Top Tech Trends
Game-changing trends are reshaping your operations and members’ expectations.
The Great Recession has slowed almost everything except the pace of technology innovation. Your members are relentlessly embracing a dizzying array of high-tech gadgets, which are influencing the way they want to do business with your credit union.
Keeping up with all this (and anticipating what’s coming next) is a daunting and expensive task for your credit union. To help you keep pace, the CUNA Technology Council’s executive committee shares its perspective on what to expect and how to react to technology trends.
One of the biggest barriers credit unions face in improving internal efficiency and member service is integrating different technologies into a seamless experience. Unfortunately, there’s no common standard for integrating vendor solutions.
Each time a new vendor or system is added, it seems a credit union must “re-invent the wheel.” On a micro scale, credit unions handle this internally. But for the industry as a whole it’s a “macro” waste of time and money.
Under the auspices of the CUNA Technology Council, several credit unions are developing technology standards for integrating software. Under the name CUFX, these standards will reduce the costs and complexity of integration and improve speed-to-market. They should greatly improve credit unions’ competitiveness.
Credit unions possess a wealth of data. It’s imperative to leverage this data by developing insightful business-intelligence strategies. But success in this endeavor requires more than technology. The ingredients of a successful business-intelligence program are:
- The data warehouse—a strong infrastructure for integrating, manipulating, and displaying data. Unfortunately, many credit unions take a “we built it, they will come” attitude. This doesn’t work. Credit unions must have the right people to manage the data and thoroughly integrate the data for all staff to access and use.
- The right people asking the right questions. Analytical minds and “what-ifs” are critical to a successful business-intelligence program. Without inquiring, persistent minds at all levels of the credit union, technology will sit on the shelf.
- Thorough integration with internal processes. When adding a new product or service, be sure there’s a tie-in to the data warehouse to track and measure adoption and success. When changing pricing, model it before and after launching. When improving a process, track the improvements throughout the process to gauge their effectiveness.
All of these ingredients are imperative and must develop in tandem. Think of business intelligence as a three-legged stool: If one leg is missing or shorter than the others, you’ll end up on the floor.
Many credit unions are adopting a concierge approach to member service in their traditional branches.
Members’ needs are changing and, as a result, more mobile technologies will appear in branches. As more members opt for self-service delivery channels, branch size will shrink and more activities will focus on cross-sales and financial counseling.
Branches will become increasingly high-tech. Trends include more sales and media displays, imaging technologies such as teller capture, and multifunctional printers to reduce courier runs for printing services.
Some branches might establish community areas for members, such as lounges with free wireless Internet access. While the member experience is evolving, branches will continue to be essential to the future of financial services.
In-house vs. outsourced IT
Outsourcing some or all tech services (and in many cases, the entire data center) is a growing trend. There are many reasons, but cost historically is the driving force. Outsourcing is back on the increase in the current economic climate.
Outsourcing can take many forms—from staffing, to application or data center hosting, to cloud computing. Before outsourcing, consider the pros and cons listed in a table accompanying this article at creditunionmagazine.com.
There are pros and cons to both outsourced and in-house solutions. Analyze your options carefully, and decide on the best fit for your credit union’s unique needs.
If you’re considering outsourcing purely for financial reasons, be sure to consider the nonfinancial benefits of an in-house information technology (IT) department. They might outweigh the cost savings of outsourcing.
Next: IT and the member experience
IT and the member experience
Don’t make the mistake of focusing too much on infrastructure technologies and lose sight of your credit union’s higher priority of delivering an outstanding member experience.
If you adopt a technology-centric approach, your IT team will start with technology and work “outward” toward the member touch points. A better method is to start with the desired member experience and work “inward” toward the appropriate technology. This helps your credit union deliver exceptional member experiences.
Each new enhancement or implementation should first have a compelling vision for the desired member experience. Beyond specifications, be sure to describe your vision for the desired outcome. That vision statement will get your business-unit staff and your IT staff working toward the same goal.
One option is to write a press release your team would want the local newspaper to publish after the new or enhanced service goes live. Though it might never be used, this press release will help keep the focus on the member experience.
Your IT team probably has sufficient technical skills, but it might be lacking a shared vision for a member experience that matches your senior management team’s vision.
In a time of decreased loan demand and increased pressure on revenues, credit unions are doing everything they can to control expenses. A few of the cost-saving strategies credit unions are adopting include:
- Collaboration: Why reinvent the wheel? Credit unions are pooling scarce technology resources to solve unique member needs. They’re teaming up with other like-minded credit unions to share costs related to core systems, due diligence, statement processing, desktop equipment, bill-pay services, and item processing.
- Workflow/process optimization: This tactic is helping credit unions reduce errors, decrease labor costs, and increase employee and member satisfaction. Start by identifying processes that are tedious, have multiple steps, and take a long time to complete. Create a team of experts who actually use the processes daily. Document each process step-by-step. You might be surprised to find you can accomplish it all with fewer steps. Find ways to automate highly repetitive manual processes.
- Electronic statements and notices: Most credit unions have moved away from paper statements. If you haven’t, you can save thousands of dollars each month by asking members to switch to electronic statements. Provide electronic notices for certificate maturity, overdrafts, and other member notifications.
- Remote work force: Employers are overlooking a large, talented (and often highly educated) resource pool—stay-at-home parents and those nearing retirement. Technology exists today to allow remote employees to function as effectively as if they were in the office—especially for call center or back-office employees. Many of these workers aren’t interested in a full-time job, but would love to work part-time or from home.
The benefits of remote employees are numerous: reduced compensation costs by staffing for peak hours, reduced benefits costs, increased employee satisfaction, and more highly educated staff.
At a technology cost of less than $2,000 per employee to start, and a monthly high-speed Internet connection, some remote staffing might make sense for your credit union.
Personal work devices
Many employees now use personal computers (PC) and mobile devices provided by their employers, and some use their own personal devices, to work from remote locations.
Regardless of who owns the devices, remote equipment shares many of the same security and other challenges. But employee-owned devices introduce additional challenges.
While they can help your credit union save on the cost of equipment and help employees feel more comfortable and productive, you need to figure out who keeps the device updated, protected from malware, and secure. Who supports the personal device when a problem occurs? What happens if the device is lost or stolen? Does it contain confidential data? Who replaces it?
Develop clear policies on the use of remote devices, especially those owned by employees and used for credit union work.
Online vs. mobile
If your credit union doesn’t currently offer mobile banking, it should be on the must-do list for this year. Smartphone sales surpassed PC sales for the first time in fourth-quarter 2010, according the Financial Times.
Today, approximately half of the hundreds of millions of mobile devices in the U.S. are smartphones, reports The Nielsen Co. Today’s smartphones are nearing the speed and processing power of full-function PCs.
Mobile banking is here to stay. Consumers want options for interacting with their financial institutions in the most convenient way. Mobile banking should be a complementary extension of online banking.
Members likely will want to use a PC and online banking at home for basic things like budgeting and money management. But they’ll also want access via mobile devices when they’re away from their PCs.
Ideally, your mobile banking system will integrate with your online banking system to ensure consistency between channels.
Credit unions that can find ways to complement the strengths of online and mobile banking and payments will successfully convince members to use these lower-cost delivery systems, which benefit the bottom line and increase member satisfaction.
Next: Merchant-funded rewards
Credit unions are feeling a squeeze from low loan demand, loss of courtesy pay income, NCUA assessments, and the regulatory threat to debit interchange income. Merchant-funded rewards offer alternative income and can be delivered online and through mobile devices, without exposing the member’s personal information.
The downside: the potential pushback from members who don’t appreciate the intro¬duction of advertising into their online banking relationships.
Examples include cash rebates, refunds for credit card purchases, and coupons delivered online within the member’s account history (“Online banking coupons”).
The benefits of merchant rewards include:
- The consumer gets rewards for normal spending;
- The credit union receives income; and
- The merchant gets targeted/personalized advertising to the consumer.
Personal financial management (PFM) tools have been around for decades. In addition to Intuit’s Quicken product—the industry leader for many years—new vendors have emerged. (Intuit Financial Services is a CUNA Strategic Services alliance provider.)
Consumers now demand easy-to-use tools that can aggregate all their financial data from all sources. This
is an important feature that vendors and credit unions must take seriously. If it isn’t easy to use and access, consumers might set up accounts but never visit or use the site again.
Also, consumers must be able to see, at a glance, their spending habits, how much expendable income they have, and how close they are to either sticking to or exceeding their established budgets.
While 40% of consumers agree PFM tools would help them manage their finances, only 15% had used a PFM within the past 90 days, according to a 2010 Fiserv
survey. The overwhelming majority of those who use their PFM service do so via their online banking channel.
The takeaway: Offer members account-management tools on various platforms using existing online banking formats that they’re already familiar with and use regularly.
Whether your credit union already provides this service or not, make sure you have a PFM strategy going forward. PFM tools are one of the most “sticky” services: Once consumers begin using them and plug in all their financial information, it’s highly unlikely they’ll switch to a different institution.
Providing access to a PFM behind your credit union’s online banking log-in makes your credit union more relevant to members. And PFM tools provide abundant cross-sell opportunities for auto loans, certificates of deposit, retirement accounts, and mortgage loans.
While not everyone uses PFM tools to manage their finances, PFMs satisfy a niche credit unions can’t afford to ignore—consumers who carefully manage their budgets and watch for low loan rates and high savings rates.
While PC sales are beginning to fall off, tablets are the fastest-growing technology. Several analysts predict tablets will outsell PCs by 2015.
Mobile computing has changed consumer computing demands—from having to find a computer to get online, to anywhere/anytime Internet access in the palm of the hand. The largest problem with traditional mobile/smartphone access is the display size. With tablet devices, consumers now have the best of both worlds: highly portable devices that are always connected and easy to read.
Be aware of this new technology from a home banking/mobile banking perspective. While Web-based applications (apps) are still relevant and function well on tablets, consumers with these devices expect more feature-rich and easier-to-use apps.
Although many current mobile apps work on tablets, most layouts aren’t optimized for the larger screen size, and consumer adoption is very low.
Credit unions that have deployed more advanced apps that take advantage of the larger screen size are getting great reviews from their members. Eventually this will become a basic member expectation instead of a nice-to-have feature.
The tablet device is a game-changing technology that will transform members’ expectations and enhance convenience both in and outside the branch.
Next: Evolving mobile payments
Evolving mobile payments
Pilot programs abound for mobile payments. And merchants are joining in on the promotions.
Many business models depend on revenues from merchant tie-ins, marketing opportunities, and discounts. Once a consumer accepts a marketing offer or purchases a discounted product, data about that transaction stays in the mobile wallet.
When redeeming the offer, the merchant scans a barcode from the consumer’s mobile phone or uses the tap-and-pay feature of a chip embedded in the phone. An example of the latter option is retailers that support cardless payments like MasterCard’s PayPass. Google earns revenues not from the payment transaction itself, but from the marketing for promotional offers.
In addition to point-of-sale (POS) mobile payments, several new payment options are in development. For example, Facebook is working to expand its “Facebook Credits” used to buy goods in virtual games like Farmville. A logical next step for Facebook would be to enable payments between Facebook friends and to make purchases with Facebook-featured merchants.
Another player, PayPal, also has introduced new payment methods for peer-to-peer payments and payments at some retail locations.
As we move toward a widely accepted mobile payments model and infrastructure, credit unions can prepare to integrate mobile payments into the arsenal of payment products by:
- Adopting or continuing strategies that grow your debit and credit card bases and grow the number of transactions per card. Any widely accepted mobile payment model will probably use the existing payments infrastructure—Visa, MasterCard, and the regional networks—for routing transactions between merchants and card issuers.
- Encouraging the use of mobile devices for other financial transactions, such as accessing account history, making account transfers, and remote deposit. Enabling POS purchases will be a natural add-on once an industry standard is established.
Adding any of these technologies isn’t an either/or proposition. In the months and years ahead, members will expect your credit union to offer all these services (or access to them through a third party), in an integrated, easy-to-use collection of technology tools.
THE FUTURE OF TABLET TECHNOLOGY
Once a credit union offers a tablet app to its members, a whole new world of opportunity becomes available. Some tablet apps, for example, allow for GPS integration to help members find the closest branch/ATM. There’s also an app for camera integration that enables remote deposit capture. These examples are well-established.
But imagine the future possibilities:
THE PROS AND CONS OF IN-HOUSE VS. OUTSOURCED IT
Source: CUNA Technology Council