SAN ANTONIO–Technology is redefining financial services delivery, distribution and money movement in ways that many credit unions still don’t fully comprehend, according to one person.
That includes companies that can provide member experiences that credit unions simply can’t match—but CUs still have a strength of their own, that person added.
Mark Sievewright, who formerly headed up Fiserv’s credit union unit, told the Association of Credit Union Internal Auditors (ACUIA) meeting here that finance has entered a new age, the age of analytics, and credit unions need to prepare for what is taking place.
“New entrants are challenging the incumbents, new forms of distinction are needed,” said Sievewright, who now heads up his own firm. “Demographic shifts will have a profound impact on growth relevancy and talent. Forty percent of your business is digitized. Banking has gone beyond the digital tipping point. Disruptive technology is the next part of this.”
Sievewright observed that when “mobile” is discussed it is too often confused as being just about the phone. “But that’s not going to be ‘mobile’ in the future, it’s just going to be one part of it,” he said. “I was asked to speak about the future of the plastic card. I said, ‘That’s easy; it doesn’t have one.’ Long term, we’re going to be paying for things that will not be driven by the plastic card. What if we move all this effort we put into chip and we pay in different way, with the palm of your hand?”
But payments will move far beyond just hand-held devices, he noted, pointing to another inflection point of the next five years in the Internet of Things in which everything is connected, and potentially a payments device.
“In 2008, we passed a unique time when the number of devices connected to the Internet exceeded the population of Earth. By 2020, we’re going to have 50 billion things connected to the Internet,” he told the ACUIA meeting. “What if regular devices in your home are financially enabled? How much progress has your organization made in achieving omni-channel? The big challenge for our industry is dealing with integration of the channels. We have a heck of a big challenge over the next five years in integrating, and you have an even bigger challenge in controlling it.”
By 2025, noted Sievewright, companies that many CUs are not familiar with, such as China-based Ant Financial, will be the world’s biggest bank through its Alibaba and Alipay platforms. Moreover, he said, there have been more than 4,000 payments fintech start-ups in the last few years, such as Kabbage.
“These fintechs won’t destroy your business model because they can’t,” said Sievewright. “They don’t have member trust, they don’t have your scale collectively, and they don’t have your distribution. But they do have unbeatable technology. They can give members experiences that you cannot. Big organizations said we can never compete with these guys. So, they said, ‘Let’s take their technology and embed it in our organizations.’ And they have seen great success.”
The second big trend Sievewright urged CUs to watch is the changing demography of America.
“The biggest demographic segment is people older than 55, about 30% of our population,” he said. “And where we’re going is one-in-five Americans will be over 65. So, this segment is really important to us, even though we keep talking about Millennials. Gen X is about 18% of the U.S. population, 27% Gen Y and 27% Gen Z.”
Sievewright said older Americans now readily embrace technology, and it’s also changing the workplace.
“For the first time, we have all of these demographics in our workplace at the same time,” he said.
The third trend that is having an effect on every credit union is data and analytics, which Sievewright stressed several times.
“We are now in a situation where five digital companies—Amazon, Apple, Facebook, Netflix and Google–have a market cap that is double the top five banks,” he observed. “Those five companies are showing us what we have to do. We have to become flywheels for data. You don’t just have to talk to your vendors; you have to hold them hostage almost to drive this for you. If they aren’t good enough, find someone who is. Without this competency, you don’t win.”