3 Steps to Digital Maturity

According to McKinsey, COVID-19 sped up digital transformation and technologies by several years and spiked an increase in technology spending.

However, there is a material gap within the credit union industry between the emphasis placed on digital and the ability to execute digital strategies successfully. Understanding the areas where additional effort is required to use digital as a competitive differentiator will be the focus of those credit unions that wish to remain relevant in the coming five years.

The 2022 Credit Union Digital Maturity Index (DMI), conducted by Finalytics.ai, offers insights into that gap and what can be done to close it. Credit unions ranging in asset size from $133 million to $31 billion and with less than 10,000 to more than 2,000,000 members participated in the survey. The results revealed three areas that credit unions should focus on to achieve digital maturity: Leveraging digital, member interaction and data.

Leveraging Digital

The majority of credit unions (86%) agreed that their competitive strategy relies on digital. However, only 14% of credit unions agreed that they have the appropriate flexible, iterative and collaborative approach to execute an effective digital strategy. Moreover, although respondents scored their capability to use modern technology like APIs, cloud and artificial intelligence higher than other abilities, only 14% completely agreed that their credit unions have those technologies in place.

Every credit union aspires to manifest the value proposition they deliver in the branch on digital channels. However, the challenge is educating leadership teams about the opportunity of digital and creating environments that accommodate digital-first strategies and support modern technologies. This should be a priority, as consumers expect digital banking experiences similar to their interactions with e-commerce companies. According to a Finalytics.ai survey conducted by The Harris Poll, 40% of Americans are likely to leave their primary financial institution for digital banking compared to an online shopping experience.

Member Interaction

The DMI survey also revealed that credit unions seem inattentive to how their members interact digitally with their institutions. Only 36% of respondents utilized member journeys, meaning most credit unions do not have an accurate representation of their members’ activities and interactions. Furthermore, less than half (45%) used personas and member journeys to drive their technological choices.

This lack of focus on members could be linked to how some credit unions perceive digital maturity. Many institutions might be introducing technology in a checklist manner. They are playing catch-up with their competitors rather than asking themselves what their members want in a digital experience. But today’s consumers don’t want a transactional, checklist-like digital experience, but a relational one.

This shift from transactional to relational plays directly into the core value of credit unions. It is their relational approach that sets them apart in the market. Therefore, upgrading or innovating a digital banking platform – typically optimized for transactional activity – is not the path to success. Instead, looking for ways to deepen the sense that a member is unique within the digital channel is key. To do this, credit unions must confront the elephant in the room.

Data

Data is that elephant. The question of how to leverage internal and external data remains largely unanswered by credit unions. This is not due to a lack of effort or understanding. Leaders of credit unions know that the proper use of internal and external data can improve retention rates and grow member numbers. Yet, the DMI survey showed that only 12% of respondents said their credit union could use data, among the lowest score of all the areas measured.

Credit unions need to unlock the value of data to attract prospective members and deepen their relationships with existing ones, instead of offering generalized banners and pop-up offers tailored to broad swaths of consumers.

So, how can credit unions leverage the power of digital, direct their attention to their users on digital channels, and unlock the value of internal and external data?

Embracing new technologies will help them continue to deliver their secret sauce to members at scale through digital channels. This will require a shift in mindset, as credit unions often see technology as expensive, risky or complicated. However, new technology is increasingly cheaper, easier to use and delivers a better total cost of ownership than legacy solutions.

Credit unions need to find technology partners that solve the data problem by offering the software and expertise necessary to transform digital from transactional to relational. Credit unions don’t need data scientists, analytical tools that take months to install or specialized training. Building the expertise internally will either fail, as it is too hard to find and retain talent that understands both data and the credit union industry, or it will be too late to market to have the desired impact.

Armed with this data and analytics, credit unions can continue showing how much they care about their members and provide unique, segment-of-one experiences on digital channels. What is required is a willingness to embrace new technology platforms built to confront the elephant in the room and turn data into information, allowing credit unions to provide members with digital experiences that are as relational as the branch once was.

Craig McLaughlin is Co-founder and CEO of Finalytics.ai, a San Mateo, Calif.-based provider of a customer-centric data platform for credit unions.