Could Credit Unions Be the Next Oakland A’s or Dallas Mavericks?

Credit unions and professional sports franchises have a lot more in common than you might think – mergers and acquisitions, recruitment, branding, star players and newcomers, to name a few. But their most important connection is their need to always stay competitive and prioritize their members’ experience.

COVID-19 has introduced a low interest rate environment, which has helped boost credit unions’ loan originations and led to an outstanding book of business, according to a CUNA report. Additionally, savings balances and total membership numbers have steadily increased in recent months as well. So, while on the surface it may seem as though credit unions are well-positioned to serve members during this economic downturn, the real question is, are they truly well-positioned to serve their members post-pandemic?

Today, we are in the largest mortgage market in U.S. history, surpassing the previous record of $3.8 trillion-plus set in 2003. But many lenders are understandably too busy processing the high volume of business coming their way to recognize that this trend won’t last forever. In fact, according to a Freddie Mac forecast, the 2021 origination numbers are expected to decline by more than a trillion dollars. When that volume drops in just a few months, credit unions must be ready to compete with innovation and experience.

In 2020, the average time to close a mortgage loan is between 45 to 50 days. The most frequently cited reasons for the prolonged process are the “new” regulations imposed by the CFPB back in 2015, the appraisal standards and the title-related unexpected delays. But these reasons hide one of the biggest contributors to the delays, namely, ingrained inefficient processes driven by their technology platforms.

These different legacy systems are not configurable and don’t communicate with one another, leading to data-integrity issues, heavy reliance on paper checklists, and an overall inability to collaborate. In fact, according to a Stratmor Group study, most credit unions are afraid to increase mortgage origination volume because they don’t have adequate infrastructure to ensure a high quality member experience. This state of affair should not be the accepted norm for credit unions.

So, how can credit unions create a new and improved norm? By leveraging the right tools and technology, credit unions can dramatically reduce the loan origination time, thus allowing more loans to be processed and ultimately increasing members’ satisfaction. The MLB Oakland A’s and the NBA Dallas Mavericks offer a window into how to do this.

After seven years of failing to reach the MLB playoffs, the 2000 season’s Oakland A’s, led by their progressive General Manager Billy Beane, reached the playoffs four years in a row and became the first team in the modern era to go undefeated in 20 consecutive games.

So how did the A’s do it? Knowing they had limited resources compared with the bigger and richer teams, the Oakland A’s redefined their system from their on-field strategy to the way they evaluate the players. Billy Beane, together with the Harvard economics grad, Paul DePodesta, were the first to utilize “sabermetrics,” or baseball science, with a major league team. The A’s’ out-of-the-box thinking, coupled with their new scientific approach to the game, helped them realize that players and their traits were often misvalued. Beane leveraged this new data in order to maximize the team’s limited budget, to the extent that they competed toe-to-toe with the formidable New York Yankees, who spent three times more money on payroll during those years.

Fast forward to the 2009-2010 NBA season, the Dallas Mavericks became one of the first teams in the NBA to use a ground-breaking, player-tracking analytics system called SportVU. SportVU’s technology, developed by two Israeli entrepreneurs, consisted of six computer vision cameras set up along the catwalk of the basketball arena, synched with complex algorithms that extracted enormous amounts of data from all objects on the court. Almost instantaneously, the coaching staff had a whole new world of data about the players and the game at their disposal. A year after implementing this state-of-the art technology, the forward-thinking Dallas Mavericks won their first NBA championship, beating the heavily favored Miami Heat led by LeBron James in the finals.

What can credit unions learn from these examples?

1. Data is key.

Based on a study conducted on behalf of Equifax, less than half of the banking providers actually use the data available to them to understand their customers and create better experiences. The study also found that one of the reasons for the slow adoption of new technology is the heavy reliance on legacy systems, which make integrations difficult. A forward-thinking credit union could take these next steps to better position itself:

• Promote high-impact projects that drive change and create a data-sharing environment. Just as the Oakland A’s expanded their team to include a Harvard economics grad and committed to a systemic change to become a successful team, so could credit unions unlock the opportunities in a data-driven world.
• Invest in predictive analytics, smart algorithms and tools that help make better decisions. The Dallas Mavericks won the championship because they turned into a team that takes precise decisions based on comprehensive, real-time data.

A combination of these two efforts – better rationalizing and managing the data, and employing smart analytics and/or using machine learning technology – allows credit unions to create a superior experience for their members.

2. Buy, not build. 

Credit unions are financial cooperatives created, owned and operated by their members. They are not tech companies.

Based on a 2018 Cornerstone Advisors report, the median amount spent on IT as a percent of assets among credit unions was 0.42%, slightly lower than the average of the nine mega and regional banks. But breaking it down further, only about 21% of that spend was on strategic technologies. And while simply spending more on strategic technologies might seem like the obvious solution, a more targeted, prudent allocation of funds might elicit better outcomes. Credit unions, therefore, could benefit from partnering with technology vendors who can provide them with the best ROI and members’ experience. In many cases, these technology partners are up-and-coming startups – just ask the Dallas Mavericks and SportVU’s execs.

The A’s and the Mavs were always good teams, but what allowed them to move from good to great was their forward-thinking approach to technology, data and infrastructure. Today, if you ask any Oakland A’s or Dallas Mavericks fan where they were when their team won 20 consecutive games or the NBA championship, they will most definitely remember. Credit unions might not have a championship on the line, but they can still create that same kind of highly memorable experience for their members through technological innovation. So the question is, is your credit union ready to win?

Daniel Gottesmann is Co-founder of the Boston-based mortgage technology company elphi.