The Economist report (2020) says nearly 59% of the participated bank executives believe the branch banking model will become obsolete by 2025. That tells most consumers are looking for seamless digital banking services. As consumers are getting aggressively tech-savvy, it becomes quintessential for credit unions to implement top tech trends. However, they are far from behind in going fully digital, as digital transformation in credit unions is still a tough nut to crack. If they can decode the transformation difficulties, it would boost their business metrics such as member engagement; adherence to compliance and legal rules; and optimizing operations to a maximum extent.
Improving Technology Adoption
Credit Unions are not known for their technology prowess as compared to the traditional large banks or new age digital banks. However, it's crucial to consider a comprehensive Digital Transformation Strategy to catch up and stay competitive, Explore the 8 Key Components of a Digital Transformation Strategy. Traditional banks have financial resources to strategize and execute their digital vision. They have wherewithal to adapt to latest tech stack, machine learning and artificial intelligence algorithms for an excellent consumer experience. However, credit unions may lack the strategic vision and / or availability of budget that slows down their technology adoption rate. But instead of going for a disruptive change, they can and should take small steps to digitally transforming their business.
For example, one such feature could be integrating chat capabilities. Credit Unions can implement chat features on their website and social media pages. The chat feature integrated across the website; mobile browser & social media forums will help businesses present a single unified experience to the consumers. It would also help consumers carry out tasks such as online payments, loan applications, and checking credit cards etc. This would save a lot of time both for consumers and credit unions.
We are, also, going to discuss more aspects throughout this article.
Secured Banking
There are many security challenges that credit unions need to focus on, especially while choosing payment processors. Security guidelines keep evolving periodically. Credit Unions with limited resources may not be able to keep up with the changing dynamics in the compliance landscape and can easily get exposed to data breaches or cyber security threats.
Credit unions are small organizations that might rely on third-party services. Choosing partners can become a difficult task for them, so before going for a payment processor partner, they can refer to the following pointers:
- Processor’s clientele
- Processor’s offerings
- Adherence to compliance standards such as PCI, SOX
Security Compliance
Security compliance is not just a buzz word, most organizations including credit unions take a wrong step by only focusing on upgrading specific products and ignoring the need to maintain overall compliance.
When a financial institute is ensuring compliance, it should include all digital products (in-house & third-party), infrastructure, and operations related. Even communicating the importance of compliance among the employees. Maintaining compliance is essentially one of the steps for ensuring security across any digital platform.
Increasing Workforce Productivity
If your employees are productive, then your clients are happy as they see value in their investments being realized and when your clients are happy, your business is happy – It is a win-win-win for all and your bottom-line shows. Some tasks might require employees to be in front of desktop, others might require fieldwork with the tablets or cellular phones. Employees should have the freedom to work from anywhere, have a sense of work autonomy, be encouraged to be part of your vision and mission.
Operational Efficiency
Credit unions should look atDigital Transformation as a long-term journey with measurable impact along the way. This transformation would allow the financial institutes to have a 360-degree view of processes and operations, whichwill help them with real-time data leading to insightful decisions & driving operational efficiencies, amongst other business metrics.
Product
It is up to the credit unions on how they want their customer journey to be - via their digital products. Due to restricted resources, credit unions might not adhere to the latest technology trends, which can be a big “No” from a customer viewpoint. They can, also, explore partnering with other companies to shore up their technical prowess.
These institutes need to focus on creating resilient & secure mobile apps, websites, and integration with big P2P payment platforms like Apple Pay, Samsung Pay, Google Pay & Zelle.
Implementing Digital Transformation in Credit Union
Let’s say a credit union has implemented expensive technology aiming at a total revamp. However, in the end, the results were just not that great! Does this mean you need to keep away from attempting digital transformation in the future? Or the idea of such failure dissuades you from taking the first step?
There is always a better way to approach Digital Transformation in Credit Unions. You need to pick up an impact area that has a greater chance of success and showcase this success story to get more buy-in from all the other stakeholders. You could start Digital Transformation in your credit union by picking up:
Member Retention & Attraction
Most consumers, especially millennials and Gen-Z, use digital platforms like Venmo and PayPal for transacting. If your credit union fails to be part of such digital platforms, then you would probably lose consumers to other competitive credit unions. By implementing the feature(s) iteratively, you will be able to tweak existing apps, websites, and internal digital settings to stop customer attrition and gain new customers. Based on the success of this project, you can plan your further investments.
Speed of Transaction
Core legacy systems have been credit unions' powerhouse for ages now. A legacy system relies on batch processing and legacy hardware, of which many manufacturers have even stopped producing. Consumers expect instant notifications like they want all their transactions to be reflected immediately on respective digital channels.
Digital Transformation propels your credit union to go for real-time data processing and omnichannel banking presence providing consumers with real-time transaction data across relevant digital platforms.
Lower Cost of Operations
As per a Deloitte Global CIO survey, the maintenance of a legacy system nearly costs 57% of IT budgets, which the credit union could have used to implement Digital Transformation.
Failing to understand that legacy core systems are expensive for credit unions, as it requires more space, less secure, time-consuming etc., could prove detrimental for credit unions.
Speed of Implementation of Projects
Since many Credit Unions use outdated programming languages (like COBOL), it gets difficult to find anyone with a specific language skill set. The financial institutes often struggle to keep up with their legacy systems and are compounded with unavailability of the required workforce. In addition, if credit unions use waterfall methodology to manage their projects, it is very difficult to build an application that meets the needs of the business and your consumers in the most optimal way.
Adopting new software development methodologies not only would boost your time to market, but also ensure transparency and drive accountability.
In a Nutshell
While implementing digital transformation in credit unions, don’t get carried away by the complexity of the effort involved or positively swayed by the benefits it promises to bring – Instead focus on smaller wins. You need not go for the big-bang approach; instead start with the area (s) where you can see immediate impact and use this impact to drive more adoption across the various functions. Simultaneously, keep measuring the output to ensure the expectations and ground-reality are not far off.
Conclusion
Digital Transformation in credit unions should be a must-have by now to re-define their services and attract new consumers. Shift to Digital Transformation need not be a massive and stringent process – You can start by focusing on what the objectives are and how to achieve them. Qentelli understands that everyone’s Digital Transformation journey is different, and our solutions should align with business objectives. Let us know your Digital Transformation goals by connecting with us at info@qentelli.com – Let’s make it happen!
