For decades (closing in on centuries), financial institutions have offered the same fundamental products and services: savings accounts, checking accounts (savings accounts which allow third-party withdrawals), loans, and credit cards (flexible, high-interest rate loans).
Yawn.
While the packaging has changed with technology, the essence of these offerings remains mind-numbingly consistent. Yet, despite this seemingly obvious reality, many credit unions (and their executive teams) find themselves in a perpetual (and costly) cycle of vendor migrations and technology upgrades that offer little tangible value to their members.
SOS – No, seriously; Help!
This phenomenon, often called “Shiny Object Syndrome” or ‘SOS’, describes the tendency to chase after the latest trend, innovation, or flashy feature without fully evaluating its utility or alignment with strategic goals. While SOS is not unique to credit unions, it is particularly problematic where resources are finite, and member trust is paramount.
The frequency of vendor migration projects exemplifies this issue. Digital banking platforms, online account opening systems, and just about any other bolt-ons imaginable are swapped out as often as every three to five years in a perpetual search for the ‘latest and greatest’ technology and flashiest user interface.
Each migration involves significant upfront expenses including, at minimum, front-loaded software licensing fees, exorbitant implementation costs, and multi-month staff retraining. These expenditures often run into the hundreds of thousands for even small to mid-sized institutions, while also requiring enormous amounts of staff time and effort, diverting attention from meaningful member-facing activities and strategic initiatives.
The justification for these migrations often revolves around supposed ‘market-driven’ changes – a ‘better’ user interface or some ‘new’ feature that, in reality, adds little practical value. Meanwhile, the core functionality remains unchanged, raising appropriate questions about the ‘wisdom’ of such costly endeavors.
The illusion of innovation
This cycle reflects a broader human condition—a devotion to the illusion of innovation. Some, or possibly all the features touted by these third-party vendors are merely inconsequential (if not harmful) iterations of existing services (remember that time you ‘upgraded’ from Windows XP to Windows Vista).
Not that I need to spell it out, but here are a few examples of how every banking service is essentially the same as another:
- Certificates of deposit (CDs) are essentially savings accounts with better interest rates and time restrictions on deposit dollars.
- Commercial banking is just consumer banking, repackaged for theoretically higher transaction volumes.
- Business payroll and consumer bill pay are both variations on the basic functionality of a checking account (which is just a savings account), dressed up with tiny bits of automation.
There’s no need to go farther with these examples, or at least I hope not. They highlight how the financial industry willingly and frequently updates its façade with no fundamental changes. So, is it worth spending hundreds of thousands (or millions) of dollars to rebrand or slightly tweak the same services that have been available for decades? Only you can answer that question for your FI, but it’s at least worth considering.
Not just a credit union problem
In case you feel like you are being picked on, take comfort; SOS is not confined to credit unions. It’s a well-documented cognitive bias that affects decision-making across industries. In the technology sector, for instance, companies often adopt new tools or platforms simply because they are popular, leading to additional degrees of complexity and inefficiency, which are, ironically, the thing they probably set out to eliminate in the first place!
Startup companies and entrepreneurs frequently pivot to pursue trending ideas, sacrificing focus and long-term viability, while teams in AI and data projects implement advanced tools without assessing their fit, resulting in wasted resources and systemic frustration.
Yes, everyone wants the new, shiniest thing. But no matter how nice or new, there’s always something ‘better’. (The grass is always greener on the other side of the fence?)
Scholars have studied this tendency, identifying it as a distraction that leads organizations away from their core objectives. These insights underscore a critical lesson: chasing trends without evaluating their strategic value is a recipe for inefficiency, missed opportunities, and, ultimately, obsolescence.
Build unique value propositions
As credit union executives, you have a responsibility to avoid these traps and focus on creating unique value for your members. This requires a shift from superficial enhancements to meaningful innovation.
One area ripe for exploration is the native integration of digital assets into your core credit union services. The financial world is evolving rapidly, and digital assets have already become a 2 trillion-dollar part of the economic landscape. To remain relevant and competitive, your institution must transition from cash-dependent systems to supporting digital asset storage, payments, and currency exchange.
The benefits of this transition will be obvious to those of who you have done any demographic research. A growing number of members, particularly Gen Y (Millennials) and Gen Z, are investing in digital assets and expect their financial institutions to support these transactions.
Offering secure storage and payment solutions in the digital assets space will create new revenue streams through pseudo-SaaS revenue models, non-traditional interest income, and community payments partnerships.
While we recognize that credit unions are inherently not-for-profit, adopting digital asset solutions positions the leaders in this industry to produce revenues as forward-thinking institutions, aligned with the evolving financial ecosystem.
Simple, but not easy
As with anything worth doing, it’s not complicated, but it’s also not easy. When ready, your institution can take a few critical steps to get out in front of the herd by following these three steps:
- Invest in education for executives and staff to understand blockchain, cryptocurrencies, and decentralized finance (yes, there is a difference between these three things).
- Fully understand your members through surveys; getting to know their individual needs and preferences around digital assets is essential.
- Leverage the investment you have already made into your modern core and existing infrastructure, then look to a CUSO with a multi-year track record of expertise to support your initiative to integrate digital assets, minimizing potential complexity and risk.
Our industry is at a crossroads. We can either continue the cycle of chasing shiny objects—spending hundreds of thousands on vendor migrations that add little value—or embrace transformative innovation that meets the real needs of our members.
Breaking free from the illusion of innovation and focusing on building unique, valuable products and services is essential. By acknowledging the nature of legacy banking business models and becoming willing to champion a true evolution into digital asset storage and payments, your credit union can position itself as a leader in the future of finance, ensuring relevance and a competitive edge for generations to come. Are you ready? Let’s do this.