The three words that define future mediocrity are “we’re doing fine”. It would be difficult to dispute that the financial world has changed dramatically over the years, and today the speed of change has accelerated significantly. The industry continues to gain members, make loans and see asset growth – but is that a measure or indicator of future success?
Over a four-decade career in financial services I have witnessed, experienced and participated in transformational change. The conversations around emerging technology like the ATM caused industry debate – consumers would never use a machine to make a withdrawal from their account. Credit cards not tied to a specific gasoline brand, local merchant or one of the giants of the catalogue sales world – Montgomery Wards, Sears and that upstart JC Penney – would never be accepted. Consumers would never do their banking over the telephone, and of course never accept online banking – remember the first versions using a floppy disk? And checks would always be the only way, other than cash, to pay for things (bill pay, PayPal, debit cards and other payment methods…all have dispelled that). Mortgages require lots of manual processes and take weeks, maybe months to close (DU/LP, Prime Alliance, Mortgage Bot, Ellie Mae, and now the Rocket Mortgage have changed that – mortgage approval in minutes, closing in days).
Many industries and well-known brands have succumbed to change because they believed that “we’re doing fine.” I would contend that what those words really mean is – we have so much we are doing to maintain great member service and keep the integrity of our operations in good order that we don’t have the time to embrace innovation and change.
Today we are faced with numerous challenges. Five or six generations of consumers in the marketplace and four generations in the work force. Regulators and the CFPB are burdening the traditional banking model while new entrants into the marketplace are free of legacy systems and regulatory constraints. Investment in now obsolete systems and real estate make moving forward slower than the speed of change.
We should be concerned about the FinTechs. They are not a fad nor are they going away. They are very well capitalized, and they have revolutionized how to leverage big data in ways we can only dream of. They have challenged credit score lending structures by leveraging their ability to engineer data. They are mobile optimized, in fact they are mobile prevalent, and they strive for immediate decisions and funding. Where traditional lenders are still caught up in past practices making it difficult to refinance student debt, underwrite small business loans in minutes, grant signature loans at the point of purchase, or embrace new credit models, the FinTechs are quickly gaining ground in market share because they can do those things today. They have reinvented what is a “common bond community” and some even call their customers – members. Just as important, they have big dollars to spend on marketing and their messaging is so on point that the consumer believes all lending is quick and painless.
So how do we leap over, not only today’s model, but the FinTech phenomena? The answer is both simple and painful. Take the burden of innovation off of the overworked, thinly stretched operational teams, and create a team with Executive Team leadership status responsible for reimagining a new business model. I am not suggesting losing our identity or our passion for doing right by our members and communities. I am saying it is time to redesign how we deliver solutions to solve member needs, while maintaining a level of intimacy with our members that we actually have been losing over time. It is also time to reimagine our cooperative effort to solve challenges.
Numerous times I have met with a credit union and had them identify their four to six major challenges. In the credit union space there are digital solutions for marketing, big data analysis, digital retention options, digital origination solutions, POS lending solutions and the list goes in. Many of those solutions are CUSO provided and provide economy of scale pricing. A number of these credit unions say they are too busy right now to solve their self-identified major issues because they are committed to X, Y or Z projects – which usually do not solve their major strategic operational challenges.
As leaders in the credit union movement we need to dig deep into the past where at the birth of our industry model we reimagined the traditional banking model which disenfranchised many groups – those original members are our core industry champions. Staying relevant in a rapidly changing digital market is challenging. We are behind in finding creative ways to say “yes” to young adults with student debt – SOFI has found a way. We are buried in our required paperwork to quickly approve small business loans – Kabbage has figured it out. And we have not evolved our cornerstone lending program, the signature loan, to compete not only at the POS for autos, but for personal improvements and major retail purchases as SOFI, Lending Club and so many other FinTechs have.
We’re doing fine in status quo mode, but falling behind on looking to the future for inspiration. We need to invest in the future to be a part of the future…then we will be really doing fine!!