Technology Hyperbole: An Age of the Past

After 33 years in the Armed Services and 25 years in corporate America, I have witnessed and been part of an era of constant change, where rules of engagement are constantly evolving for winning in the battlefield as well as in the competitive global markets through new innovative technologies.

The financial services sector is among the top industries affected by ever-changing client expectations and rapidly-evolving new technologies. New technologies such as biometrics, end-to-end encryption, dual authentication, face and voice recognition, behavioral analytics, and artificial intelligence are changing the traditional landscape for credit unions as well as the way financial institutions compete for market share.

In order to survive and remain relevant in this technology-driven financial landscape, credit unions must invest in innovation-led technologies to position the future and win; the status quo, rigid risk-adverse strategies and decisioning by committee processes must be re-drawn. It is extremely difficult to keep up with the scale of technological change, and it takes a huge investment in talent, capital and time that not every financial institution can afford.

Boston Consulting Group data clearly shows that consumers are willing to switch – and even pay a premium – to move to a financial institution capable of offering high-value, digitally-enabled services. Most of the financial institutions that we have surveyed during the past six months are not capable of offering the services that members expect and that an innovative consumer banking platform offers. The disruption is already happening with many small to mid-size financial institutions paying a huge premium for online and banking platforms with very few features and capabilities.

Put simply, the banking and credit union industry have been taken advantage of regarding online and mobile banking. Customers and members feel limitations with those services that still require them to go to a physical branch location for cash or check transactions. Branch tellers in the industry provide the services, and yet the cost of maintaining the service level by tellers will continue to significantly get higher in the years to come. Financial institutions are beginning to realize the need for branch automation, which includes personal teller machines and self-service kiosks. Even though self-service kiosks have been around for quite some time, they are being adapted by more and more financial institutions. The kiosk looks and feels like an ATM, but the kiosk can perform a variety of additional services. Kiosks allow members to cash checks, print official checks, pay bills and make withdrawals/deposits to accounts, to which an ATM could not be able to access. Large banks like JP Morgan Chase have expanded their kiosk offerings to more than 100 locations since 2012. Many credit unions are following JP Morgan Chase’s path, but it is often cost-prohibitive for them or their capabilities are limited.

Finding the best way to implement these kiosks in a cost-effective manner that actually provides all the available options will require a great deal of due diligence and selecting the right technology partner. The new age of credit union members is here and rapidly growing along with their expectations.

Credit unions must position themselves for the future ahead by offering services for multiple generations of diverse cultures, who have different expectations on accessing banking services, speak different languages and have different lifestyles. The growth in population and prospective future members will come from millennials and Gen Z, also known as the iGeneration. Gen Zers process information faster that other generations thanks to apps like Snapchat, Vine and others. The new generation of credit union members will have very high expectations on technology and ease of access. Keeping this in mind, branch automation and seamless access through mobile technologies must become a top priority for credit unions.

Credit unions that want to remain relevant, competitive and valuable for their members, as well as profitable, must rethink the future, redesign processes and establish innovative, cross-industry strategic partnerships that optimize member-centric technologies. Things to keep in mind when investing in technology or choosing a technology ecosystem partner include:

• Enhancement of speed and reliability of operations
• Easy-to-use services and value-add to the member/end user
• Enhancing the automation of processes
• Compliant with regulations and extremely secure
• Capable of providing multi-functional and inter-connected platforms
• Seamless integration and implementation, and a customizable format
• Cost-effective
• Providing the “cool factor”

In closing, exponential entrepreneurship, visionary leadership, out-of-the-box thinking, innovation, and member-centric technologies and execution will give the credit union movement the leading edge to compete and deliver value in a very dynamic and non-traditional banking environment.

Andrew P. Russell is President of Sound Payments Inc. He can be reached at 202-441-9200 or andrew.r@soundpayments.com.