By Ray Birch
ST. PETERSBURG, Fla.—In planning for what lies ahead, especially after the pandemic is over, credit unions should get out a blank sheet of paper, advises Chuck Fagan.
The president and CEO of PSCU is concerned those credit unions that rely heavily on what they have done in the past to create their business strategy moving forward are making a big mistake.
“There's so much change taking place we don't know how much is permanent or temporary,” said Fagan. “2021 will be a pivotal for credit unions, a year in which they need to do the right things. I think you go into this year with a blank sheet of paper.”
Credit unions must not think about how business has always been conducted, but instead consider how they want things to be moving forward—either a reboot or refresh of how business has been handled in the past, said Fagan.
“If you try to recreate what has existed all these years, that's a failing strategy,” he said. “You have to be thinking about what is new.”
Fagan believes 2021 will be a pivotal year for member relationships, and a big part of being successful is how staff will perform, which is why training staff now on how business will be handled coming out of the health crisis is critical.
“Budgets are tough, and the easy budget line to cut has always been training,” said Fagan. “But today, training is the worst area to cut. You have to develop and get your team ready for what it's like on the other side of all this, and PSCU is doing that right now.”
The $64,000 Question
But just what is it that lies ahead? It’s more than the $64,000 question, and every CU leader is attempting to answer it. Fagan outlined what PSCU sees as key drivers reshaping the industry, ranging from forced digital modernization to membership growth challenges to new revenue drivers.
“Digital migration, which I would even term digital modernization, is fully underway,” stated Fagan. “The pandemic has brought about the kind of change that was going to happen over the next two to five years in just six months. The consumer has adapted quickly to digital delivery and I don’t mean just the younger demographics.”
Keeping the Pedal Down
Fagan believes credit unions must keep the “investment pedal down” with digital delivery if they are to remain successful.
One big reason, he continued, is membership growth will demand the close attention of CU leaders this year.
“The branch network has always been that key channel driving membership growth, but in 2021 we are going to have to figure out new ways to drive member growth in the electronic space,” Fagan said. “Figuring out how to drive membership growth in the new digital age will be a key challenge for credit unions going forward.”
Chuck Fagan
This year, too, credit unions will need to become comfortable with driving efficiencies via artificial intelligence and bots.
“It doesn't mean people are going away; we’re still a people business,” Fagan said. “But it does mean we can make the resources we have on hand that much more efficient utilizing these more modern technologies.”
Another Key Driver
While technology will be a key driver of CU business, so will credit union attention to their local communities, particularly small business, said Fagan.
“Credit unions, with their local ties, really can be a savior and a huge resource for the small business segment going through and coming out of the pandemic,” Fagan suggested.
And yet it still all comes down to member experiences, whether that means serving small business or consumers, and it must be personalized. Fagan said that can only happen through the greater use of data.
“I think now, especially in a pandemic, consumers are looking for a personalized experience,” said Fagan. “Using data and analytics positions credit unions to provide a more personalized experience, which really goes to the roots of credit unions. Those who take advantage and really maximize the opportunity around information and analytics are going to see strong growth.”
Consolidation will continue and possibly even pick up pace within credit unions as the industry comes out of the pandemic, predicted Fagan. He said while regulators will drive some of the mergers, what’s going to markedly increase attention to consolidation is more credit unions seeing the benefits of scale to compete with the larger financial institutions and to continue to offer all of the new products and service delivery methods consumers are seeking.
The Migration Continues
Fagan also believes consumers will continue to move their daily transactions away from branches to digital, and that offices will move quickly to become centers for members to discuss life event needs.
With major credit union revenue streams—particularly auto lending and payments—being challenged not only by major players, such as automakers and their rock-bottom financing during the health crisis, but fintechs as well, credit unions are going to have to seek help from tech startups and CUSOs.
“It is going to be increasingly important in 2021 to be open to technology partnerships,” said Fagan. “You can't just check the box here. I'm saying you have to have technology in place to compete against the Chases and Wells Fargos, as they increase their investment in digital channels.”
A Final Question
Finally, credit unions have to be considering what the CU’s working environment will be like once the health crisis ends.
“As we head towards the latter stages of the pandemic, which I hope will be in 2021, what is the work environment going to look like? Do many employees stay remote? Do you go to a hybrid model or come back full steam into the office?” said Fagan. “I think that approach is going to be customized by each institution. At PSCU, we are calling this R2B2—return to business 2.0. We have a cross-functional team thinking about every aspect of how we return to whatever environment it might be once this is all over. And the team has employees’ best interests in mind. The team is really doing a heck of a job in terms of planning what this will look like, such as touchless doorway entries and dividers between workstations. They are putting videos together to share with employees and show them exactly what the new work environment will be. We want our entire staff engaged.”