AURORA, Colo.–For Brian Hamilton, everything you need to know about digital transformation can be learned in the drive-through line at Taco Bell.
In remarks to Origence’s Lending Tech Live meeting here, Hamilton, the president of Origence Lending Services in Denver, said he applied for a loan through SoFi while in line at Taco Bell. By the time he picked up his order he had been approved, and all he had to do was pull into a parking spot to finish a few more items and he received his funds in short order.
The great irony of all that? The funds were deposited into an account at his credit union, the same credit union that had earlier told him they could not complete his loan application in the timeframe he needed.
That kind of turnaround time and ease of application, he told attendees, is exactly what every credit union needs to not just be considering but doing. They have little choice, he added, outlining all the challenges CUs face related to growth, competition, new entrants, technology, regulation and consumer expectations.
On that point of competition, Hamilton urged credit unions to be thinking more about the fintechs of the world and less about other credit unions.
And yet every time he attends a credit union ALCO meeting or sees an ALCO package, Hamilton said it inevitably includes a competitive analysis that is all about other credit unions and their pricing.
“It’s important to understand you are competing with Capital One and SoFi,” he said. “We used to talk about PFI—primary financial institution. Today, the number-one PFI in the world is the mobile phone and its apps. It’s very transactional. Wherever I get the best user experience, if there is an app for a loan or an investment or a deposit, that’s my PFI.”
What About COVID?
Hamilton said a frequent question he hears is around the effects of COVID on digital transformation.
“There is an obvious effect it did have, and it may or may not unwind. It accelerated some things we already knew we had to do, but it didn’t profoundly shift what we had to do or how we had to do it,” he said. “We know now we have to do things differently than we did before.”
Noting he has no silver bullets for making that transition, he said it instead involves common sense. “But common sense isn’t always common practice,” he observed.
Digital Transformation
“Digital transformation means a lot of things to a lot of people, and one of the things it can do is paralyze us,” he said. “You go into strategic planning with six big things to do due to digital transformation. Don’t do that. Select one or two big things and then a whole bunch of small things, which will require outsourcing and partnerships. That will move the needle as quickly as possible.”
He shared one definition of digital transformation as being the integration of digital technology into all areas of a business, “fundamentally changing you and how you operate and deliver value to consumers.”
The Digital Transformation Imperative
“The biggest obstacle I’ve seen at credit unions in digital transformation is organizational and cultural change,” he said.
He stressed that going paperless is not digital transformation.
“Going without paper and then just going from one monitor to two has not changed the process,” he said. “You’re doing exactly the same thing. It’s a very nice first step. Digital transformation is when it materially changes the user experience, the member experience and you as an organization change.”
Pointing to data showing satisfaction with credit unions has declined, Hamilton reminded the long-time CU competitive advantage has always been the connection with members. But that can be a two-edged sword, he cautioned, recalling working with one credit union located inside an SEG where the tellers knew every member and their kids.
“But we discovered members were taking out a lot of unsecured loans from other lenders,” he explained. “In this case, we had that deep personal relationship we built with the member. But if that member was a little embarrassed over why they needed to borrow the money, they didn’t want to face you. They could do it on the phone.
Don’t Get Confused
“Don’t confuse personal experience with personalized experience,” he continued. “Personalized experiences are just as impactful. Amazon knows me seven ways to Sunday, but I can’t speak to a person at Amazon.”
As another example, he cited data showing that in credit unions, which have extensive branch networks, 40% of members say they are “very satisfied.” But 64% of USAA members say they are “very satisfied,” and USAA has no branches and does all its business digitally.
Stealing the CU White Hat
Hamilton said fintechs have now surpassed banks and credit unions on personal unsecured loans. It’s a mistake, he said, to dismiss that fact simply because the credit union hasn’t much of a presence in that same space.
“They are doing that because those are the simplest loans to originate. They are coming after auto and home equity next. That is a threat,” he said.
How to Succeed
For digital transformation to succeed, Hamilton said there are five keys (in addition to the fact the board must “absolutely buy in”). There must be:
- Employee engagement at all levels
- Management support and leadership
- Cross-functional collaboration
- Accountability to get on board
- Moving from ideas to execution