By Ray Birch
RANCHO CUCAMONGA, Calif.—A new year brings new plans for most credit unions, but if that planning process and the assumptions underlying the plan haven’t changed, it’s going to be very difficult to succeed in the new digital financial services market, according to one person.
And that’s before any discussion begins around how the budget likely needs to grow.
Todd Clark, president and CEO of Co-op Solutions, told CUToday.info those issues when not addressed correctly are not only hurting cooperatives in the current market, they are making it very difficult for them to plan for a banking world that is changing rapidly.
Clark emphasized the clock is ticking on credit unions making sound plans for the future.
“Over the last few years, we've seen credit unions fall behind banks from a from an experience perspective, and from a satisfaction rating,” said Clark, referencing the ongoing decline by credit unions in the American Consumer Satisfaction Index (ASCI) annual study. “It is critical that credit unions address this and also imperative that they do all this while managing rising expenses.”
Clark acknowledges the task is not small pointing to the numerous digital solutions available to consumers and the ease with which they can be “digital nomads.”
“They can go between financial institutions pretty easily. And the good news is credit unions have the right motivation. They've got the right heart about it. They just need to embrace the technology as much as they can and as quickly as they can.”
About This Series
Todd Clark
As CUToday.info has extensively reported, credit unions, their vendor partners, and even regulators already know all about the “new normal” when it comes to meeting member and potential member needs. For longer-term leaders of credit unions and their supplier partners, that doesn’t mean the new normal is easy—old mindsets and expectations can be very difficult to overcome and all that change can be uncomfortable. This CUToday.info series looks at how credit unions are approaching their planning for 2023 and beyond with the new year upon us.
While all of the change puts even more onus on planning, Clark emphasized the timeframe ecompassed by strategic plans just keeps getting shorter every year.
“From Co-op’s perspective we always have a 10-year plan, but it’s updated every year. And, it's amazing how much it changes anymore,” he said. “I believe the one that we also do from a three-year perspective is probably what I would consider the best solution.”
The New Premium
What all that adds up to is a premium on being able to quickly adapt, according to Clark.
“In 2021 we were three months into the year and we realized that some of the things we're working on weren't the things we should be working on,” recalled Clark. “So, mid-year we made a pretty seismic shift in our new products.”
One of the lessons coming out of that, according to Clark, is the old habits and practices that had been in place for years when it came to strategic planning—in particular, setting a plan and staying the course–needed to change.
“You just have to be ready to change your plans at any time. The last three years have never been better evidence of that,” said Clark. “I mean, none of us planned for COVID. And if somebody said they did, they're not telling you the truth.”
That includes contingency planning, which Clark said has never been more critical.
“Again, who would have ever thought we’d close down the world for a year and a half?” he observed. “And now we've got the uncertainty of interest rates and a recession. There are a lot of things you have to prepare for today.”
The Question
Among those things that require preparation is the question of whether to build, buy or partner when it comes to providing digital services, Clark told CUToday.info.
“Credit unions deal with this notion of do we build it ourselves? Do we buy it, do we partner with a fintech? And that is a challenge that we often face,” he said. “I think more often than not what I hear credit union CEOs saying is they are bound, or shackled, to old technology. I talk to credit unions all the time and they recognize that their core provider, or their payments provider or their digital provider is not really meeting their needs. But they also don't want to be the one who has to go through a conversion.
“And sometimes you have to be bold, right?” he continued. “You have to embrace new technology and you have to go after new technology to keep yourself competitive with the Chimes and the SoFis—and also with the BofAs of this world who are investing hundreds of millions of dollars every year in their digital footprint as they shrink their physical footprint.”
Mixed Approaches
Clark believes credit unions are mixed on whether they are investing the kind of money in technology they need to compete.
“Sometimes it is easy to spot who is doing it right and who is not,” said Clark. “When I first came to Co-op we thought of credit unions as big, medium and small. But today we also think of them as progressive or not. It's pretty easy to see who is actively being progressive and who is not, because the ones that are not are the ones that are getting merged out.”
Overarching all of that is another change that has taken place in an evolving marketplace—the trust and goodwill that so many credit unions built with their members over the decades is simply no longer enough to stop those same members from going to another provider.
“So, as we think about build, partner … CUSOs are a good place for credit unions to put their money—combine their resources and then attack large problems,” Clark said.
What Cannot Change
And at the core of all that planning for change, Clark reminded, must remain a singular focus.
“The one thing that can't change is the commitment to financial well-being of their members,” said Clark. “That's how they win.”
To that end, Clark added that Co-op recently published a white paper: Building the new member-centricity: A blueprint for credit union leaders.