Evaluating the Future Value of Tech Investments

The past 22 months have prompted organizations of all sizes to reevaluate their digital initiatives and agencies. Feeling a new sense of urgency, credit unions across the board have made large investments in technology to improve the digital experience. Yet, it can be extremely difficult to calculate the future value of technology investments versus the technical debt burden they place on the organization. Many C-level executives and board members now find themselves in the position of attempting to do just that.

Here are six tips for evaluating projects and calculating meaningful ROI analyses for technology investments.

1. Consider the credit union’s organizational roots and the primary objective of serving local communities. There are two main reasons to implement new technologies. The first is to create a better experience for clients and employees and the second is to influence revenue, either through cost reduction or new income generation. The latter should not be considered if it will negatively impact the former. In other words, credit unions should always seek the best experience for their employees and members. Cost reduction will have no meaningful impacts in the long term if these changes negatively impact member relationships.

2. Prior to analyzing ROI, begin with a strong understanding of current pre-investment processes, workflows and business models. Many technologies are meant to create new efficiencies within existing workflows. To successfully manage change and effectively evaluate results, the team must understand what is working – and not working – within the current process.

3. Ensure that all decision-makers within the organization support the initiative and agree with the assumptions being made about the intended impact of the new technology. This is critical to the success of the deployment and to the correct calculation of ROI.

4. Work to foster a trusting partnership with the technology provider, instead of viewing it as just another vendor. The most experienced fintech providers have tools to help credit unions determine whether an investment in the technology can benefit the organization. Such a relationship requires data, trust and effective communication, and will only work if the provider truly understands the credit union’s organizational structure and objectives.

5. Focus on flexible ROI models that allow for adjustments in quickly changing conditions. Technological change is happening almost as quickly as new systems can be deployed, and complicating matters further, many technologies have long implementation lead times. For this reason, technology evaluation should be viewed as a continuous monitoring of success rather than a one-time, front-end determination of ROI. The potential benefits of deploying new technology can and likely will change throughout the process.

6. Finally, to optimize success, all stakeholders must be working from a position of openness and trust. As technology changes occur rapidly, key members of the team have to be willing to speak up if they notice issues that need to be resolved, or if something isn’t working as anticipated. As the game changes, so must the strategy.

The type of ROI analysis that should be conducted also depends on the nature of the intended technology. Before beginning an ROI analysis, ask some questions: What is the purpose of the investment – is it to increase efficiencies in current processes and workflows or to bring in an entirely new revenue stream? Is the technology replacing existing processes? If you’re using a third-party vendor, does the vendor already have ROI models based on historical experience with other clients? How does the credit union’s situation vary from the vendor’s current client base?

Whether the decision to deploy new technology is driven by market conditions, acquisitions or some other cause, the success of implementing new technology will depend on how well the implementation team understands the reasons behind the change and the benefits it can deliver. If the primary focus remains on providing the best experience for employees and members, the project is more likely to succeed.

Working closely with technology partners to understand the investments being made and the benefits gained, securing buy-in from senior management, and remaining flexible to changing market conditions and demands will create a strong position for credit unions as they move forward with increasingly critical technology deployments and enhancements.

Pat True Senior Risk Analyst Jack Henry Lending Allen, Texas