Dancing with the Dinosaur

I was reading an article authored by Marc Rapport, senior writer at Callahan & Associates, called “All For One or One For All?” comparing the different technology strategies of two credit unions in close proximity to each other and both relying on select employer based growth. The two Midwest credit unions are BCU (formerly Baxter Credit Union) and Four Points Federal Credit Union.

What struck me was how different these two credit unions view their technology strategy and how one of the two credit unions is completely comfortable allowing their future to be dictated by a company that may or may not have their best interests at heart.

According to the article, the reason Four Points Federal Credit Union is willing to allow this level of control to a third party core data processing vendor is “trust” and “we could have gotten different components from different companies and then have them dicker with one another all the time, but I don’t have time for that”. The credit union CEO goes on to say, “Regarding its new provider, the agreement stipulates that the credit union will not face any rate increases throughout the life of its contract. In addition, the credit union’s staff will also likely benefit from the new system’s enhanced core accounting functions. The member service pieces are intuitive and seem easy to learn and use.”  He further goes on to say, “This whole idea of putting all your eggs in one basket can be an issue,” he says. “But I’ll take that over the alternative of integrating everything and managing different vendors.”

WOW is all I can say. Let go through this point by point.

We could have gotten different components from different companies and then have them dicker with one another all the time, but I don’t have time for that”.  The credit union does not have time to effectively manage one of the most important and most capital intensive areas of their business. Gone are the days you open and staff a branch, and rely on members to come flocking through the door. The retail financial services sector is under attack on many fronts. Members/customers expect more. They expect 24/7 365 access to all banking products, services and transactions. What can be more important than developing and managing strategy to meet those expectations in a timely manner? Do not have time for it?

Regarding its new provider, the agreement stipulates that the credit union will not face any rate increases throughout the life of its contract. In addition, the credit union’s staff will also likely benefit from the new system’s enhanced core accounting functions – WOW no price increase until the credit union realizes it needs a new solution that they currently do not offer. Then what is the credit union’s choice, go back to the core vendor and hope they have the solution and will be fair in the price they charge (remember they need to make up that price guarantee somewhere) or …… oh I forgot, they do not want to dicker around with other solution providers. Price may be important, but can’t be the overriding reason a technology decision is made. I also love, “the staff will also “likely” benefit from the new accounting system.” At least a couple of back-office people will be happy.

It is the last statement that kills me.  “This whole idea of putting all your eggs in one basket can be an issue,” he says. “But I’ll take that over the alternative of integrating everything and managing different vendors.” – So expediency and lack of desire to manage vendors and relationship trumps or limits the credit union’s ability to define and deliver a comprehensive digital strategy.

The coup de grâce is “the go-live date for the new system is April 30, 2015, but that timeframe depends on the exit negotiations with Fiserv.” How familiar does that sound from the big-box core data processors, as they jump from one to another?

Unlike Ron Shevlin, (if you do not already, you should read his blogs, they are very entertaining) who loves skewer unsuspecting bloggers and article contributors, I bring this article to the forefront not because I want to attack the credit union CEO. I bring it forth as an example, because what was said by the  Four Points Federal Credit Union CEO is so typical of so many credit union and bank CEOs and executives.

I am not suggesting that all credit unions need to be as aggressive as BCU in managing its technology strategy, but I will say that they need to be on that side of the ledger. If you don’t control how your credit union digitally delivers its products, services and transactions, then you have little hope of formulating and executing a digital banking strategy that will satisfy your members/customers and allow you to compete/remain viable.    

Dinosaurs were once dominate creatures, but where are they now? Credit unions and banks that don’t face the rapidly changing realities of the retail financial services market face the same outcome.

Let’s look a little more closely at the performance these two credit unions as of June 2014.

	BCU – Peer Group 1B+	Four Points – Peer Group 100MM to 200MM
Member Growth	8.59%	-5.65%
Peer Group Member Growth	6.2%	-1.58%

Membership growth is generally seen as an indication of a credit union’s membership satisfaction and/or the credit union’s ability to meet the needs of their membership. Is BCU’s technology strategy, which is polar opposite of Four Points’ technology strategy, the reason BCU is exceeding their peer group in membership growth and Four Points is under performing compared to their peer group? I don’t know the answer, but it is a good question that deserves an answer.

Credit unions and banks must become more invested in their technology strategy and its execution. The CIO of today needs to be a savvy business leader that is actively involved in shaping the direction of the credit union, then putting in-place the solutions necessary to achieve the corporate goals.  The CIO of today needs to be like the orchestra conductor, pulling all the pieces together to create symphonic harmony. If you are lucky enough to have a CIO like Jeff Johnson at BCU consider yourself fortunate. They are hard to find and just may just hold the future success of your credit union in their hands.    

Bi-Direction Channel Banking, the Next Step in the Customer Experience

Omni-channel banking correctly places customers or members at the center of the banking experience. Allowing customers the ability to access multiple banking channels while providing the customer the ability to begin a transaction on one channel and complete the process where they left off on another banking channel is integral to the successful implementation of an omni-channel strategy. Bank and credit union customers are beginning to expect to be able to move between banking channels using a simple, intuitive, consistent and interactive user interface.

Successful implementing of an omni-channel banking experience may seem like the epitome of customer service success. It is not, it is only halfway there. The best customer experience can only occur if both the customer and the bank/credit union customer facing teams are on the same page, accessing the same information in real-time, without having to migrate through and between multiple banking systems. Financial products and services are often complex and numerous, resulting in many desperate banking systems that may or may not effectively communicate with each other. Middleware and a front-end UX system that can interface with these different systems and display the information in a user friendly, coherent manner is required for a bank or credit union to be able to deliver a successful customer or member omni-channel banking experience. 

Omni-channel banking is providing the customer or member with access to all banking channels in a seamless and unified manner. Providing BOTH customers and bank/credit union employees with access to all banking channels in a seamless and unified manner closes the service/user experience loop, which I call “bi-direction channel banking”.  

Bi-direction channel banking is the ultimate bank customer or credit union member user experience.  To create a truly great customer experience both the customer and the customer facing support team must have real-time access to a single user interface that allow them both to access the same data and information. Despite bank’s and credit union’s desire to create easy to use self-service products, transactions and services, invariably bank and credit union personnel have to interact with the customer to either resolve a problem, answers a question, provide advice or counsel, or assist with the process. Unlike online retail stores, financial products are often complex, require multiple decisions and product knowledge expertise.

Multiple banking systems are a fact of life for credit unions and banks. The complexity, processes, external transaction networks and regulation involved in banking makes having a single banking system impractical. Instead of focusing on a single system, embrace what each of these individual banking systems do, …. process and manage transactions. The vast majority of banking systems were developed for internal back-end use by bank or credit union staff. As the transition from brick and mortar banking to digital banking has evolved, those legacy banking system have not evolved with the change. As a result, credit unions and banks are trying to deploy customer/member facing banking systems that were designed to be back-end employee facing systems.

By focusing on the presentation layer and integration middleware layer, banks and credit unions have an opportunity to maximize their investment in existing banking systems, while being able to deploy bi-direction channel banking using customizable user experience (UX) presentation/middleware platform.  In order to deliver a seamless customer experience credit unions and banks need to deploy technology, re-organization, processes and training that are externally focused while closing the loop so employees and customers are working from the same playbook. The future of banking is bi-direction channel banking, the next step beyond omni-channel banking.