How Will Lessons From The Pandemic Shape The Future Of Credit Unions

As economies reopen and life regains a sense of normalcy, the industry must consider how business might evolve in the years ahead.

 
 

Vaccination rates are rising across the United States, the country is reopening, and a sense of normalcy is starting to return. California and New York, states that implemented some of the earliest and strictest lockdown measures, have even dropped pandemic-related restrictions.

As the country reopens, the economy is gaining steam. First quarter U.S. Gross Domestic Product rose to a 6.4% annual rate, materially higher than the 4.3% annual increase reported in the fourth quarter of 2020. Inflation is also rising; however, policy makers believe this is largely transitory and will subside once supply chains return to normal. The unemployment rate is down to 5.8%, and the United States has recovered two-thirds of the jobs lost since the start of the pandemic. The focus of many employers has shifted from navigating economic uncertainty to attracting workers to meet rapidly rising consumer demand.

In the financial sector, credit unions reported strong results in the first three months of 2021. Share growth set records following three rounds of federal stimulus. Loan originations were up an astounding 31% versus 2020’s record activity — consumer lending alone jumped 23%. Return on assets exceeded 1% for the first time in nearly 20 years.

Will this performance during a time of transition return to normal? Or is there an opportunity to build on lessons learned during the pandemic? For many credit unions, the past year brought to light new insights about talent, technology, and differentiation. How will credit unions apply those insights going forward?

How Will The Working Environment Evolve?

The reopening of the economy is bringing with it new questions and complications for credit union leaders. Whereas some credit unions have been operating in a relatively normal environment since late last year, many shops are just now starting to bring back staff to the office. This shift has both strategic and tactical implications.

On the tactical level, office spaces might require a redesign to accommodate social distancing, protocols for moving around the office might change, meetings might be limited in frequency or converted to virtual platforms, and health checks or certifications might be in place.

The past year has shifted the thinking of many leaders regarding remote work, and a hybrid workforce is likely to be the new norm at many credit unions. Some are taking the view that working in the office is the exception rather than the rule. Leaders are asking questions that include: Does an individual’s role require them to be in the office? If so, how often do they need to be in the office? Have they been productive in a remote environment? What is the effect of a remote workforce on team dynamics? Should we look beyond our geographic footprint to attract talent?

Leaders are also considering new questions about employee wellbeing. These questions include: Are employees comfortable returning to work? If they have children, do they have options for childcare, camps, or school? How important is the office in an employee’s development path?

A credit union’s culture will largely shape the answers to these questions. Fortuitously, many credit union leaders have prioritized investments in their culture over the years, and those investments paid dividends as employees navigated the challenges of the past year. The question, now, is if or when those cultural norms will fade away in a remote environment.

Many organizations are implementing steps to foster their culture within a hybrid workforce. Some are rotating different teams through the office on different days but bringing in everyone for companywide meetings. Some are asking all employees to come into the office on certain days of the week to foster cross-company interactions.

Whatever the plan, credit unions must maintain their culture amid shifting workplace norms if they want to position their organization as employers of choice.

How Will Talent Management Evolve?

Credit union leaders have gained new perspectives on their management and staff during the past year. For some, it has resulted in recognizing the capabilities of employees that pivoted quickly to changing market and operating dynamics. For others, moving from in-office interactions to remote ones revealed gaps in training or skill sets. Remote management requires different capabilities, and empathy and the ability to connect with team members became just as important as technical skills for many leaders.

What leadership behaviors from the past year will credit unions retain? How does the past year shape the requirements of the next generation of leaders? Will credit unions elevate and reward innovation? Will they continue to make the kind of quick, decisive decisions that the past year has required? Will new organizational models emerge to position credit union teams to better anticipate changes in a rapidly changing marketplace?

How Will The Member Experience Evolve?

Perhaps the most significant shift from a consumer and member perspective lies in the accelerating adoption of technology. With credit union branches closed or operating at limited capacity, members had to interact with their financial institutions in new ways and are now using tools that are more efficient and effective than the old ways. According to market observers, the pandemic pushed consumers to jump three-to-five years forward in their adoption of new technology.

Credit unions that accelerated their technology investments to take advantage of these opportunities added ITMs and enhanced online banking capabilities. Some looked for new fintech partnership opportunities. Others evolved their processes and now rely on artificial intelligence and robotics to handle some member interactions.

Looking ahead, how will credit unions leverage data and insights obtained during the pandemic to shape future member service experiences? What role will members play in defining credit union-member interactions going forward? Are credit unions developing member experiences that effectively integrate technology to deliver tailored, personal interactions? What can credit unions accomplish on their own and where should they look for partners to help evolve their capabilities?

How Will Credit Unions' Strategic Priorities Evolve?

The past year has been the ultimate stress test for the financial, operational, competitive, and cultural resiliency of credit union everywhere. Leaders have greater depth of insight into the risks facing their credit union and can now better plan for and address those risks, allowing the organization to focus primarily on longer-term opportunities.

Credit unions emerged from the Great Recession in a strong position. In fact, it was the industry’s best decade ever in terms of growth, market impact, and member engagement. The post-pandemic landscape, however, is different. Legacy competitors are strong and new competitors continue to emerge. The ability of an organization to anticipate, and quickly adapt to, changes in consumer needs and behaviors is now table stakes. Are credit unions dedicating parts of their organization to understanding and building for tomorrow’s changes?

Credit unions have one major advantage: The have the ability to take the long-term view. The economic challenges of the past year have amplified the essential role credit unions can play in the lives of their members and communities. This environment presents the opportunity for credit unions to re-think not only their operating norms but also how to position the organization to make an even greater impact on employees, members, and communities.

Yes, it is a time of change. Credit unions must embrace that. Because even more so, it is a time of opportunity.

This article is excerpted from the first quarter issue of Callahan’s Credit Union Strategy & Performance. Click here to download an issue of the industry's only strategy-oriented publication.

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