Sadly, this is not a remake of the 1952 Bing Crosby/Bob Hope classic. Far from it. This is some serious stuff.
The International Monetary Fund (IMF) and the World Bank both held their annual meetings in Bali this week. (No, I’m not providing on-site coverage; nobody is sorrier about this than I.) The two organizations jointly issued a report called The Bali Fintech Agenda, the purpose of which is to guide policymakers as they try to strike a balance between encouraging innovation and keeping “the system” stable.
The Agenda seems to agree with what I’ve been saying for the last year or two – that fintechs and traditional financial institutions can peacefully co-exist because each has something the other needs. Fintechs have cool technology and FIs have actual consumers. Sounds like a match made in heaven, right?
However, as I was reading about a panel discussion that examined the implications of The Agenda, one topic jumped out at me: cherry picking. This term refers to the inclination of fintechs to focus their efforts, dollars and technology on small, highly lucrative segments of the market in order to maximize profits. That could still turn out to be a real problem for credit unions.
Think about. Even though credit unions provide a wide range of financial services to a well-defined field of membership, some of those services and some of those members generate a disproportionate share of the revenue. Some services and members actually lose your credit union money. That’s the nature of a cooperative. You have to take the good with the bad.
Now consider fintechs, which are free to provide a very narrow range of services to a very narrow range of people. They may attempt to hoard all the good and leave you with just the bad. That would suck, wouldn’t it?
What’s your first line of defense? It’s simple. Efficiency must reign supreme, and that effort must start with technology. You can’t just keep buying new attachments to strap onto your gasping-for-its-last-breath core platform. It’s no longer just a matter of checking boxes on a checklist to make sure you have mobile, make sure you have RDC, make sure you have online account opening, etc. You have to evaluate every technology decision you make with the end goal of making your credit union the leanest, meanest financial services machine in your market.
That will get you going internally, but you also need to consider your member-facing technology. How are you engaging members? Do you provide online financial literacy tools? Are you working to become part of their overall online and mobile experience? Or is it business as usual? I hope you didn’t choose the latter.
In short, your credit union needs to become as efficient as possible on the inside and as engaging as possible on the outside. The end result will be a superior member experience that beats the fintechs every time.