Charting Your Course Through 2014
Before setting goals, be sure you hear from marketing, IT, and finance.
Before setting goals, be sure you hear from marketing, IT, and finance.
Given the state of the financial services world today, it’s important to receive feedback from your entire staff before making plans and setting goals for the coming year. Three key areas you’ll want to hear from are marketing, information technology (IT), and finance.
For a marketing perspective, we asked Michelle Hunter, chair of the CUNA Marketing and Business Development Council, to provide us with the major marketing trends that credit unions should consider as they make plans and set goals for the coming year.
For an IT perspective, we checked in with Belinda Caillouet, chair of the CUNA Technology Council. And for advice from the world of finance, we turned to William Kennedy, chair of the CUNA CFO Council’s communications committee.MARKETING
A few of the major issues credit union marketers will be focusing on this year are big data, content marketing, and new technology tools, according to Michelle Hunter. In addition to chairing the CUNA Marketing and Business Development Council, Hunter is senior vice president of marketing and development for $723 million asset Credit Union of Southern California in Whittier.
She offers a closer look at these three issues:
1. Big data is a term that entered the business vernacular in 2012, according to Google trending analysis. A short time later, it has become a major business trend.
The term “big data” describes the exponential growth of data and the careful parsing of that data to come up with trends that can help you make more insightful business decisions.
“Credit union marketers are wrestling with issues related to big data and how to harness the massive amount of personal information now available,” Hunter says.
The availability of more personal preferences, habits, and events in members’ lives, Hunter says, is pushing the evolution of data analysis and creating significant marketing opportunities. Credit union marketers will need to determine w hat information is relevant and how to best leverage it to create personal, timely, and effective messages.
2. Content marketing involves the creation and distribution of various forms of content—videos, white papers, and infographics—that are meant to communicate and attract the interests of current and prospective members.
Content marketing is the art of communicating without selling. It has been called “noninterruption” marketing. Instead of simply pitching your products or services, content marketing delivers information that educates the recipient of that information.
Content marketers’ strategy is based on the belief that if they deliver valuable information to buyers, those buyers will ultimately reward them with increased business and loyalty.
“Content marketing is a hot topic,” Hunter says. “More credit union marketers will be rethinking their traditional marketing strategies to incorporate content marketing.”
3. New technology tools will enhance target marketing. Every home banking and debit transaction creates a clearer picture of members’ preferences and habits, Hunter says. And that information is becoming more actionable with new tools and technology.
“Now that financial institutions can get in touch with members via their smartphones, many institutions are texting special, personalized offers to members that are relevant to them,” she says. Marketers’ present and future tech tools include:
Credit unions must catch their breath in the midst of an avalanche of technology advances. They must focus on enhancing members’ cross-channel experiences, says Belinda Caillouet, chair of the CUNA Technology Council.
Also high on the IT radar for 2014 are streamlining operations to trim expenses and evaluating and upgrading cyber-security.
Payment systems—including the mobile channel— remains an important category to monitor but “it doesn’t seem to have the same level of hype it had in early 2013,” says Caillouet, vice president of IT at $1.8 billion asset Spokane (Wash.) Teachers Credit Union. That’s primarily because no market leader has emerged from an ever-growing array of providers and models.
“We can’t predict the future, but what we do know is that things are changing quickly and we must be ready to take advantage of opportunities,” Caillouet says. “You’ll need to develop a ‘learning organization’ that’s able to embrace constant change and respond quickly when necessary.”
Caillouet offers a closer look at these three areas of emphasis:
1. Enhance members’ cross-channel experience. Credit unions other their members a wide range of options to meet their financial service needs. But often these channels don’t interact as seamlessly as they should, which can cause confusion and inhibit use.
“We need to remove the barriers we created with old business rules and rethink our processes,” Caillouet says. “We must focus on creating a consistent, intelligent, and personalized experience for the member. This includes being able to start a process in one channel and finish it in another channel.”
Caillouet recommends identifying systems-integration opportunities with the help of Credit Union Financial Exchange (CUFX) standards, and creating brand and functional uniformity among your credit union’s varied connection points with members.
Also, investigate and implement data collection and tracking measures to facilitate proactive communication with members that can empower them and fuel growth.
2. Streamline operations. “With some credit unions still experiencing weak loan growth, managing expenses continues to be a priority,” Caillouet says. “With the use of technology, IT can have a positive impact on expenses by creating efficiencies internally and for the business units.”
She recommends quantifying the effectiveness of your longstanding practices, revisiting and potentially renegotiating vendor contracts, and exploring the internal development of products and services.
It’s also important to reallocate staff to properly support your technology initiatives, which might include:
3. Evaluate and upgrade cybersecurity. About 80% of credit unions cited protecting data and infrastructure as their top technological concerns last year, according to CUNA research. Those issues remain front and center this year, Caillouet says.
Make sure you have the proper staff resources to test security and respond to threats, she advises.
From a product perspective, many credit unions have accelerated their efforts to revamp their card services. The urgency stems from the 2015 liability deadlines for converting to EuroPay, MasterCard, and Visa (EMV) chip technology.
“With looming deadlines and increasing fraud, EMV cards or chip-enabled cards are starting to pick up steam,” Caillouet says.
Rising interest rates concern NCUA, “and credit unions must address the possibilities, if they haven’t already done so,” says William Kennedy, CFO of $148 million asset Interior Federal Credit Union, Reston, Va., and chair of the CUNA CFO Council’s communications committee.
The worst case for any credit union, he says, would be if rates stayed the same for the next two to three years. “Our net interest margins would continue to decline.”
The uptick of rates in May through September of 2013 concerned some credit unions because their investment portfolios took unrealized losses, he says, but that interest rate move meant nothing, really. “The rates we pay on deposits didn’t move at all, so our cost of funds didn’t change.
“In fact, this gave us the opportunity to increase rates on real estate, which has been a hot item,” Kennedy says, explaining that credit unions with 15-, 20-, 30-year paper saw interest-rate bumps of 75 to 100 basis points (bp).
“You certainly have to be aware of rising rates in the future,” Kennedy adds. “It’s likely most credit unions already have positioned investments accordingly.
“We use a ‘barbell’ investment strategy,” he explains, which means holding a large amount of short-term investments, fewer intermediate-term, and then a large amount of long-term investments.
“So if interest rates do rise,” he says “you have enough cash flow to reinvest at higher rates.”
Other strategies to consider, according to Kennedy:
Take a look at mortgage-backed, variable-rate products because they’ll have interest-rate floors, which can be a type of insurance policy.
Increase your borrowing capacity through the Federal Reserve discount window or the Federal Home Loan Bank.
Most credit unions have done their due diligence when it comes to controlling expenses, renegotiating vendor contracts, and re-evaluating product bundles.
But Kennedy sees room for more collaboration among credit unions by, for example, sharing staff or back-office operations. “If you’re opposed to collaboration and you’re a smaller credit union, you’ll find it more difficult to survive.
“The saying ‘if you’re not green and growing, you’re ripe and rotten’ certainly applies to credit unions’ future,” Kennedy remarks. Collaboration isn’t always easy, he acknowledges, but “it’s great to see some credit unions making an attempt.”
Big data also can be a huge competitive advantage for credit unions, Kennedy says. Extracting data from members’ credit and debit card histories can yield valuable information. Big data requires a big effort, and you have to be willing to spend the money on it—and to use the findings—in your decision making, says Kennedy.
This is where the industry is going—using big data to make more effective and efficient decisions while honoring consumers’ privacy, he adds.
“You have to dedicate sufficient resources to it,” Kennedy says. “You can’t have someone who gives 10% of his or her time to big data. That’ll be a challenge for many credit unions.”