Top Tech Innovations
From tablets to apps to mobile payments, tech innovation marches on.
Truly innovative technologies often spring up overnight. But they can take years to evolve into mainstream financial services. Sometimes they arrive on the market as actual products and services; other times they’re enablers of products or services.
The CUNA Technology Council executive committee offers a brief glimpse here at technologies on the cusp of wider acceptance, and their applications to credit union operations.
Mobile financial services
The wider adoption of smart phones and mobile phones is transforming online banking. The next generation of credit union members will be markedly different from the current crop. They’ll demand that their credit unions meet them where they live, which increasingly is at the mobile device.
Ignore Facebook and Twitter to your peril. Standard home banking ported to a phone won’t be enough to keep young members’ attention.
Members in the next decade will want to:
- Apply for loans while they’re at the car dealership;
- Be alerted to things that “will happen” on their accounts rather than what “just happened”;
- Be proactive instead of reactive;
- Combine their finances with their online lives; and
- Share financial successes and research options with online peers to avoid failures.
Cash, checks, and plastic will fade, and more secure mobile transactions will favor the retailer and the consumer and reduce financial institutions’ interchange income.
Mobile banking—while not there yet—is quickly becoming a competitive necessity. Nearly 20% of credit union members who don’t currently use mobile banking would switch financial institutions to get it, according to a May 2010 survey by Mercatus.
While home banking is a reactive platform, mobile banking is interactive. Members will expect the mobile banking platform to go far beyond providing only static information. This mobile transformation will put credit union services in the pockets of all members.
Closely tied to mobile banking is mobile or person-to-person (P2P) payment technology. Soon, for example, most consumers will be able to check balances while waiting in line at Starbucks, view smart ads indicating the special of the day, and click on their choices to place orders. At the counter, their coffee will be waiting. One tap on the mobile phone to pay, and they’re on their way.
Mobile payment technology is moving fast, but lacks set standards. P2P payment competitors include ZashPay, Obopay, Popmoney, and PayPal Mobile. But while the options are expanding, P2P adoption in the U.S. is still minimal.
One technology that might increase adoption is near field communication (NFC)—the addition of small computer chips to cell phones so they’d operate with payment readers like the cards employees use to enter secure offices. NFC adoption would open the door for point-of-sale mobile transactions. As NFC technology advances, it’s likely NFC-capable handsets will too, pushing mobile contactless payments into the mainstream. It’s rumored that the next generation of iPhones will be NFC-enabled.
Several NFC business models are emerging, according to Forrester Research. In all the models, a trusted service manager (TSM) serves as a partner—bridging the end user, application provider, and telecom provider. It’s too early yet to make a determination as to which model will ultimately prevail.
Another mobile payment option is Starbucks’ Mobile Pay, using 2D bar codes, for the Blackberry and iPhone/iPod touch. This technology uses the device’s camera and Starbucks Card Mobile App to display the barcode used to make a purchase. Starbucks is piloting the service in Seattle and the Silicon Valley. Through the pilot, Starbucks will learn about customers’ habits around mobile payments and apply lessons learned while other technologies mature.
While mobile payments seem poised for broader acceptance, most experts advise against heavy investment in technology because of the lack of standards. When your credit union decides to adopt the technology, select vendors that have open integration paths, and be willing to change with the environment. Expect many more changes in the payment systems area in the next few years.
Next: Tablet technology
While the concept of “tablet” computers was first introduced about a decade ago, Apple revolutionized the concept with the introduction of its iPad this year. The iPad has catapulted tablet technology from a note-taking, word-processing device to a true computing tool that opens the door to an endless array of uses.
A tablet is a portable computer with a flatpanel display and a touchscreen and/or stylus. Tablets typically measure and weigh between the size and weight of a full-size laptop and a smart phone, and combine much of the functionality of both.
Some financial institutions already use tablets in their lobbies to improve efficiencies and offer members more convenient options. Tablets can increase self-service and possibly reduce the number of staff needed in branches.
When members visit a branch equipped with tablets, for example, they can start by entering their information into a tablet, then check the products and services they want to open or inquire about, read special credit union offers that pertain only to them, and finally transmit the data to the credit union’s database. Member service representatives, equipped with this information, can then meet with members to review pertinent offerings and answer questions.
In the next five years, the opportunities for tablet technology are endless—including social networking and preference customization. Members will be able to customize their experiences across all channels—retail, online, mobile, and in-branch.
Tablet technology can pinpoint a member’s location and capture his or her preferences. Credit unions can use these features to proactively offer services to individual members. For example, when members input desired services (car loans, mortgages, or credit cards), the technology can find them the best deal, best rate, and best financial institution to meet their needs.
Credit unions can further use tablet technology as portable replacements for desktop computers. Members can input their own information on the tablet, agree to disclosures, sign the tablet, and e-mail themselves documentation. It’s a great example of efficient use of technology—using a device that’s not only portable but versatile and able to handle a range of technology solutions.
Social media use, by all businesses, is a hot topic. Credit unions likely will continue to increase their social media presence for at least the next few years—until it matures or until yet another new communication concept emerges.
While it comes with risks, social media also carries the risk of opportunity lost if you don’t use it intelligently to benefit your credit union and its members. Most credit unions have an established presence on social networks, and many use social media to interact with members through blogs and chat.
Our industry will fine-tune its use of social media in the next few years, but some credit unions are considering replacing websites or portions of websites with social media sites. Some businesses have already done this as consumers continue to migrate from brand websites to social network pages.
Brands such as Coca-Cola, Pampers, Walgreens, and Kraft Foods all have increasing numbers of fans on Facebook. And their Facebook fans continue to increase, while visits to their own brand websites decrease, reports Advertising Age.
Cost and traffic are factors in the decision to move resources toward social media and away from corporate websites. Facebook, for example, currently hosts participants’ pages and provides usage analysis for free. And company employees can easily develop and maintain the pages. Branded websites, on the other hand, include costs for either in-house or third-party hosting systems. Many organizations are hiring outside companies to design, develop, and maintain corporate websites.
In the next few years, social media might replace both websites (or portions of websites) for consumer communication, and internal intranets and extranets for employee communication.
Next: Preference technologies
About 20 years ago, Michael Porter at Harvard University presented ground-breaking research on competitive advantage. One of his prophetic ideas was that customers want a sense of control over transactions. He called it “customer agency.”
Fast forward to 2010, and the Internet has made self-service the equivalent of good service. Now a majority of our transactions are, or should be, performed on remote channels.
The next phase is channel normalization—making the consumer experience as similar as possible across all delivery channels. One way credit unions can do this is by providing preference tools that allow members to specify the experiences they want on each channel.
Credit unions offering this service usually allow it through their online portals. Members, for example, can select from various options for online banking, mobile banking, ATMs, and phone banking. In fact, the preferences can even include their desired experiences with tellers.
The move to channel normalization and preference engines suggests you should put your delivery channels under one team instead of in silos. The retail industry already has learned this. Companies that treated online sales as a separate silo from in-store sales missed significant opportunities to create unique customer experiences.
Next-generation online banking
Your members are stretched in all directions—trying to make ends meet, not having enough time, and lacking sufficient financial knowledge to cope with an increasingly complex world. Many consumers live paycheck to paycheck and don’t even have basic budgets.
In this environment, credit unions have an opportunity to strengthen relationships with members by providing next-generation online banking systems that are easy to use and save members time. They also need to provide better money management tools and financial education.
Online banking, excluding mobile banking, is now the preferred method of conducting financial transactions, according to a survey by the American Bankers Association. Survey results showed that the popularity of online banking isn’t exclusive to the youngest consumers: In 2009, for the first time, it surpassed all other options as the preferred banking method for all consumers younger than age 55.
While it’s likely mobile banking adoption will surpass traditional PC-based online banking in the next 10 to 15 years, next-generation home banking systems must continually evolve.
The goal of any new functionality must be to make it easier for consumers. Apple has taught us the importance of good design; Google, the importance of speed and simplicity; and Facebook, the importance of social interaction. Credit unions that can adopt all three will position themselves to compete in the years ahead.
Next: Predictive analysis
Credit unions collect and maintain vast amounts of data—valuable information that can provide a competitive advantage.
But how can your credit union use it? Predictive analytics—an in-depth analysis of existing member behavior—can help your credit union efficiently cross-sell products and services. This usually leads to higher profitability per member and stronger member relationships, and helps credit unions cross-sell the right products at the right time.
Predictive analytics also can help credit unions reward member loyalty and retain more members. For example, by frequently reviewing a member’s past service use and other behavior patterns, predictive models can determine the likelihood of a member canceling a service in the near future. Intervention with special targeted offers can increase the chance of member retention.
Proactive webchat is another application of this strategy. For example, a consumer applying for a loan online might see a webchat window open to recommend the best loan product for the individual at that particular time.
Some say cloud computing is merely a new term for application service provider (ASP), software as a service (SaaS), or outsourcing. But used to its fullest, the “cloud” might fundamentally alter how information technology (IT) departments function.
Some predict the cloud will provide a full suite of technologies—almost in real time and on-demand—operating like a utility, similar to electricity.
Many credit unions are now moving away from physical servers, workstations, storage, and applications to virtual versions—both in-house and through the Internet.
This means credit unions must:
- Get comfortable with the concept of not having all resources in-house;
- Ensure that vendor contracts and service level agreement processes are strong;
- Understand current expenses; and
- Ensure that system architecture is well-positioned.
The list goes on. But once you go to the cloud, use the newly recovered time and creativity to apply technology toward solving front-office challenges and taking advantage of competitive opportunities.
Increased regulation, competition, and tighter operating margins, are encouraging more credit unions to move toward back-office collaboration, which takes many forms and offers many cost-saving benefits. The basic premise: Multiple credit unions share one or more back-office functions.
The credit union movement has a strong tradition of collaboration. But we’re now seeing a slightly different twist: A much smaller group of credit unions servicing themselves in a highly collaborative model.
The potential benefits include gaining economies of scale, pricing leverage, expense reduction, faster time-to-market, maturity and robustness unavailable to a single credit union, and career development. Clearly, collaboration promises great opportunities. But it won’t be easy.
How does collaboration affect the IT professional? As with cloud computing, back-office collaboration requires a fundamental shift in thinking. The typical first reaction is uncertainty, fear, and loss of control. Many ask, “Is my job secure?”
All tech innovations, including collaboration, bring change. But they also introduce new opportunities—to expand and extend skills, explore new platforms, specialize in new technologies, and be on the front end of industry trends.
This feature article was a collaborative effort of the CUNA Technology Council’s executive committee members, including: