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.   

The Flaw in Omni-Channel Banking, Why Bi-Direction Channel Banking is Next

Just when you thought you had the evolution of banking channels figured out I am here to explain the flaw in the latest evolution of banking channels; omni-channel banking.

The progression of banking channels has evolved from credit union and bank focused to being about the member or customer experience. From a single banking channel (inside out), which involved an in-person visit to the credit union or bank to omni-channel (outside in) which is designed to allow the member or customer to access banking services and products using multiple channels, in a seamless and consistent manner.

Here is the problem. Successful implementation of omni-channel offers a member or customer access to banking products and services across and between multiple interactive channels in a customer focused seamless manner; but what happens when they encounter a problem? As much as self-service, automated processes, intelligent workflow and automated decisioning are designed to simplify and expedite a transaction, invariably problems occur that require communication or assistance from bank or credit union personnel.

You know the drill. You have a service problem and you know what happens next. You call your credit union or bank and get that annoying automated call tree. Once you finally get someone live you explain the problem and they say, “Just one minute, I will transfer you to Jane in the XYZ department”. Your call is transferred and you get a message saying, “All personnel are on the phone please hold”. After waiting on hold for 5 minutes listening to promotions you have no interest in hearing, someone answers the call and you again carefully explain the problem. After hearing your problem explanation the person says, “Sorry, but that is another department”, and promptly transfers your call. This time your call is immediately answered. For the third time you try to patiently explain the problem. The employee says, “So what are you trying to do on our website”? You respond, “I am trying to apply for a loan and a credit card”. “OK, I can help you, but I have to access two systems. Our loan system and our credit card system”. The conversation goes on-and-on and it is like the “customer is from Mars and the employee is from Venus”. There is a total disconnect.

Why? Because you and the employee are accessing different systems, seeing different information and even worse, the customer is accessing the customer facing interface while the employee is accessing the administration module.  It happens every day in retailing, banking, cable, phone, and most service industries, but it is changing, led by companies like Amazon and FedEx.

For a true low friction member or customer experience the customer/member support team must be able to access and view in real-time the path the customer has taken and have access to support data, regardless of the problem trying to be solved.  To accomplish that goal silos must be broken down, training provided, the user experience (UX) of banking systems must be consolidated, and what application architects and business analysts call the “non-happy path” must be incorporated into the system. When something goes wrong the best opportunity to solve the problem is if both parties are accessing the same system with the same data and error messages, not front-end and back-end systems.

Omni-channel banking is an important initiative, but it must move to what I call “bi-direction channel banking”. Omni-channel focuses on the member or customer experience, which is 50% of the solution. Bi-direction channel banking brings customers and the employees together on single user experience (UX) platform and completes the circle.

We know banking is complex and is driven by multiple banking applications. There is the core data processing system, payment systems, general ledgers, cash management, credit origination systems, credit servicing systems, online and mobile banking systems, account opening and the list goes on. How can a bank or credit deliver a single system view to both its customers and employees with all these different banking systems and applications?

Through a user experience platform (UX presentation layer) that uses an enterprise services bus middleware as an integration layer, connecting to the bank’s or credit union’s multiple banking systems.

Simple…… no but achievable, and replacing all those legacy banking systems is not an option for most banks or credit unions.  Instead of replacing core data processing systems and other critical banking systems, embrace them for what they do, process and manage transactions.

Using a UX presentation layer provides credit unions and banks a customizable solution displaying what and to whom information is displayed.  Within the presentation layer customized automated processes, intelligent workflow, business rules and automated decisioning can be incorporated, which allows each credit union or bank, regardless of their existing legacy systems to be able to develop their own solutions that fit their banking model.

In one of my blogs, “Do We Need Better System Integration or Fewer Systems to Integrate?” I argue Gonzo Banker’s position that rewriting all the bank’s systems into a single system is the right way to go. For all but the largest national and super regional banks, rewriting multiple systems into a single application is not viable.  

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.