​6 Digital Transformation Trends Impacting Today's Credit Unions...

Jen Shefner, Strategic Business Analyst
CUengage

If you’re considering or are about to enter a digital transformation, its no news to you there are many pieces to the puzzle to consider. In this article, we’ll review how your credit union can come to a common understanding of what a digital transformation is, why now is the time to act, and the 6 digital transformation trends CU Engage is seeing across clients and projects.

The Digital Conundrum
The word “digital” can mean so many different things these days. When asked, financial leaders define “digital” in a variety of ways.

Digital is not:

• Digital is NOT simply about online and mobile banking, or any specific technology alone
• Digital should NOT be siloed to your IT or eCommerce leaders
• Digital will NOT just happen without a plan

On the flip side:

• Digital is a way of doing business across all your business lines and operations
• Digital is obsessed with member experience journeys across channels
• Digital is driven by data and innovative technologies to create personalized, interactive experiences
• Digital requires automation
• Digital transformation is hard but rewarding

Your online/mobile banking platform and vendor can become a launching pad or frustrating barrier for how you conduct a digital business. It’s truly, just one piece of the overall puzzle, but it is an important one. It’s the most common touch point you have with your member. But that’s not all. It’s a member-facing portal that integrates with many of your other systems – including cards, mortgages, account opening, loan origination, etc. The flexibility, integrations and user experience created by your digital banking platform affect the member experiences your users have with those services as well.

Before selecting a new digital banking vendor, we recommend that credit unions set a corporate digital vision and be ready to answer tough questions about your commitment to achieving that vision. Without doing so, the voice of the current culture can limit your transformation.

Why NOW is a strategic time to act
According to the Digital Banking Report, when financial leaders were asked about their top three priorities for 2018, 72% selected: “redesign or enhance the digital experience for consumers.” The next priority at 51% was the “use of big data, artificial intelligence (AI), advanced analytics and cognitive computing.”

It’s probably not a surprise to you that these were the top priorities reported last year as well. Financial institutions have spent the last few years talking about digital transformation – painting a picture of where we need to go to meet consumer expectations. We want to:

• Proactively personalize the experience like Amazon
• Create a frictionless journey like Uber
• Interact like Alexa
• Adapt quickly to new technologies universally

Mobile banking usage is at a volume where leaders must act. Raddon predicts that mobile usage will surpass 60% of consumer households in 2018, and 85% of millennials already use mobile banking monthly.

But that doesn’t necessarily mean you’re meeting users’ expectations. In fact, an online poll of 1,600 users conducted by Harris Poll and D3 Banking Technologies found a majority of users were frustrated with digital banking during the past year: 68% of Americans overall and 73% of Millennials felt this way. Furthermore, 32% of Americans are willing to leave their current banking relationship for a better digital experience.

79% of banking operation leaders say their org existence could be threatened if they don’t update technology according to a 2018 Accenture report.

6 Digital Transformation Trends CU Engage is seeing across clients and projects
As we look at the digital banking space, we’re seeing some common trends...

1. Consolidating platforms:
We still have many clients that have been using separate online and mobile vendors or platforms. Consolidation can create better experiences for their members across channels and can lead to potential operational efficiencies.

2. Migrating off legacy UX:
Credit unions on legacy systems can see their user adoption and engagement is lacking and are demanding improved user experiences to meet member expectations. In the past, decisions might have been driven more by vendor price, but credit unions are willing to pay more now because of the indirect value of a better experience.

3. Demanding flexibility:
When we start an evaluation project, we spend a day with executives and operational teams to understand their requirement and goals. Often clients are looking for the presence of a Software Development Kit (SDK), an Application Programming Interface (API) and a partner culture that allows for customization, but many clients today aren’t equipped today with the development staff to immediately act on these requirements.

• If the groundwork hasn’t been laid with a corporate, strategic digital plan, it’s not uncommon for the purchase of an SDK to be pushed to a second phase priority or for current culture and staffing limitations to eliminate vendors that require more configuration or development because organizations aren’t ready to commit to making the needed changes.

4. Deeper Integrations:
Integration is one of the key factors that credit unions consider when evaluating vendors. Again, digital banking is a portal that touches many other systems, and the depth and type of integration strongly impacts member experience. More and more credit unions are demanding API integrations over Single-Sign-On integrations.

API:
With this type of integration the user interface is typically created by your digital banking provider or, in some cases, by the credit union themselves. Many credit unions are moving their full-service credit card integrations from Single-Sign-On to API integration.

• Single Sign On: With an SSO, users can access a third-party vendor’s (TPV) website via online/mobile banking without a separate login.
• Hybrid: The functionality integrated via API can vary based on how much the third party opens up and the scope that you or your vendor are willing to create. It’s not unusual for us to see vendors offering a hybrid API/SSO where some functionality is part of online banking and other pieces must be accessed via a link to the third party’s website.
• Native: Vendors are also responding to the desire for deep integrations, by creating their own native functionality. On the plus side, the native functionality is fully integrated without the need of a third party, but on the flip side, these offerings are not yet as feature-rich as other dedicated solutions.
• Integration also triggers a few tough questions for credit unions to address during an evaluation.  Particularly, what is your appetite for new or beta integration? And, are you committed to your current third-party solution? Depending on the age, client base, and integration approach, vendors will vary based on existing integrations with your specific third parties.

5. Dreaming of Big Data:
As we saw earlier, the use of big data and analytics is the #2 priority of financial leaders in 2018.  As CU Engage works with clients on vendor evaluations, we hear it’s a priority too, but most tend to say they don’t have a data warehouse or data lake yet, but that’s it’s a strategic initiative on their roadmap for 2018 or 2019.  Vendors have noticed this as well. In some cases, they have built their own data engines that help bridge the gap.

6. Card Management:
As mentioned earlier, integrations with card processors are a top priority for many credit union’s today. Not only are credit union’s looking to integrate card balances, history, and payments into the mobile experience, but card controls, alerts and reward balances. Travel notices and dispute claims that route automatically to card processors are also an attractive API feature in demand.  Card processes often offer these features within their own sites or standalone apps, but we see credit unions wanting to provide members with a single unified experience.

Final Tips
If you haven’t already, it’s time to update your digital banking technology to be more flexible and capable of supporting innovation. Perhaps this is already what’s keeps you up at night, and you can relate to one or more of the above 6 Digital Transformation Trends. Here are some final thoughts to consider when going through a digital evaluation:

1. Always know when your contract is expiring, and always send a Notice of Non-Renewal.
2. Start your evaluation 20 months to two years before your existing term expires. That may sound like a lot, but it’s important to allow enough time to evaluate your options, negotiate pricing, scope custom development, allow for vendor implementation queues, and implement the project.
3. Evaluate your options even if you expect to renew. By looking at the market, you’ll gain pricing leverage. You may realize new opportunities in the process. You can bring requests to your existing partner or may select a shorter renewal term because you found a better partner.
4. Start by creating a 3-year Strategic Digital Plan, so that your business goals and digital technology initiatives are aligned.
5. And, finally, use a consultant! Beyond guiding you through the vendor landscape and getting better pricing, using a consultant has many advantages. Decisions as influential as your digital banking partner require buy-in from many areas of the credit union and aren’t without politics. Our process and advisor skills help teams get heard and strategic objects remain in focus. We help ensure that executives and operational teams, alike, feel like the project is a success.

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