Threat or opportunity? It’s all in how you look at it, according to several credit union technology leaders asked about what they see in the year ahead.
Being vendors, using digital to discourage defections and deepen bonds between credit union and member was one big item top of mind for the five executives who talked to creditunions.com about 2015.
For instance, Jack Henry & Associates President David Foss touted his company’s new Kernel digital marketing tool, which uses a single application programming interface to deliver targeted online and mobile marketing messages based on users’ interest and interaction with each channel.
First shown off at a Finovate show, the software can target non-members, too, by also tracking their activities — such as looking at retirement planning or college savings products — and using browser histories to equip the financial institution to respond with a tailored pitch.
“This is just one of all kinds of new things happening as the whole omnichannel concept becomes a reality,” Foss says. No credit unions have committed to the responsive advertising solution, but Foss — whose Missouri-based company owns Symitar — notes it was just formally rolled out in November.
Other emerging technologies, along with an improving economy, membership and loan growth, and pro-credit union consumer sentiment, also were mentioned as opportunities.
Challenges, meanwhile, include the regulatory burden, data breach costs, and disintermediation in the face of growing competition from non-traditional financial institutions.
Budgeting For Breaches
Joan Nieman, marketing director for core processing CUSO Share One in Memphis, TN, says a client credit union told her that data breaches cost it thousands of unbudgeted dollars and that it’s budgeting for more in 2015.
“Their soft-dollar costs came from managing a spike in calls to their call center after any mainstream media announcement occurred,” Nieman says. “Their hard-dollar costs mounted when they had to re-issue credit and debit cards … as well as unplanned expenses for marketing materials to alert and explain their reissues and notifications.”
As for regulatory burdens — which she calls “an ongoing battle of how to remain up to date” — Nieman points to this example: “The overdraft protection rules that are currently under review by the Consumer Financial Protection Bureau could possibly impact that income stream if an extension of credit is mandated.”
That said, helping to boost noninterest income with tech tools was mentioned as a 2015 opportunity by Tom Berdan, vice president of market development for Davis+Henderson, which became his employer after the Canadian firm bought Harland Financial Solutions (including UltraData) in 2013.
Lending and credit/debit card protection was one area Berdan mentioned in the general context of using software channels to improve efficiencies. For instance, he says, D+H is trying to “create a solution around mortgage lending and consumer spending” working with point-of-sale systems and fulfillment programs.
Credit unions also could benefit from continued lending growth in 2015, Berdan says, pointing to growing loan-to-share ratios in the industry as a leading indicator. “Lending is a big opportunity,” he says.
Capitalizing On The Economy
Mark Sievewright agrees. “Consumers’ willingness to spend and borrow is on the rise,” says the president of credit union solutions at Fiserv, noting in particular a falling unemployment rate and robust auto lending. “The credit union movement is going to have a strong base of opportunity in 2015 if it can capitalize on these greatly improved conditions.”
Capitalizing on that, from his perspective, means a focus on “providing tech-savvy experiences to increasingly tech-savvy members,” especially through mobile channels.
“Credit unions are also doing wonderful work in payments, with many acutely aware of the coming EMV transition,” Sievewright adds. “I anticipate high adoption. In addition, credit unions are currently the dominant institution type in Apple Pay.”
But it’s not all rosy, even for the perennially upbeat Sievewright. He warns about rising competition from third-party payments and money handlers. Of the threat of disintermediation, the longtime financial services executive says, “Staying on top of new members’ preferences and needs is crucial to avoiding this.”
That may not be happening at a lot of credit unions. Callahan & Associates data, for instance, shows that of the 4,967 credit unions of $100 million or less, only 304 offer remote deposit checking. Meanwhile, 773 of the 1,512 credit unions above $100 million in assets offer RDC, often pointed to as a must-have in the product lineup.
Sievewright notes that disparity, too. “A reality that credit unions will continue to face in 2015 is a widening gap between small and large credit unions,” the Boston, MA-based Fiserv executive says. “There are many perspectives on whether this trend is good or bad — regardless, we are all aware of it.”
Opportunity And Angst
For Randy Karnes at core processing CUSO CU*Answers in Grand Rapids, MI, the biggest opportunity in 2015 will be a growing economy. “My hope is that as things heat up, margins will return and we can get out there and do well,” he says.
“Our claim to fame as credit unions is that when things are bad, when the economy is shrinking, that’s when we shine. But we need to shine just as much as champions in a robust economy as in a tough economy,” Karnes says.
And that opportunity comes with angst. The CU*Answers CEO says he thinks the biggest threat to the system is a lack of faith in the cooperative model that threatens the industry’s distinctive place in the marketplace.
“We’ve allowed the marketplace to define us,” he says. “There’s a hyper-focus on the customer aspect and too little commitment to the cooperative design and the power of ownership and the emotion behind that ownership.”
The result is the notion even among credit unions that today’s consumer “doesn’t understand anything that isn’t some kind of bank knockoff or transaction engine,” Karnes says. “And that creates a kind of apathy about who we are and where we’re going.”
He also fears that credit union executive and board leadership turnover will further erode the driving spirit that has for so long defined the credit union movement.
“I’m worried about the passion of the industry right now,” Karnes says.