PORTLAND, Ore.–What would credit union pioneer Ed Filene think were he in a credit union lobby or attending a credit union meeting today?
That question comes courtesy of Mark Meyer, CEO of the Filene Research Institute, who wants credit unions to pause for a moment and think about that.
“What’s different about the conversations around our members’ kitchen tables about their hopes, their wants, their dreams, their fears,” asked Meyer. “If Ed were in the room, what he would want us to think about?”
Meyer told the Northwest Credit Union Association’s Amplify meeting here that there are other fundamental questions for credit union people to ask themselves, including their own level of belief in the credit union promise, as well as their level of preparation for the “war for talent” every credit union must engage in. “The people you bring in are going to be the ones who enable all this,” observed Meyer.
After noting all the positive news around credit unions, including a recovering economy, stronger consumer confidence, and rising membership numbers, Meyer touched on another development many in credit unions might immediately see as a negative, but he disagrees.
“In last four years, Fintech has funded 1,092 companies to the tune of almost $17 billion,” said Meyer, standing next to a crowded slide showing new players in the lending, personal finance, payments, retail investments, crowdfunding, remittances, financial research, and consumer banking spaces.
What's That Smell?
“Smell that? This is the smell of opportunity,” said Meyer. “People are ready to digest their financial services in different ways. I’d be running for that exit sign if no one was trying to get into our backyard.”
Meyer pointed to data showing that during 2014 more than one-million households entered into new primary banking relationships, as well as 2013 research that found 46% were unsatisfied with their existing relationship.
But are credit unions prepared to handle those new consumers, and are their services on par with consumer expectations?
In 2013 the Filene Research Institute and 65 credit unions conducted a pilot with Amazon that involved a member filling out an application for a credit card. Seventy-three percent of the 65 credit unions required a manual intervention that took up to 24 hours or longer to complete.
“We thought credit unions were ready to play here, but we had to back up and say ‘We’re not ready to go there yet’,” recalled Meyer. “Go visit all of the plumbing in your member experience and see what that feels like.”
As an example, Meyer showed one credit union that watched through a one-way mirror as people attempted to fill out its online mortgage application. Another example: cold-calling the CU’s call center. “Its ‘Dial 0 for operator. Dial 0 for an operator. It’s not by intention. It happens.”
Two Questions Around Relevance
Citing research done by Bruce Kane for Filene around the issue of relevance and other opportunities every credit union has:
- Act as brokers of trusted identity in the sharing economy. “Your identity could give you ways to use/share assets rather than just buying them.”
- Act as knowledge transfer hubs, a place not just for pooling capital, but also for pooling experience and advice.
“One other thing Ed would say is this: ‘You hold something so dear and so precious, and you know what it is: trust,” said Meyer. “No matter who does the research, credit unions come out on top in trust. But you have to get past attention deficits. How do you drill through that? It’s another journey. But it gets back to one key thing: make sure you are Sesame Street simple and people will get it.”
A big part of keeping it Sesame Street simple means recognizing that “80% of successful growth comes from aligning strategy with consumer needs,” said Meyer.
With disruptions to the financial services market coming almost daily, Meyer urged credit unions to understand that that strategy alignment must apply not to where consumers are now, but to where their needs are headed. For credit unions, for instance, that could mean realizing that no one has a car loan in a driverless car future where consumers just subscribe to vehicle/transportation services. It also means understanding the “demographic earthquake” that is occurring.
The Filene Methodology
To help credit unions get there, Meyer pointed to the innovation process model that Filene has developed over the past 10 years. That process:
- Build a simple prototype, validate need plus the concept.
- Launch small control group alpha pilot; pause, evaluate results, learn and improve.
- Launch a larger more expansive beta pilot, pause, evaluate results, learn and improve.
- Implement or scale.
For those that don’t want to innovate, there’s another option: “Do nothing and die,” observed Meyer.
But for those credit unions that do want to innovate and adjust to a disruptive market, Meyer urged each CU to have a research and innovation budget, and then to go an extra step. “Include appropriate innovation/discovery expectations in CEO/employee goals,” he said. “Enable the concepts of pilots and prototypes, and support small failures.”
Much of that will require hiring new people with different skills. He pointed to Jim Collins’ book “Good to Great,” which asks, “Are you engaged in the war for talent? Do you have the right people on the bus?”
And throughout all of that, Meyer reminded, credit unions need to remember the critical importance of belief in the credit union promise, ideals and passion.