Why the Status Quo Must Change - What Banks Can Learn from Credit Unions

Credit union membership declined from June 30th 2013 to June 30th 2014 at 54% of all credit unions, according to NCUA data.  Median credit union membership was also down

0.4%. for the same period. Overall credit union membership grew 3.7%. Also, during the same period the NCUA approved 234 credit union mergers and 20 were closed by NCUA supervisory action. The number of credit unions is reducing by about three to three and a half percent a year.

The primary reason cited for credit union mergers according to the NCUA is to offer expanded member services.  U.S. financial institutions under a half billion dollars in assets have a difficult expense and income challenge, due in most part by non-existent economies of scale. As margins shrink, the mega banks get more efficient and technology demands and expenses increase, this challenge is going to become even more difficult to manage.

A look inside these numbers reveal what most industry analysis have been saying, the large get larger and the small are getting smaller.

Membership in credit unions with assets:

• Over one billion dollars grew 6.2% 
• Between half billion and one billion grew 4.3%
• Between 250 million and 500 million grew 1.5%
• Between 100 million and 250 million grew 1.4%
• Less than 100 million shrank by half percent.  

Only 7% of all credit unions, 456 out of 6,558 exceed a half billion dollars in assets. Long-term, even the best credit union executive management teams will be extremely challenged to operate viable credit unions under half billion dollars in assets unless they identify and serve a special niche and recognize that their ability to compete in the digital banking space will become more and more difficult. Credit unions must find a way to achieve greater economies of scale to reduce operational and technology costs. 

The chart below shows the inefficiency of credit unions as their size decreases.

What is an acceptable efficiency ratio target? There are several high‐performing credit unions nationwide that have set long‐term targets to move toward a 50% efficiency ratio. Cornerstone Advisors, Inc. recommends that all credit unions target at least a ratio below 70% and more optimally somewhere between 60 – 65%.

For comparative purposes, the operating efficiency ratio for all banks average 65%. Community Banks’s average efficiency ratio is 73%

Banks under a half billion dollars in assets face the same challenge as their similarly sized

credit union peers, the inability to achieve economies of scale to move their operational

efficiency to the level believed necessary to be able to compete long-term in the retail financial services space. Where banks have an advantage over credit unions is that 19% of banks (1,090) are over a half billion dollars in assets compared to only 7% of credit unions (456).  As of June 30th, 2014, there are 12,315 credit unions and commercial banks. Both are shrinking at 3% to 4% a year. Of the 12,315 financial institutions, only 12.5% exceed a half billion dollars in assets. 10,769 banks and credit unions have an asset based of less than half billion dollars. How do they continue to compete? Through cooperation and collaboration!

The most effective way to for banks and credit unions under a half billion dollars in assets to achieve economies is through a cooperative effort that provides technology solutions and combines back-office operations for multiple banks or credit unions. Credit unions have used with mixed results “credit union service organizations” (CUSOs) designed to provide either operational or technological economies of scale. CUSOs are generally non-profit entities that are owned in-part or wholly by the credit unions that use the CUSO’s services.

As a former executive of a core data processing CUSO I have seen the strengths and weaknesses of the CUSO models. Generally the most successful CUSO’s focus their services around transaction processing and transactional services, where economies of scale can be achieved. The less successful CUSO’s tend to focus on the development and deployment of their own proprietary technology solutions. 

Why are technology/software development CUSOs less successful? Software development, technology hosting, support, installation, data conversion and distribution is expensive and capital intensive, and generally cannot be spread over a large and diverse base of customers. A CUSO by its nature serves a limited number of credit unions. The limited number of credit unions is a catch 22. The capital required to fund a technology CUSO is too high for the limited number of credit unions and the CUSO needs capital to grow.

I believe the successfully CUSO model must adjust from being transaction orientated to being both transaction/back-end oriented and a technology aggregator. By combining transaction processing with non-proprietary technology solutions, CUSOs have an opportunity to deliver:

1. Lower back-office/back-end operational costs
2. Favorable technology pricing through aggregation and distribution

There is a CUSO network that has successfully moved towards a hybrid of this model, 

Michigan based CU Answers, Xtend and eDOC, who are all part of the cuasterisk.com brand, a network of credit union owned CUSOs. These three entities are headed in the right direction, although they rely on the development of their own technology solutions. Their primary market is smaller credit unions, however, the true value of this solution must be recognized by credit unions of all sizes. 

For this CUSO model to work, the CUSO must have strong and focused management with a clear mandate and vision. Too often CUSO boards consisting in-part or in-whole of credit union CEOs that own the CUSO, but have little knowledge about the business the CUSO undertakes. The result is they fail to establish a clear vision, set a clear mandate and metrics and fail to see the big picture, instead focusing CUSO management on their individual credit union requirements/expectations. My best recommendation to CUSO owners, hire qualified management team, hold them accountable and then get out of the way. 

Bankers and larger credit unions executives ask, “Why would I want to partner with a competitor”? Good question, and the answer are simple, “Survival”. The end isn’t coming today or tomorrow, but what about five or ten years from now? The consolidation numbers are real and are not going to slow down. In fact, I expect consolidation, mergers and acquisition to start growing at a faster pace. 

The time is quickly approaching when bankers and credit union executives must begin to consider alternative business models in order to remain sustainable. Back-office/back-end processing is a transaction commodity process that does not offer a sustainable competitive advantage. The right technology vision and solution mandate will allow common back-office processing, achieving transactional and back-office economies of scale while offering a customizable user and staff interface, workflow, business rules and data analytics  that can be customized by each credit union or bank without adversely affecting the technology platform and follow-on upgrades. Think of Salesforce and similar SaaS platforms that are customizable and unique to each company, but still run on a common platform in a cloud environment.

Survival of banks and credit union under a half billion dollars in assets may be dependent upon them competing on the front-end and cooperating on the back-end.  

What is the triggering event that will cause banks and credit unions to examine and take action on this idea, or is the inertia so great that it is like a frog placed in cold water that is slowly heated a boil? 

What is the water temperature at your credit union or bank?   

Do We Need Better System Integration or Fewer Systems to Integrate? (Gonzo Banker)

I read an article ”Do We Need Better System Integration or Fewer Systems to Integrate?” by Terence Roche, co-founder of Cornerstone Advisors and contributor to Gonzo Banker. In the article he says, “If I were to go to most bankers today and ask them what one thing they would do to improve their systems environment, a large number would say better integration of the systems they are using. Ten years ago, if I had asked them that same question, the majority probably would have said - hang on to your hats here - better systems integration. Despite a lot of focus on middleware, application programming interfaces (APIs) and other tools, this issue has never stopped being top of mind with system users.”

He goes on to suggest that the solution is not better system integration, but rewriting systems following the design principle of other industries - customers and employees use a common system and the front-end experience is the start point? He cites Amazon, Uber and FedEx as examples of other industries to follow. 

I accept the author’s premise that banking systems need to be built around the front-end member/customer experience first and then the back-end that credit union and bank employees access and use to support the member/customer. From that point forward I will argue the opposite as it relates to the solution he proposes, rewriting the many banking technology solutions into a single platform. 

He rightly points out that back-end banking systems (their core processing systems) were written 20 to 40 years ago and are based on antiquated technology. They were designed before self-service or member/customer facing solutions were even a twinkle in the eyes of the developers. They were batch systems designed to process transactions. 

Unlike Amazon, Uber or FedEx, the level of innovative solutions (third party and homegrown), complexity, high level of expertise required to create and deliver these solutions and the ongoing regulation that must be overcome is limited, compared to what banks and credit unions face.

To expect a company with a single banking technology platform to develop, deliver and support all the technology solutions to meet the needs of their customers, regulators and employees is not practical. There are several core data processing companies that have gone down that road with very limited success. 

Why not build a single member/customer and employee user interface (UX) platform that accesses all these diverse systems and databases and let the diverse systems and databases do what they do best, process transactions? The result is a single member/customer and employee UX with integration to all of the credit union’s/bank’s front-end, back-end systems and supporting services. How data is input, retrieved and used would be dependent upon how the credit union or bank design their user interface (UX). Designed around business rules, workflows, and decision matrixes, this UX using today’s technology can be built around drag and drop and customization menus. Work that can be done not by credit union/bank IT programmers, but by the new banking team of the future:

1. Data analyst - Google has even created a new name for this position, Data Scientists
2. User experience designer - Must be able to tell your story in a simple and in an intuitive way
3. Algorithmic risk specialist - Identifies risk through multiple data sets without requiring input from the users
4. Predictive analytics - Provides services, solutions and expected responses at just the right time, "the magic second" of opportunity.
5. Behavioral psychologist - Must understand your members or customers, their desires, buying and behavioral patterns. The future of bank marketing is behavioral patterns not demographic profiles
6. Social media expert - The person that develops the message and engages your members and customers

The sheer complexity, services integrations and number of technology front-end and back-end banking systems make a single rewritten system with the required specialization and ongoing regulatory compliance almost impossible. A single system is a utopia that will not happen.

Credit Unions to their credit are actively designing a standard interface protocol “Credit Union Financial Exchange” (CUFX) led by the CUNA Technology Council that will help facilitate integration between technology solutions. A UX platform integrated with the credit union’s or the bank’s front-end, back-end and outside services have a much higher probability of success and is a realistic goal to achieve omnichannel implementation than a rewritten single technology platform.

For your enjoyment, a fun cartoon about and OmniChannel Banking. It hits the mark. 

Putting the Digital Banking Puzzle Together

Digital banking is a relatively new term that encompasses ATMs, mobile banking, online banking and has expanded to include essentially all banking channels except for the branch. Like most iterations, digital banking started as a single solution, ATMs, but really gained traction as a term when online banking and mobile banking were introduced.

The result of this iterative process has been the implementation of a "collection" of technology solutions that are intended to allow credit union members and bank customers to digitally interact conveniently and effectively with their financial institution. Let's call this Digital Banking 1.0

Problems with Digital 1.0 are abound. The first problem is a lack of strategic planning and thinking as the new technology solutions and channels were introduced. The agenda and digital innovation are being driven by the major national banks that either have the resources to develop the technology or have acquired the technology. Everybody else is following, trying to keep up. As a result, there is no digital strategy, it is all reactionary, and digital implementation is a hodgepodge of disconnected solutions.

I was having lunch yesterday with a couple of friends and a discussion about banking began. How exciting I must be as a lunch companion. A question was asked, "Who has an account at a credit union or small bank?" They are both in the millennial generation and confirmed that they both have an account with either a credit union or small bank. I asked, “do you also have an account with a major national bank?" Again they both said they do. I then asked, “who do you prefer to do business with?" They both expressed a preference to for their credit union or community bank; however, both of them almost exclusively use the major national bank. I asked why? They both said, "Because they make it easy to do business with them." 

The credit union and community bank were their preferred financial institution because they provided better loan and deposit rates, better in-branch personal service, and they knew their names, but at the end of the day that is not enough to win their business. Why, because it is not easy enough to do business with the credit union or community bank. Both are relatively new to the Atlanta area. When they moved, their big national bank made the transition easy. To this day, neither one of them have set foot in their new branch locations. The lack of a comprehensive digital strategy sent these two high value customers to a large national bank.

This was a chance discussion, ............how often do you think this happens every day? The data is clear, according to the millennial disruption index study, Chase, Citi, BofA and Wells Fargo are among the ten least loved brands by Millennials. According to FICO's Forging Lasting Banking Relationships with Millennials, 68% of Millennials use Chase, Citi, BofA or Wells Fargo as their primary bank. Only 15% use a credit union and only 9% have a regional bank as a primary bank. More Millennials bank at national banks than any other generational group (55% for Gen X and 43% for Boomers). Why, because the big national banks have a digital strategy and are leading the market with the implementation of their strategy. 

It is past time for credit unions and banks to move into Digital Banking 2.0. You have lost

tremendous ground to the big national banks when it comes to the next generation of most profitable banking members/customers. It is not too late, remember they want to do business with credit unions and smaller banks; you just have to win their business by making it easy and convenient to do business with you.

How do you make it easy and convenient to do business with you?

1. By making digital banking a highest priority
2. By developing a digital banking strategy
3. By allocating the resources necessary to implement your digital strategy
4. By mastering social media communication
5. By treating digital banking as its own P&L channel, and not a channel to drive members/customers to the branch or call center
6. By quite asking the question was is the ROI. That is simply a question to stop moving forward. By the way, Forrester analysts have developed a concrete ROI for mobile banking of 15.7%, if that information helps you feel better

The first step is to assign or hire a digital banking executive to lead your credit union or bank into Digital Banking 2.0 

Credit Union’s and Bank’s Race Against Digital Darwinism

By Brian Solis

Digital Darwinism is a fate that threatens most organizations in almost every industry. Because of this, businesses not only have to compete for today but also for the unforeseeable future. Digital Darwinism is the phenomenon when technology and society evolve faster than an organization can adapt. There are many reasons for this of course. Every fabric of a company is strained due to internal and external influences. The challenge lies amongst the very leaders running the show today. Their mission and the processes and systems they support today may already be working against them. The financial services industry is quickly dividing into two groups:

1. Digital Leaders -  those financial institutions that have a digital strategy and embrace change
2. Digital Darwin’s - those financial institutions that face distinction through the lack of adapting to change

Technology is now part of life among those who live an active digital lifestyle. Connected consumers or Generation-C  or Information Age Generation as they are often referred represents a growing subset of consumers as a whole. They’re simply more connected than everyone else. As a result, they’re more informed and empowered. And, their expectations, at the same time, are soaring. They demand attention, personalization, and efficiency… their way.  And, they require that your values match their own. This goes beyond expectations. This is about entitlement.

To compete, to thrive, requires new perspective…now. It also necessitates transformation of the digital and philosophical kinds. Time is ticking. As customers and employee behavior evolve and once your competitors set out to address them, you’re reactions and actions seal your destiny and legacy.

The answer to digital Darwinism is digital transformation. Digital transformation is the use of technology and methodology to address shifts in behavior by upgrading or overhauling processes and systems that amplify existing and unforeseen opportunities.

Sounds easy right?

The real story is that most credit unions and banks aren’t ready to face this challenge. Turmoil exists inside as CIOs wrestle with existing roadmaps and managing legacy departments. Managers manage against dated procedures skillsets. Marketing, sales and service teams are missing customer touch points and needs because they’re unaware of new windows or customer suppositions.

Investing in technology is not the answer. That’s a reflex or a tactic. Building upon the house of cards that is your existing IT infrastructure is also not the answer. Investing in digital transformation to earn newfound relevance is the goal and the solution.  Now’s not the time for a wait and see mentality. If the culture of your organization is risk averse, one that waits for others to take the first step, trust me when I say that first mover advantage is indeed an advantage.

Capgemini and MIT Sloan set out to learn more about the challenges that face organizations, leaders and what they’re doing (or not doing) to adapt. In the seminal report released in 2012, “Digital Transformation: A Roadmap,” the team found that all companies surveyed face common pressures from customers and employees and as such, digital transformation is now inevitable. Successful digital transformation as validated by the report does not come from implementing new technologies but instead from transforming the organization to take advantage of new possibilities that new technology provides.

Yes, it’s complicated, challenging, and terrifying.  But it takes courage in the face of VUCA, volatility, uncertainty, complexity and ambiguity, to not only solve problems but admit that they exist. It also takes vision to see a new direction and leadership to unite teams and show the way.

The key to digital transformation according to the report, is “re-envisioning and driving change in how the credit union or bank operates. That’s a management and people challenge, not just a technology one.”

Everything begins with fixing what may not appear broken today. Start by assesses the experiences your members/customers are having today and how their online and mobile behavior is affecting decision-making. Then, re-think and redesign your member/customer journey. Examine how the current infrastructure of your organization can optimize performance or where it hinders it. The answer lies in new technology, processes and business models.

So what’s the answer?

According to the report, executives are mindful when approaching digital transformation, recognizing that focusing on any one area would miss the point. Capgemini and MITSloan discovered that digital transformation is unfolding in three key areas: 

1. Member/Customer experience
2. Operational processes 
3. Business models

The study also identified nine elements that defined each of the three pillars. They are as follows:

Customer Experience

1. Customer understanding
2. Top line growth
3. Customer touch points

Operational Process

1. Process digitization
2. Worker Enablement
3. Performance management

Business model

1. Digitally-modified business
2. New digital business
3. Digital globalization

Successful enterprises pursuing digital transformation incorporated several elements, in their own way, as the building blocks for technology, process, and business model investments. Interesting, and not a surprise though, that no company in the sample had fully transformed or embraced all nine elements. Of course they haven’t. This is leadership not management and the vision required to move forward is as elusive as the leaders who will lead digital transformation.

To come full circle, the report also outlines the challenges facing organizations to take the first steps toward relevance.

1. Lack of impetus rises to the top. Why change when the business is performing wonderfully as is? If the company is not experiencing pain, then it’s difficult to prescribe a painkiller. As the report notes, this skepticism often results in the investment of processes that prevent digitally focused experiments and ultimately business changes.
2. Regulation and reputation rightfully plague certain businesses, especially those in financial and healthcare. There’s a piercing fear of regulatory sanction. At the same time, there are reputational considerations that may carry a far more devastating outcome should something go wrong. However, there is hope. The study found the companies here are evaluating digital investments based on four criteria:             
         i. Economics       
        ii. Burning platforms     
       iii. Strategic foundation investments     
       iv. Low risk investments. Sometimes answers appear through every step you                  make, no matter how small.
3. Missing skills can prove fatal if not addressed sooner than later. Many executives use “professional judgment” to make important decisions about the future. Their competitors however are harnessing the power of big data to embrace analytic-based decision-making. Social media, mobile, big data, are just a few of many technologies disrupting businesses. I refer to this as the “Wheel of Disruption.” New skillsets are required to understand new tech, bring about change from the top-down and also to reverse mentor from the bottom-up.
4. Culture issues are often the chokehold of digital transformation. Sometimes, as the report notes, legacy leadership is part of the dead weight that prevents successful transformation and long-term viability. The best answer may in fact be to hire new leaders for their fresh perspective and the culture it can create. Successful enterprises also empower front-line workers to make autonomous decisions.
5. IT difficulties are often lacking in infrastructure and capabilities.  Personally, I see this as a significant challenge and to address it requires that the IT function undergo an overhaul starting with mission and purpose. You can’t lead transformation against the current technology roadmap. With CMOs estimated to outspend their CIO counterparts, IT should replace the “I” for information with innovation. You cannot innovate, adapt, or thrive if you build on top of legacy systems that prevent true integration or at least match how employees and customers connect and communicate outside the organization. 
   One executive was frank on the subject, “We have through the last 50 years proliferated our IT systems and applications. We don’t retire systems. We just add on top of them, which creates a tremendous amount of expense and complexity.”
6. Decision-making is slow, sluggish and often painful. Governance issues are rooted in the inability to get find and share actionable information across the enterprise. To do so requires changes in processes and decision-making enterprise-wide. Without a top-down approach, existing governance dampens the winds of change, thus creating coordination and collaboration issues. One group may solve problems but they cannot or will not collaborate with other units. The channel conflict is real and it must be addressed through an overarching, longer-term vision.
7. Vision is commonly nearsighted. No two visions are equal as they are measured by distance and loftiness. Sometimes vision is incremental and not enough. As the study notes, “Unless senior executives establish a transformative vision of the future, managers in the rest of the firm will tend to locally optimize within their own spheres of authority.”

Challenges exist in every organization. It is how leadership addresses them now and over time that defines their fortune and legacy. This is not a time for the spaghetti theory where stakeholders randomly throw pasta on the wall to see what sticks. This is about an investment in transformation to meet or exceed customer and employee expectations at every step of their journey. It takes vision. It takes courage. It takes resilience. Without it, organizations will continue to make the same mistakes as they always have. 

Technology isn’t the answer; it’s an enabler.

The real value of digital transformation pays its dividends in the short-term, but its true prize is one that remains out of reach. The goal is to create a culture of empowerment, agility, innovation, and engagement. Technology is not the answer in of itself. Technology is a way of life and business. Its impact on society is only accelerating. If you do not adapt, you will fall to digital Darwinism. You are competing as much for relevance as you are market share. By re-imagining your company’s direction and how it works, technology (and people) become part of the solution instead of the problem. This increases revenue, cuts costs and improves competitive advantages.

Who's on First? The Contradiction of Millennial Research

"Who's on First?" comedy routine made famous by Abbott and Costello speaks to the

confusion of communication. How can same thing have two polar opposite positions? Research about the Millennial generation seems to be research in contradiction. 

For example,  according to the millennial disruption index study, Chase, Citi, BofA and Wells Fargo are among the ten least loved brands by Millennials. According to FICO's Forging Lasting Banking Relationships with Millennials, 68% of Millennials use Chase, Citi, BofA or Wells Fargo as their primary bank. Only 15% use a

credit union and only 9% have a regional bank as a primary bank. More Millennials bank at national banks than any other generational group (55% for Gen X and 43% for Boomers). Millennials also have more products with their primary bank. They have 3.49 products compared with 3.3 products for Boomers. How can these two studies be reconciled?  

FICO's report also goes on to say, "Millennials now comprise the largest population segment ever in U.S. history, and that segment is growing as a percentage of the overall population. Opportunities are abound for banks and credit unions that understand this generation and can address their unique requirements." 

It is clear that credit unions and banks have to understand and resolve this conflict of information or their futures may be bleak. Philosophically, a credit union's mission is more inline with Millennials beliefs than major banks, yet the four major banks dominate their banking experience? Why?

Millennials, while bringing values that may be different than their parents, are also extremely pragmatic, learning from the challenges their parents face. In an interview by The Financial Brand, “Millennials are very pragmatic and have high expectations around technology,” said Laurie Paleczny, co-founder of Digital Fieldwork, noting that the research examined thousands of online data points, including publicly available profiles on Facebook, Twitter and other social networks. “If convenience and functionality aren't there, they’ll do business with banks even if they do not always respect their values.”   

Digital Fieldwork's research suggests that "credit unions have a golden opportunity to acquire a new generation of members, but first they must adopt smarter ways of engaging them online. Their research into U.S. credit unions’ digital landscape reveals a distinct gap between the current digital strategies of credit unions and the interests of Millennials." Credit unions’ struggles to attract Millennials, a demographic of approximately 74 million people, is well documented. Many credit union observers are concerned that the average age of credit union members is 47, and that a large majority of younger generations are not familiar with credit unions.

Javelin Strategy & Research writes, "Millennials are made up of two distinct

segments, both with widely differing circumstances, behaviors, and needs. The first group, Gen Y.1, numbers 31 million consumers ages 18 to 24. Gen Y.1 is financially young and uncommitted to any one service provider - a great target for prepaid cards or basic checking accounts. Their counterparts, the 42 million consumers of Gen Y.2, are 25 to 34 years old. These consumers are highly engaged in financial services, and are tech-savvy consumers with an appetite for financial products. To earn the business of next-generation financial customers, providers must understand and meet the needs of these two groups."

There is good new for credit unions and community/regional banks. Despite the

high Millennial market share the four major US banks have they are very vulnerable. According to FICO's Forging Lasting Banking Relationships with Millennials study, Millennials are less loyal to their primary banks than other consumers. The survey showed that Millennials are five times more likely than those over age 50 to close all accounts with their primary bank. They are three times more likely to open a new account with another bank.

So what does all this information mean 
about how to attract and retain Millennials to credit unions and community/regional banks? Millennials are using the services of the major US banks primarily because of pragmatism and their perception that only the major banks have the digital channel they seek to conduct their financial business. They have little knowledge about credit unions. They are not loyal to the big banks and will quickly switch when they find a better option. Millennials consist of two distinct groups that have very different needs. Credit unions and banks must appeal to both segments.

Javelin Strategy & Research recommends:

1. Don’t wait until Millennials are profitable. Start a relationship with Gen Y.1 now through products such as student loans, checking accounts, and prepaid cards. Gen Y.1 consumers are underbanked at high rates, which demonstrates a clear need for bank products.
2. Provide Gen Y.2 consumers products suited to their career-driven life stage. Unlike Gen Y.1 consumers, Gen Y.2 has a developing need for products such as brokerage and retirement accounts and home loans. Credit unions and banks that act as a trusted provider and teacher throughout Gen Y.2’s financial maturation can earn their loyalty in the long term.
3. Design digital banking for speed and simplicity to serve Gen Y.1. Position high-frequency activities like account balance and recent transactions front and center and allow users to monitor their accounts without logging in. To satisfy Gen Y.2, build out support for multiple financial products and services within digital banking: retirement accounts, loans, stocks, and multiple account types.
4. Look for opportunities to create financial co-management tools. Because 40% of Gen Y.1 members have others managing their finances, look for opportunities to create financial co-management tools to support their needs. These could include tools to facilitate easier money movement or for oversight to help caregivers ensure their funds are being used responsibly. Additionally, design actionable alerts enhance these tools.
5. Opportunities lie around budgeting, savings, and education. For Gen Y.2 members are transitioning from co-dependence to financial autonomy, so lightweight tools to create and manage budgets are critical. For education, a guided experience can help them become better buyers of financial services products and maintain financial well-being.

Millennials use a broad set of channels and devices to interact with their credit union or bank. Credit unions and banks need to keep communications and customer experiences consistent between channels and well-orchestrated. A well planned and executed digital and omnichannel banking strategy is a key to gaining and retaining Millennials banking business.

The Journey to OmniChannel Banking

Omnichannel banking is not a marketing program, a technology solution, or a process. It is not something you can buy. Omnichannel banking is a destination. 

Like any trip it takes a plan. Are you going to New York or Los Angeles? Do you really want to take a trip? Will you drive, fly, take a train or boat? (you can sail through the Panama Canal). When do you want to leave? How long will you be there? Where will you stay? Do you have a budget or money for the trip? How much will it cost? Do you have time to take the trip?  What will the weather be like? What should you pack? What do you want to see? Is the trip business or personal?

The first decision that needs to be made is, "do you want to take the trip?" Omnichannel banking is not a decision to be made lightly. Success will only occur if the entire leadership team and your board of directors are on-board and part of the process. Moving towards an omnichannel banking model is one of the most significant strategic decisions your credit union or bank will make. Be sure you know what you are getting into before you buy the boat. Your team must crystallize exactly what omnichannel banking means to your credit union or bank, and what you want to achieve. 

Once you commit to the journey then the real hard work begins, preparing for the trip. The fun part is the final destination, but what can and will go wrong as you prepare? The

most difficult challenge your organization will face while transforming to an omnichannel banking model is .......culture. An omnichannel banking model is all about putting the member or customer first. Putting the member or customer in the center of your business. Focused outward instead of inward. You say, ah that is easy, we are already member or customer focused? Are you really? 

When a member or customer comes into your branch do they go to a teller, go see a loan

officer, or ask for assistance from a member/customer service representative? Once they move from one transaction to another are they directed to the appropriate department or person? If they do, you are already set-up to fail. Members and customers are not seeking a tour of your branch. They want answers, services and solutions from an expert that can address all their concerns. You have created silos that must be broken down. 

Who in your credit union or bank is responsible for the member/customer experience?  Is it the chief operating officer, marketing, digital operations, information technology, regional vice presidents, branch managers, the CEO? Silos, they must be broken down with focus being on the member or customer, not areas of responsibility that exist within your current organizational structure. What will that do to your executive team? Easy you said, we are already member or customer focused. Are you really?      

Omnichannel banking has a huge upside for those credit unions and banks that are ready to embrace the concept and commit the time, resources, planning and re-educations to make it a reality and not just another passing fad. Are you and your team ready to take a trip to omnichannel banking?          

What is OmniChannel Banking?

Omnichannel has officially made it as a “buzz” word. The term omnichannel has been used and abused over the past two years more than the only chew toy at the local animal shelter. Along with her sister term big data, omnichannel has recently been positioned by countless analysts and bankers to mean......... almost anything.

Heck, how do you spell "OmniChannel"? Is it spelled omnichannel, omni-channel, omni channel? Regardless of how it is spelled, it is all about the M-E-M-B-E-R or C-U-S-T-O-M-E-R.

What is omnichannel banking? It is the seamless convergence of all credit union member and bank customer interaction channels delivering a consistent and uninterrupted experience, regardless of what or how many channels a member/customer uses to connect with the credit union or bank.

Omnichannel represents a long-term journey and commitment. I describe Omnichannel as an “end goal”, not a product, service, or marketing campaign. Omnichannel is the breaking down of silos that exist with most traditional financial services providers. Omnichannel as goal, and its successfully implementation will only occur if credit unions rethink their model and it receives the same commitment, resources and seat at the executive table as the CFO, COO, marketing and other key areas of the credit union. Omnichannel represents business from the "member's perspective" not from the credit union's. Omnichannel is not just “e” services or digital services. It is the entire member experience. It is how credit unions interact and reach out to their members, both digitally and within the brick and mortar of their buildings.

Omnichannel does not happen all at once. It is the strategic creation and delivery of people, processes and technology unifying all member interaction channels and experiences. It is a slow and methodical process. As New York Senator William L. Marcy said in 1828, "to the victor belong the spoils". It will be worth the effort and investment.