By Ray Birch
SCOTTSDALE, Ariz.—Since most credit unions lack the resources to be technology builders, they naturally buy and integrate new solutions. But to be effective in doing that requires top-notch coordination and integration methods organization-wide, and that’s not always happening, according to one company’s analysis.
But that’s not always happening within CUs, says Sam Kilmer, senior director with Cornerstone.
“We all know that building technology is, for the most part, not realistic for most credit unions,” said Sam Kilmer, senior director with Cornerstone Advisors. “So whether the CU is buying, partnering with CUSOs, whatever the approach to innovating, coordinating internally and leading technology provider relationships to the right benefits is vitally important.”
Kilmer explained that in Cornerstone’s work with credit unions the company has found that the most common breakdown in maximizing vendor benefits is not the vendor.
“It’s internal coordination, or lack thereof. Specifically, a need for lines of business leaders—lending, e-commerce, payments, etc.—to be coordinated in a total approach with CIO and others as a check and balance on getting the benefits.”
Often Informal Process
Kilmer added that in many credit unions the process is too informal or not done at all.
“In turn, it ends up causing both a lack of innovation and a rise in finger pointing and toxic relationships,” he said.
But Kilmer said credit unions have no choice but to get the process right, given market pressures from big banks and other providers to introduce more new technology, such as improved mobile platforms and automated lending.
“The pace of technology change is increasing,” said Kilmer. “Expectations from members are increasing because of Chase, Ally, and Wells Fargo, for example, that have been very aggressive at rolling out new technology.”
Cornerstone Advisors’ Managing Director Brad Smith said that when it comes to managing vendor relationships, credit unions have gotten better at holding themselves accountable for the cost and risk sides of the relationship.
“But we don’t have the discipline and accountability for what is the business case for embarking on this new technology venture other than it’s the next cool thing, it is what Millennials want, or it’s what other credit unions are doing. We don’t do a good job of establishing what success looks like—and that means metrics.”
Smith said that the key to delivering any new technology to consumers is not just rolling it out, but rolling it out well. He said that many credit unions, unfortunately, simply look at new technology as the next cool thing but fail to define what success of each new tech addition looks like.
“It sometimes gets down to, ‘Let’s try this.’ But in 12 months later the CFO may ask, ‘How are we doing on this?’”
Kilmer and Smith emphasized that the credit union must establish a companywide process for selecting, evaluating and deploying new technology, especially since tech is now being rolled out in virtually all areas of the organization.
“It is not just the job of the CIO anymore,” reminded Kilmer.
Smith said that not all areas of the company play well together to bring in new technology, and that it is critical that they learn to work as one team.
All About Culture
Sam Kilmer
Smith said the credit union needs to establish a culture that tackles new tech holistically, and looks closely at what the CU is trying achieve.
“It’s a culture around metrics based management and having common lingo within the organization and then some cross-functional group—it could be the executive team, the product committee or a technology steering committee. You come to this group when you have a technology request. And then it’s a portfolio approach, and not just about another good idea. It’s we have five good ideas to consider, so let’s talk about the business case for each and then prioritize, considering the three legs of the stool—cost, benefit and risk.”
But Kilmer cautioned that in the move to a “holistic” approach a credit union cannot confuse standardization with centralization.
“A lot of times what you will find is that credit union executives will confuse standardizing something with centralizing something. For example, one way to tackle this issue is to have the CFO assert himself and say, ‘We will centralize this. I will review every major vendor agreement over X number of dollars and I will be personally involved in negotiating these deals.’ So effectively you create something close to a standard by centralizing it.”
But Kilmer said this is one aspect of the business where that approach does not work.
“There are too many different areas of the credit union deploying new technology,” he said. “The cat is out of the bag and technology deployment is not just coming from the CIO’s office anymore. So you can’t say you will fix this with centralization because you will kill the credit union’s culture. Instead this calls for a set of standards and a systemic level of coordination. And don’t think committees or meetings, think more along the lines of a review process.”