KOLOA, Kauai–The future is not in the future, credit unions are too quick to move right to “harvest,” and too many CUs are product-focused, according to a panel of experts who shared their views on those issues and more here.
The panel appeared as part of Co-op Solutions’ CEO Conference and included:
- Nikhil Lele, principal digital transformational leader, banking and capital markets with EY
- Christie Kimbell, chief product officer with Filene
- Dean Michaels, chief strategy officer with Co-op Solutions
- Samantha Paxson, chief experience officer with Co-op Solutions
The discussion was moderated by financial journalist Jean Chatzky. Here’s a look at what was discussed:
Chatzky: Tell us more about where credit unions should be focused.
Paxson: So many of the ways we run our credit unions are product-focused. I serve on a credit union board and I hear measurement around individual product penetration and cross-sell, and the majority of time it’s focused on lending. Lending is a point-in-time activity. It’s about continually looking at life stage as a way of looking at your business. I like this idea of continually growing the usage of the credit union and better engagement with existing products.
Michaels: I am pleasantly surprised to see (in a poll of the audience that found strong interest in) getting better engagement. Often it’s about how can I use the data to get a new member or sell a new product.
Chatzky: The research made it clear members are using and trusting fintechs. They are happy there. What do credit unions do? Lean in? Disrupt? Partner?
Lele: I believe (in this) central aspect of strategy, and that is this notion of building around an ecosystem. That is number-one; acknowledging the reality you don’t provide all the solutions your members need because they need solutions across the spectrum. Their needs are numerous and you only serve a narrow slice of those needs. You can stick with that strategy, and/or invest in creating a strategy ecosystem, investing in orchestrating a better member experience.
If you are a traditional FI and you want to bring in a planning and investing capability, you don’t need to go through all the regulatory hurdles to create that business. You can partner to create it.
You can make partnerships an entire P&L vertical for your business. You build these through the journeys. You pick the journeys you want to win at and dominate, and pick the partners who can help you do that. Really getting a P&L focus around these partnerships journeys is critical.
Paxson: I’m always thinking about root causes. What’s the primary reason for a problem? What’s challenging about designing a P&L for an entire journey is that we are in annual planning and budgeting cycles. We have to show a return to our boards.
Chatzky: In working with your clients, how do you see that constraint and how is it showing up as the reason why this isn’t happening?
Lele: Product P&Ls aren’t going away nor should they. So, the question is how to optimize around that constraint. What we’re seeing is a new model in which there is a chief product officer construct in a business. One bank took all its digital officers across the enterprise and brought them together in a platform concept. This is a way of moving toward this model. You will have annual planning, but that planning is orchestrated around the journeys.
Chatzky: What are you seeing in your research?
Kimbell: The challenge we heard from everyone in our research was uncertainty and exhaustion. I absolutely think you need a partnership strategy, but you don’t have to be overwhelmed by the fintechs themselves. You can first figure out what members are looking for, and then make the partnerships that make sense.
Chatzky: How do credit unions justify spending both time and money on investments where they may not see immediate ROI?
Michaels: I think for credit union CEOs the biggest challenge isn’t that an investment today will take time. Today, I think credit unions are very focused on ‘I spent a dollar today and that must lead to a new account…’ It’s very centered around direct revenue streams. When I think about what we have been talking about today and how fintechs look at consumers, it’s the indirect revenue that makes the investment that much more challenging.
You don’t charge your members for engaging with you. You are building relationships. A fintech thinks, ‘This member is worth X to me and I need to nurture it.’ That’s what engagement is. I think credit unions tend to go right to harvest. The challenge for credit unions is a mindset challenge. You’re going to spend money and not get immediate payback. You must nurture the relationship, and then when the time comes they will think of you.
Chatzky: With financial wellness, it is one of those things like trust where you don’t have immediate ROI. Where does this conversation need to go to fill opportunity gap?
Paxson: It’s a place where we can absolutely differentiate ourselves in the market. Credit unions will often say, ‘We have better rates.’ But people will say they are getting good rates at their bank. When our behaviors are so similar to banks, we need to make sure we stay true to who we are. There is a need in the market. This is a human need where people are so fragmented. We see a confluence around payments. There is an incredible amount of data in that set of behavior. When you say ‘We are credit unions, we are people helping people,’ and then we connect it to how people are behaving in their daily interactions, you have an opportunity to really differentiate yourselves in this space. It increases trust, revenue, growth.
Chatzky: If you wanted people to remember one central takeaway, what would it be?
Lele: The future is not in the future. It’s happening in front of us every day. We have to pull our organizations toward it. This must start at the top with your management teams.
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