Shift Happens

A lot of shift has happened in 2020. I have kept track of the changes I’ve seen this year through conversations with credit union CEOs and leaders across the country, through various committee and task force meetings, and through insights generated from Filene’s research and incubation driven by academic leaders at the top of their fields.

Looking back on the past year, credit unions have done a tremendous job quickly recognizing the new needs of those they serve and shifting plans, strategies, programs and processes to respond in effective and helpful ways. The most successful among them are those that accept the shifts as the new status quo and look for new and yet-unexplored opportunities within them. By letting go of previous assumptions and patterns, credit unions can get to work on the new challenges they and their communities face and be productive in building solutions for the future instead of for the past.

The three areas where I have seen credit unions face the most significant shifts, with the most opportunity to reimagine their future, are in service, technology and leadership. Combine a deep understanding of our new and different environment with an innovation mindset in each of these areas to stay sustainable and relevant long into the future.

Shifts in Service Needs

Credit unions have always existed to provide fair and equitable financial access to all. What’s new is the sheer volume who now more than ever before need credit unions’ people-first approach. In November, unemployment rose by 245,000, for a total of 10.7 million people. While this number is down from its high in April, it is still nearly five million more than where we started the year. Combine that with the impending end to federal student loan payment moratoriums and economists’ predictions for a double-dip recession, and we see greater needs across the consumer spectrum.

In the Filene report “Pathways to Financial Well-Being,” researchers concluded that while access to affordable, responsible financial services is a critical piece of the financial well-being puzzle, inclusion is not enough. Filene’s newly-launched research center focused on the measurement of credit unions’ social and community development efforts proposes a future in which credit unions have significant impact on their communities acting not only as financial service providers, but as allies, coaches, custodians of resources and advocates for overall well-being.

Dig Deeper: Through customized research studies to help individual credit unions better understand their members’ financial security, mobility and stress, and explore the connections between financial, physical and social well-being, Filene found a strong interdependence between types of well-being. Innovative credit unions are recognizing the opportunity they have to expand the important role they already play in the financial lives of their members, and in doing so, differentiate and deepen their engagement with members.

Start by conducting your own data analysis and market research, as in the case study of Kern Schools Federal Credit Union to get up-to-date knowledge about your member base and their needs – it is not enough to assume you already know in the face of major technological, demographic and competitive changes. With an understanding of core members’ current needs, Filene’s report on member experience and service excellence focuses on how credit unions can shape strategies and services to be more compatible with what attributes the core member group values most.

Shifts in Technology Needs

It may come as no shock that the recent “Credit Union System COVID-19 Restart and Recovery Task Force” report stated that to adapt to the accelerations in digitization of financial services brought on by COVID-19, credit unions “must drive scale, execute on digital transformation, deliver exceptional member service, innovate products and services, and adjust to new demographic and workplace realities.”

If shifting to a digital-only environment while maintaining the level of member experience that has typically been a credit union’s differentiator wasn’t hard enough, as Filene’s report from earlier this year on “Fairness and Accountability for Algorithms in Financial Services” highlighted, consumer trust in the financial industry is at an all-time low, and credit unions have both a challenge and an opportunity in such an environment to ensure that bias and discrimination does not take place while implementing algorithmic underwriting, thus gaining back a higher degree of trust from their members and community. Facing reality on what is the future of branches and thinking through how to invest in technology to keep up with consumer adoption and demand is also now essential.

Dig Deeper: A three-part special report on the pandemic’s effects on workers and consumers explored possible future scenarios to help credit unions prepare for a post-pandemic world. It includes guiding questions addressing the shifts resulting from COVID -19 and how to adjust strategy for the medium and long-term. The researchers concluded that they “believe that credit unions can help individuals and communities weather these latest storms, and that the credit union system will emerge stronger by doing so.”

Start now to prepare for the future of financial services in terms of data analytics and ethical practices for the use of consumer data. Assess your digital channels in terms of the technology platforms you’re using and review your business model to ensure use of branch locations is an attribute rather than a detriment. Avoid the failings of Blockbuster; accept that technology has accelerated exponentially and consumers have embraced it. When an entirely virtual re-fi experience is possible, most opt for it. What extreme value can you offer with your physical locations to support your digital experiences? It is vital to know your members’ needs, as when it comes to technology access, one size does not fit all.

Shifts in Leadership Needs

The changes we have seen happening in the CEO suites over the last few months are creating ripple effects throughout the industry. CEO departures, coupled with new hires, represent a big shift in the credit union leadership landscape. With top-level change, there’s often new players put in place and as functional area re-orgs occur, new leaders will be observing what is working today, what isn’t working today and making changes based on today – meaning what’s worked in the past is no longer relevant.

Credit union leaders have doubled down on putting their people first and we’ve seen painful tradeoff decisions made to ensure safety. Going forward, new leaders will need to balance building relationships in a virtual space while prioritizing employee health and well-being, and taking a fresh approach to talent attraction and retention.

Dig Deeper: A 2020 Korn Ferry survey of board directors and CEOs confirmed that there is a major mindset shift happening in leadership. The report concluded that the most effective CEOs and the highest-performing companies will possess the mindset and view that this year’s disruption provides opportunity for transformation and reinvention.

Start by encouraging your leadership teams to embrace an innovation mindset to be able to pivot and adjust to complex environments – not only for today, but for scenarios in the future that are impossible to predict yet. Put your highest potential talent in leadership development programs now, such as Filene i3, to prepare them for unknown futures filled with rapidly changing, hyperconnected and radically contingent factors – and retain those who see this first as opportunity rather than threat.

Innovative and forward thinkers across all industries agree that value creation is everyone’s job. While this year’s shifts have proven to be a pain, they have also given us a chance to actively listen, learn and reassess – a disrupting force to shake us awake and test our ability to replace the best there is with something still better.

Mark Meyer President/CEO Filene Research Institute Madison, Wis.