MADISON, Wis.–In the six months since the coronavirus pandemic took hold in the United States, the Filene Research Institute has been conducting ongoing research on the long-term implications or short-term disruptions, and is now offering some early and conclusions from that work.
George Hofheimer, EVP, chief research and development officer with Filene, said the organization has conducted three research projects this year related to understanding what is taking place in the world in which credit unions operate.
Hofheimer addressed a concept within the field of econometrics known as a structural break, which denotes a moment in time series data when trends and the patterns of associations among variables change.
“A structural break is the very best time to be a strategist, for at the moment of change old sources of competitive advantage weaken and new sources appear,” said Hofheimer during CO-OP Financial Services’ THINK Strategic Growth Forum.
A ‘Unique Opportunity’
Calling the current environment a “unique opportunity,” Hofheimer said over the last six months he has done hundreds of Zoom interviews with CU CEOs.
“One question I ask them is to reflect on another time when we had another structural break, the financial crisis of a dozen years ago,” said Hofheimer. “I asked them to reflect on what they had wished they had done differently, and the theme again and again was they wished they had been more aggressive. Yes, it was a time of great uncertainty, but in retrospect they wish they would have taken the opportunity to gain marketshare, to lend more to people in need, to find the new advantages. The obvious implication is now is the time to think in those same terms.”
Insights from Filene Research
According to Hofheimer, some of the long-term implications of the short-term disruptions uncovered in Filene’s research are:
- Support your members today (human). “Now is the time to utilize your capital to try to help members,” said Hofheimer.
- Rediscover financial well-being at the heart of your credit union's value proposition (human)
- Evolve service delivery models (operations). “Some key decisions are going to need to be made; the form of branches is going to look very different. How do traditional models interact with some very modern models, such as mobile and online?”
- Prepare for business models in a long-term, low-rate environment (strategy)
Practical Actions
- Incentive direct deposits and automated bill pay to create stickiness.
- Design payments and PFM tools with low- and middle-income (LMI) members in mind
- Make data, security, protection and transparency central to organizational value and messaging. Hofheimer shared the story of one CU that pulled its ACH data, including data revealing which members had received a federal stimulus check, which reveals rough income levels, as well as a state check, the latter indicating they were on unemployment. The CU reached out to those individuals and explained the solutions it offers to provide assistance.
- Automate financial tasks and portfolio management wherever and whenever possible
- Invest in owning, collectively, the financial technologies of the future rather than purchasing and repackaging others’ products. Hofheimer said a good example is CUSOs, such as CO-OP, that are owned by credit unions.
Leaning on CU Structure
“Leaning on partners and aggregators is one of the key strategies credit unions need to think about, especially as the needs of the consumer marketplace become more sophisticated and the demands become higher,” said Hofheimer.