CUs Poised to Lead in Technology Innovation

Smaller financial institutions tend to be more agile than their larger competitors.

July 15, 2013

Having worked in financial services for nearly four decades, I’ve seen firsthand how technology has transformed our industry. Over the span of a couple generations, banking has evolved from all-paper transactions and face-to-face interactions in “bricks-and-mortar” branches to a cloud-based enterprise requiring neither paper nor physical locations.

Although some consumers will always prefer face-to-face interaction, a growing number of younger consumers see paying bills or transferring funds as just one more thing that can be done on a smartphone.

To attract these consumers, financial institutions aim to make virtual banking faster, more efficient, and accessible with a broad range of tools or apps. My experience suggests credit unions are well-positioned for this new landscape, and may be able to lead their older, larger competitors.

Although “big banks” were first with technology such as computerization and ATMs, smaller institutions have the advantage today when it comes to adopting innovation. Not only is technology better, less expensive, and more widely available than ever, smaller institutions like credit unions are simply more agile.

The enterprise-wide information technology systems big players installed 20 years ago were cutting-edge then, but today are legacy systems, often with outdated architecture that is difficult and expensive to upgrade.

As the ability to innovate quickly becomes increasingly important for attracting and keeping members, several trends and technologies that should be on the radar of every credit union leader.

Some may be obvious—and you may already be doing them—but they will be permanent parts of the landscape going forward.

Online banking

In much the same way the Internet has changed how we buy goods and read the news, online banking has changed how consumers conduct financial services. The Internet has not only lessened the need for bricks-and-mortar locations, but also for people to staff them.

Consumers like online banking for the convenience it provides. To maximize convenience, it’s important to offer every service online that is offered at a branch, such as loan applications, money transfers, and more.

Of course, the more you move business online, the more you need to be able to ensure security. Even the most tech-savvy consumers are likely to flee if their accounts are compromised.

Remote capture

This technology moved swiftly from check clearing verification to the ATM to mobile devices. Image capture lets consumers deposit checks from anywhere in the world simply by taking a picture of them with their smartphones.

For credit unions looking to offer a full suite of online services, remote capture is a must-have. Fortunately, the technology is getting easier to implement and is available from numerous vendors at affordable prices.

Third-party vendors

The most successful financial institutions focus on what they are really good at and what’s most important—attracting deposits, making loans, and earning fees—and outsource the rest.

As a correspondent banker, I am a firm believer in the convenience and cost savings that expert, third-party vendors offer. Vendors can supply the technology to provide virtually any service you want, but require much smaller initial investments than it takes to build or house the technology yourself, allowing you to better manage costs.

Underwriting credit cards, for example, is expensive and risky. But a card service vendor lets you provide a branded credit card with competitive rates while reducing your risk exposure.

The strategic use of vendor services can help you meet rapidly changing consumer demands without “breaking the bank.”

Online training

The financial services industry is a highly regulated environment—and the regulations change frequently. Online training offers a convenient, cost-effective alternative to traveling out of town for in-person training.

Online training may include only reading and testing, or it may include video seminars or live interactive sessions. For cost savings and convenience, explore every opportunity for your staff to participate in training online.

The most profitable institutions are those best able to control costs while providing convenience and a wide range of services. Credit unions have long been recognized for offering services at a lower cost than larger banks, and passing those savings on to members in the form of lower interest rates and fees.

As technology continues to revolutionize the banking industry, credit unions are well-positioned to leverage their cost advantage and agility to be at the forefront of technology innovation—being first to give members the services they want at competitive prices.

TOM BRYAN is CEO of Nymbol Technology.