Looking Back, Technology and Credit Unions Have Come a Long Way Together

Hindsight, as they say, is 20/20. So when you look back at how credit union technology has evolved over the years, it’s easy to view it all as natural, logical, and almost inevitable. But I don’t think any of us truly appreciated the significance of each technological advancement as it occurred, or the profound influence technology would have on credit unions and their members. I know I certainly didn’t. I found myself in the credit union technology business somewhat by accident – graduating from journalism school in the 1970s and following the lead of some friends who’d taken jobs in the industry. First as an employee of the New Jersey Credit Union League, then on the staff at USERS, my first reaction to the credit union technology world was amazement. I was amazed we had computer centers filling entire rooms, connecting in real-time to host systems over phone lines at 1600 baud, and using desk-sized computer terminals to print checks at 35 characters per minute. Driving the use of those early technologies was a set of goals common to most credit unions at the time: to operate efficiently, serve members effectively, and compete successfully. Little did I know that two things would remain the same for the next three decades: credit unions would continue to focus on those goals, and they would continue to use technology in amazing ways to achieve them. There have been many inflection points along the credit union technology timeline, too many to laundry-list here. One of the most apparent is the Internet. Early on, some viewed it as a passing fad; others recognized its tremendous potential; but I believe few of us fully realized how fast this technology would change the way we live and work. In my first year of graduate school, I did my research on character-based terminals. Year two, I was viewing scanned images on CD-ROMs. By year three, everything was on the Web. Maybe I didn’t take the fastest route to an MBA, but the enabling technology sure sped along. It’s amazing to think that in an incredibly short timeframe, credit unions have seen the Internet evolve from an interesting idea to one of the cornerstones of member self-service, and a vehicle for significantly reducing costs. Other technologies also have more than lived up to their promise, altering the industry in ways we couldn’t have imagined initially. Think analog modems (the forerunner of the high-speed digital communications that enable today’s online systems); or optical technology (at first just a microfiche replacement, now a key enabler in Internet service delivery); or PCs (novelties that ultimately became the foundation for distributed systems). On the other hand, some greatly-hyped technology revolutions just never occurred. Audio response and ATMs were supposed to spell the demise of the branch, and checks and debit cards were going to wipe out cash. We’ve since discovered that each new technology doesn’t replace another; it simply adds more options for members and more service opportunities for credit unions. For every major technology milestone, credit unions have been there, paving the way as early adopters. Perhaps it’s their strong desire to serve members first and foremost – often placing economics second – that’s spurred this front-runner status. But while early adoption may sound risky, credit unions have been extremely smart about it. For instance, most have chosen to outsource technology: not just adopting online/ASP solutions, but outsourcing the development of in-house technologies rather then build them internally. The decision to focus on the business of financial services instead of the business of software has made those credit unions nimble and agile – key characteristics in a market where change is a given. And while change has been an industry hallmark, we’ve seen some constants, too – among them, the competition that’s played a role in the continued advancement of credit union technology. Early on, the big hairy monster was the savings and loan; then non-traditional threats, mutual funds, and eventually the “disintermediaries” – any third party that can control the member relationship or make it easy to cherry-pick services. This healthy, ever-present competition has naturally resulted in a greater focus on differentiation, for both credit unions and their technology providers. Along the way, we’ve both learned that competing on product alone isn’t the answer. In the `70s, USERS was a leader in the real-time, online business. Then World Computer launched an in-house system, so we countered with our own, and others followed. The fact is, there will always be a hot, new software application, just as there will always be a hot, new financial product. But you can’t sustain a competitive advantage on product, for two reasons: others will soon have what you do, and something else will surely come along to replace it. Over time, we’ve both learned that the real, sustainable competitive advantage is the relationship. For suppliers, it’s a strong, strategic business partnership with the credit union, delivering solutions that help them succeed. For credit unions, it’s building and growing relationships that help members achieve their personal financial goals. When those relationships are in place, you don’t lose sleep over what’s coming next – because you’re always in position to respond. I hope that I’ll continue to be amazed by credit unions and their use of technology. And I’m confident I will, because I believe credit unions will continue to do what they do so well: Harnessing their resources to deliver the strongest value to members. Isn’t that what credit union technology is all about?