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Accelerating Your Credit Union's Digital Roadmap to Keep Up with A Digitally Dependent World

By Arcady Lapiro09.14.2020

The COVID-19 pandemic has dramatically altered the way members interact with their credit union.

According to the World Retail Banking Report 2020 from Capgemini and Efma, consumers increasingly prefer digital engagements with their financial institution post-COVID-19, with 30% willing to shift financial services to BigTechs/fintechs because of unsatisfactory experiences with their primary institution.  The survey indicated that branch banking may bounce back to pre-covid-19 levels post pandemic; however, digital banking will witness significant traction. This will drive banks to rapidly build digital capabilities.

Credit unions face the challenge of keeping up in the digital banking arms race while also maintaining the personal touch that sets credit unions apart for their members. During the pandemic, as states face various levels of shelter-at-home orders and restricted business openings, credit unions must ensure that their members can always access their money and that their credit union can aid in times of hardship.

This has resulted in credit unions accelerating their timetable for rolling out digital banking offerings. Plans to enhance technology that may have been made for a roll out over the next couple of years are now happening in a matter of months as COVID-19 has taken a toll on current initiatives. This is especially true for smaller financial institutions and credit unions as they do not have the money or scalability that megabanks have.

Prioritize Digital Banking Needs

While it is easy to say credit unions need to ramp up digital banking offerings, budgets and capacity require leaders to prioritize their efforts to those areas that will have the biggest impact.

The Capgemini and Efma research found that following COVID-19, 55% of customers prefer mobile apps for banking, up eight percent prior to the pandemic. Additional research from nonprofit organization BAI found that this trend accelerates for the youngest generation, with 74% of Gen Z indicating an overwhelming support for online, mobile and self-service channels.

Among those tools that have experienced the most demand during the COVID-19 pandemic are mobile banking apps, direct P2P payment offerings and online-based member support, such as video chat or chatbots. Members also need mobile deposit options, especially as Congress debates a second round of stimulus checks that could go out later this year.

Sankar Krishnan, EVP and industry head, banking and capital markets at Capgemini, said that in addition to prioritizing the tools to implement first, credit unions also face the challenge of ensuring there are enough personnel resources to manage incorporating new technologies.

Roughly 75% of credit unions say they need external teams to take on the new tech, which means more money spent from an even tighter budget.

Build, Integrate, or Partner?

Once a credit union’s leaders decide on their priorities, they must find the best approach to rolling out the new offerings.

One option is to build (or buy) the digital tools from scratch, but the long development time and costs involved make this option not a realistic option for most credit unions.

Most often, credit unions rely on their core processor for additional digital banking solutions. These are sometimes built by the core and sometimes are integrated offerings they provide from outside fintech companies. The advantage is that ideally these digital banking tools work smoothly with the core, but the reality is often less rosy. Old core software is not optimized to run mobile-first environments and often the third-party integrations are not as seamless as they appear.

A third option has been to mirror the success of challenger banks, which have become a primary competitor for credit unions. These banks leverage APIs and other open banking tools to connect quickly to customer databases and provide mobile-first accounts and services.

Instead of a core conversion, Arcady Lapiro, CEO of Agora Services, says credit unions should look at the Amazon model and seeking partners that can provide the needed digital services that sit on top of their existing core, and enable additional capabilities to be added with ease. This allows for members to have the control, customization, and convenience they crave, while eliminating the hassle of a conversion or complicated integration.

Credit union leaders should therefore seek to partner with companies that can offer standardized tool kits to optimize credit unions’ digital capabilities. By adding on to what the core offers, the new offerings would not take away from the services already available or interfere with the core.

Krishnan added that these types of services allow for quick integration that can be deployed in a short amount of time which is vital for credit unions given the current climate.

Lapiro said that instead, credit unions could offer challenger bank-type services by working alongside their existing tech infrastructure. Common options that could be leveraged include white-labeled products that fit the niche needs of the members, such as teen accounts that allow for money management of both teens and their parents. Another common need in the pandemic economy is special mobile accounts for contract and gig workers to receive faster payments and manage their finances on the go. Other capabilities allow for multi-access accounts that benefit elders and their caregivers to assist in money management.

Regardless of the method they choose, credit union leaders have a small window of opportunity to cement member loyalty with digital banking options that will enhance the member experience and meet their financial needs during the pandemic.

Optimize your credit union to remain competitive and to continue to deliver top level technology and services to your members.

Arcady Lapiro is CEO and founder of Agora Services, which offers financial institutions a customizable cloud-based offering that enables banking customers to create new banking products.