PALM DESERT, Calif.–Credit unions have heard all the numbers and gloomy scenarios: there are more than 12,000 fintech companies and new start-ups every day. Members are using PayPal, SoFi, Prosper and others instead of the CU.
Bad news? It doesn’t have to be, according to one person.
During a session titled “Disrupt like Uber, but Hug like a Credit Union,” Anne Legg said the market niches, emotions and needs fintechs have tapped into can all be filled by credit unions—they just need to better understand the process, and then better understand the data they have right at their fingertips.
Legg, who is director of client strategy with CUNA Mutual’s AdvantEdgeAnalytics, said that among the reasons consumers and members turn to fintechs and providers are: They understand me (Kabbage), Are easy and instant (Capital One); Engage me (SoFi); Help me to live a better life (Mint), and help me to be social (Venmo).
“Tell me how that isn’t a credit union,” said Legg, speaking to California and Nevada Leagues' REACH meeting here. “What they are doing is making it incredibly easy.”
Using Kabbage as an example, Legg said it’s six-minute approval on business loans has very strong appeal to that market. But the company arrives at decisions in a different way than credit unions, and makes approvals using non-traditional data sources, including PayPal, Amazon.com, Social reputation, and UPS data (to show if a company is shipping).
Credit unions can take a similarly different non-traditional approach, said Legg.
“I want to look at Kabbage a little differently. We’ve been given a gift with CECL,” she said. “It’s forcing us to look back at our loans. By looking back, we can then look forward and predict what’s going to happen in the future.”
There is considerable discussion in credit unions about platforms, but what are platforms, exactly? According to Legg, when it comes to platforms it’s not that individual products that are important, but instead how well they work with the other products in the platform.
“A platform becomes powerful as a business model because it uses technology to connect people, organizations and resources in an interactive ecosystem in which amazing amounts of value can be created and exchanged,” she said.
Platforms are highly dependent on the Network Effect, which is the more people use something, the better it works (Uber is a good example).
What would that look like as a CU model?
“There’s a whole world out there that would like to have what you have,” said Legg. “Members need shelter, education, transportation, food, travel and play, healthcare and community. What connects all that? A credit union.”
Member Is The Platform
But the most important thing to understand about a platform, emphasized Legg, is that it isn’t the CU that is the platform, it’s the member.
“You are just the guide,” she said. “To be successful, you need to have channels and the channels have to be super-easy to enroll and use, and must offer ‘multi-homing.’” Multi-homing refers to the ability to connect to other platforms, including form other providers.
Any platform, said Legg, requires three elements for success: frictionless entry, ability to create communities and have shared learning, and economies of scale.
“A lot of times we think technology is just putting it in, turning it on and making sure the red light glows. That’s not what this is; this is non-stop, it’s an ongoing journey. But the beauty is you are making the members’ lives better.”
To make that journey better Legg said credit unions need to truly understand what creates value for members and consumers. She pointed to research from Bain & Co. that identified the “30 Elements of Value.” Among those in the hierarchy that are important to credit unions are reduce anxiety, saves time, simplifies, makes money, reduces risk, connects, and avoids hassles.
“If you just do this,” said Legg, referring to the aforementioned attributes, “if this is your plan, you have completely given value back to the member in the ways that they want it and in ways that are impactful.”
CU Assets
The assets that credit unions currently have, according to Legg:
- Price. CUs have it, but it’s “dicey.”
- Process. “Let’s be honest: some of it is freaking awesome, some of it isn’t so freaking awesome.”
- Member insights from big data. “We have so much robust data. The problem is that on average it lives in 50 different systems. No wonder we can’t get them all together. So, if you can harness that, you can look at the member in pretty powerful ways.”
- Conduit to members. “This doesn’t mean pimping out the members. It means meeting needs they have that we can help fill appropriately.”
When it comes to leveraging member data, which is the chief solution offered by AdvantEdge Analytics, Legg said credit unions can use the information they already have to know the following about members:
- Make and model of member’s next vehicle and where they frequently get gas.
- The competition for the member’s auto loan, credit card and home loan.
- Where members shop.
- What members watch, read and listen to (“This tells us a whole lot about who they are.”)
- Member’s hobbies and interests.
- Who the member is being served by.
“If you see Lending Club or Prosper, why aren’t they using the credit union?” observed Legg referring to one member scenario. “Go back and look at who is in your member’s world.”
That data can be used to target offers of discounts to certain merchants, for instance, said Legg.
She said credit unions should be asking themselves, “What problems can we solve for members before they even know it?”
Moving forward, Legg said Phase One is building the business case for using analytics, including:
- Objective. “What business plan item will accomplish this?”
- Resources: People, Money, Time, Data, Success Measures and Benchmarks. “Who do you need to partner with to accomplish your goal? What about a dream index? What are members’ dreams and how can we help them to accomplish them? How to we measure that and then communicate that back to the members?”
Phases 2 and 3
Start small, recommended Legg. Start with one product, such as an auto loan or credit card.
Once that’s done, Legg said a credit union should build on successes, and ask: What was learned? What will be done differently? Who were the champions? Who will be the team for the next phase? How do we build the case for the next phase?
“This is different, this is uncomfortable, but who ever said change was easy?” asked Legg.