Competition for credit union members is heating up—and it is no longer just coming from other financial institutions.
In recent years, new and innovative players have entered the financial services realm, and they’re looking to grab pieces of your business, John Best, president of Best Innovation Group, told CUNA Tech/OpSS Council Conference attendees Monday.
Best defined this trend as “death by 6,000 cuts.” This refers to the six thousand financial technology startup companies that are each targeting one small piece of traditional financial institutions’ business model.
These companies include such diverse offerings as CoinStar (coin exchange), Acorn (which rounds up customer’s purchases and puts the excess into investment accounts), and Kabbage (an online lender to small businesses).
What traditional lenders will be left with, Best says, is members’ transactional business while new, innovative players siphon off the more profitable pieces of the traditional banking business.
This is no small problem, he adds. Currently, financial technology or “fin tech” companies have obtained $14 billion in funding. The Lending Club alone has financed $11 billion in new loans to consumers—loans that are being granted outside of banks and credit unions.
What can credit unions do in the face of such competitive pressures?
Best advises credit unions to define what type of company they want to be. This starts with deciding on whether you are a technology company that delivers financial services, or a financial services company that delivers via technology.
Either approach is valid, but the danger lies in trying to take a middle path. This results in a degradation of user experience and a lack of consistency and continuity in your value proposition.
“The technology is changing so fast, you can no longer have a five-year strategic plan; now it’s one to three years,” says attendee David Thibodeau, vice president of information technology at $1.2 billion asset Workers’ Credit Union in Fitchburg, Mass. “It’s not so much focusing on what new technology you are implementing, but rather focusing on understanding what your members need.”
Best cited the CU Wallet app as a step in the right direction for the credit union industry. CU Wallet will help to bring credit unions and their members together in a more community-focused way, fostering long-term loyalty and active engagement.
Click here for more coverage of the CUNA Tech/OpSS Council Conference, which runs through Wednesday in Orlando.