and other shifting market dynamics.

The above is an edited excerpt from the white paper “How Humans and Machines Will Transform the Credit Union Industry,” by Shazia Manus, Chief Strategy & Business Development Officer for AdvantEdge Analytics. To download and read the paper in its entirety, visit cunamutual.com/aea-ai.