ROX Is the New ROI

Historically, financial institutions have measured their success purely on traditional return on investment (ROI) metrics, such as revenue, efficiency ratio, member numbers and deposit growth. However, with digital disruption, innovative fintechs and weakening customer loyalty all upending the banking industry, these measures no longer tell the full story, nor do they provide actionable intelligence to credit unions for long-term planning. The financial sector is moving too fast, and its customers are moving even faster – meaning success today is no longer an accurate forecast for future viability.

The concern with traditional measurement techniques is that they focus too much on the here and now, and don’t take into account the simple fact that credit union members have more choice than ever when it comes to their financial partners. They may maintain a primary deposit account with a credit union or have a car loan with you – which looks good for the credit union’s balance sheet – but take their mortgage or wealth management business to a user-friendly fintech if they feel the credit union can’t meet those needs. This translates to lost future revenue for the credit union, but ROI measurements may not show that.

In today’s world, experiences – not products – are what build durable, long-lasting relationships between people and businesses. Peloton doesn’t offer fitness bikes, it sells community. Tesla doesn’t sell cars, but a more conscientious way of living. Credit unions are selling simplicity, convenience, shared ownership and community. This is why it’s vital to look at the impact of experiences created, as well as members’ engagement with the credit union – even when these things don’t immediately translate to cash flow.

A Shifting Digital Mindset

Tech leaders like Netflix and Uber have raised the bar within their respective industries for customer experience (CX). Both give consumers an easy-to-use experience with substantial relevance and personalization through single platforms. Institutions must also pursue digital strategies to build and strengthen their customer relationships to be successful in the long term. But currently, the financial industry tends to create siloes between functions – and the adoption of new, enterprise-wide innovation is often stopped by those who are afraid of change, or those who are only interested in seeing their own “turf” succeed. However, according to Gartner, those rigid institutional mindsets, processes and structures are predicted to bring down 80% of financial institutions by 2030 if they don’t embrace digital transformation.

So, how can a credit union break down these silos? Contrary to common misconception, shifting to digital doesn’t just mean adopting new digital tools. Instead, it requires credit unions to rethink their digital strategy in a holistic way to create engaging, memorable experiences for both members and employees. Here’s how:

• First, adopt a single-platform approach that allows members to consolidate their financial lives in one place – that is, they can manage all of their deposit accounts, loans, credit cards, investments and more without having to ping-pong between different departments or call centers at the credit union (or worse, having to open and log into a different app).
• Second, deploy both digital and human offerings across all touchpoints, but leave it open for the member to determine when and how they engage. When done this way, members are empowered to problem-solve with the same efficiency and high-touch service no matter how they choose to interact with their credit union.

This comprehensive, unified approach gives credit unions a 360-degree view of each member, allowing them to identify the elements that are enjoyable and where expectations still aren’t being met – and to quickly eliminate friction points. At the same time, this holistic view enables credit unions to view each member as an individual, provide them with deeply tailored experiences and upsell offers to help ensure stickiness and facilitate organic growth.

This approach might appear to be a tall order, but as it turns out, many present-day technologies are intelligent enough to compensate for legacy technology and siloed functionalities. The key is identifying technology partners and solutions that will layer over your existing technology and unify them as a single platform, versus throwing out the baby with the bathwater.

Quantifying the Intangible

While delivering an outstanding CX should be an obvious goal, many credit unions struggle to measure its true value or how it affects their business’ success. However, defining and determining how to measure CX is crucial. With this information, decision-makers are empowered to make critical long-term business decisions such as which digital capabilities to invest in and what organizational adjustments should be made.

Measuring return on experience (ROX) may seem difficult, but here is a three-pronged approach credit unions can start with:

• Measure your members’ ability to problem-solve with the same efficiency and high-touch service regardless of channel. Determine if these products and services are available in all channels. Identify where there is experience and operational friction.
• Gather direct feedback from members – e.g., how satisfied they are with their experiences, whether they’d recommend the credit union to friends/family, etc. – to better understand their level of satisfaction and loyalty. Measurements like Net Promoter Score or the results of member surveys can help quantify this. It’s important to ask for feedback at the right time.
• Take a look at how member behaviors have shifted following investments in digitalization/modernization. Have deposits increased? Are members expressing interest in additional services, such as lending products? How has their engagement with the mobile app changed (e.g., duration of visits, size of transaction, number of transactions)?

We posit that, as the member experience continues to improve, member loyalty/satisfaction will increase – and that member business will grow in tandem. The goal is identifying a direct through-line between an investment in the platform and tangible, meaningful growth in member stickiness.

Vince Bezemer SVP for the Americas Backbase Atlanta