Looking a decade into the future, the financial services industry will have consolidated, and will be more competitive than ever before. There will be no more than 4,000 credit unions, and a similar number of banks.
The largest banks and credit unions will hold the bulk of deposits and accounts, and will be the primary source of growth within the industry.
Large credit unions will have grown significantly, stemming from natural membership and deposit increases, as well as mergers of equals. As a result, there will be many more $20 billion credit unions serving the market than there are today.
Technology will narrow the gap significantly between large banks and large credit unions, creating an even more competitive environment.
Technology evolutions and changes in consumer preferences will mean the massive distribution of ATMs and branches large banks currently employ will no longer provide the same degree of differentiation that they do today.
Branches will still have a role to play, but they won’t have a transactional focus. Instead, they will serve as financial advisory and education centers.
Most transactions will occur on mobile devices, interactive teller machines, and on voice-activated devices like Amazon Echo.
These roughly 8,000 banks and credit unions also will face increased competition as newer fintech companies gain more traction. These companies will focus on flexibility and user experience, and will continuously compete with traditional credit unions and banks for wallet share.
Finally, there will be fewer companies and organizations—technology providers, trade groups, publications, and others—supporting the financial services industry due to consolidation.
How will CUs change?
Credit union delivery channels will focus on seamless experiences, in particular, digital-in-motion, and digital-in-home:
►Digital-in-motion. Consumers will access their financial information using biometric authentication via mobile devices (phone, wearable, pendant, etc.). Branch networks will be available for consultative and advisory services, and more complex questions or problems, but will not be transactional or “day to day” in terms of delivery.
►Digital-at-home. The interfaces consumers use day-to-day—voice-activated devices, flat-screen televisions and panels, and next-generation at-home computing and mobile devices—will enable live video interactions for nearly any advisory service a credit union might deliver.
Digital signatures and authentication will make the process smoother, and we’ll be comfortable speaking to devices powered by artificial intelligence (AI) and machine learning as part of digital-at-home banking.
In terms of internal-facing technology, credit unions that run core processing, lending, and other systems will outsource them almost universally.
It will be more economical to do so as these technologies become more and more sophisticated, and will allow credit unions to focus on their core business of providing service and help to members.
Increased competition from new fintech companies, combined with rising consumer expectations for seamless, simple processes, will demand a lot of attention from credit unions.
Meeting those expectations will require a strong, data-driven ability to understand members. A confluence of AI, machine learning, geographic locating, and deep analytics around members will be the backbone of everything the credit union offers, from the ability to present timely offers to providing anywhere/anytime access to information and services.
The payments environment for credit unions will change too. More often, members won’t ring up at the grocery store before they exit. They will simply walk out, and their total will be billed to their phone’s mobile wallet system, triggered by geolocation or near field communication.
Between new payments delivery like this, and the rise of person-to-person (P2P) payments on social and mobile, cash will take a backseat.
While these new methods are in their infancy now, they will be consumers’ preferred method of P2P payment within 10 years. Credit unions need to be prepared to maintain leadership in these new payments ecosystems.
Advice for CUs
Focus on member experience. Everything ties back to it.
As a part of that effort, expand your marketing and analytics focus, and reduce the amount of time you and your staff spend on managing technology and infrastructure.
Invest in technology that allows you to understand your members. It should help you interact with members in the way they prefer, and serve as a force multiplier for them and your staff.
Dig into your members’ spending and lifestyle habits by harnessing analytics and data. This data and the credit union value proposition ultimately are the main advantage you’ll have over newer fintech companies and other competitors.
Get ahead and leverage the opportunity to position your credit union for success in the new, data-driven future.
Also, expand your commercial services. Many of your members are running small businesses.
As the economy trends upward, you want entrepreneurial members to come to you for their business needs.
VINCENT BRENNAN is president, Credit Union Solutions, for Fiserv.