Survive the Shifting Payments Landscape: Four Steps

CUNA Payments Blog: Big Data is CUs’ Best Defense Against the Zombie Apocalypse

The ability to mine data for insights can pay dividends on both the revenue and cost sides of the equation.

May 2, 2016

Thanks to “The Walking Dead” and “Pride and Prejudice and Zombies,” we’ve learned more about self-defense against zombies than we’ll (hopefully) ever need.

Less understood, however, is the threat to your credit union from various forces conspiring to suck the lifeblood from your business and leave you wandering aimlessly.

Lest anyone needs a grisly reminder of the death by 6,000 cuts credit unions are facing, including:

  • Continuing interchange price compression.
  • Merchant steering to lower-cost payment alternatives.
  • A persistent low net interest margin environment.
  • Nonbank entrants aiming to disintermediate the credit union-member relationship.
  • Regulatory overreach, including Consumer Financial Protection Bureau damage awards.

Need we go on?

The ability to mine data for insights can pay dividends on both the revenue and cost sides of the equation. Lurking within previously impenetrable information are keys to new revenue sources, deeper member engagement, more cost-effective services, and other “aha” moments primed to maximize profitability.

Let’s apply some lessons learned from the Zombie Apocalypse that can also help navigate this new, scary landscape.

1. Decide who’s on your team

To navigate the path forward you’ll need to develop new expertise, which likely means some shuffling of team members.

Strong programmers will continue to be worth their weight in gold, but consider augmenting their ranks with “scrum masters” conversant in agile development methodologies.

User experience (UX, in the modern lingo) specialists are key to designing tools for the next generation. Most important are colleagues able to leverage the reams of data being generated to maximum effect.

Chief analytics officers, data scientists, behaviorists—the stock has gone way up for the technically oriented folks you want with you in the bunker.

But don’t overlook the “team.” Along with their insight and ability to hunt, fight, and break the status quo, these technicians will need to collaborate.

2. Travel light: Jettison what you don’t need

After eight years of the post-financial crisis gauntlet, most of us have already learned to run a lean shop.

Nonetheless, stocking up on the critical supplies noted above may require difficult tradeoffs.

Explore areas where outsourcing and/or partnering is an option. And don’t rule out alliances—you may well find common cause with some disruptors who initially look like predators. Just tread carefully.

3. Be prepared to move out of your house—bricks and mortar

The looming obsolescence of the branch is likely overstated. But the fact remains that millennials are less connected to teller transactions and show increased willingness to not only research loans but also execute them via handheld devices.

A successful credit union needs a mobile strategy. The big challenge here is implementing mobile channels in a way that preserves tight member relationships, which are credit unions’ key advantage.

4. Don’t avoid risk, but learn to identify it quickly

A purely defensive “hunker down” strategy is a sure-fire recipe for being overrun. Success requires some bold moves, but well-informed ones.

But whether it’s pursuing a new product idea or assessing the creditworthiness of a nontraditional lending opportunity, speed is of the essence.

“Fail fast,” or more accurately, “walk away fast,” should be your mantra.

5. Opportunity moves fast—what’s here today may not be tomorrow

Given the wide array of financial startups and countless competing internal priorities, becoming overwhelmed into inaction is an understandable result.

Remember that not making a decision is in effect a decision to do nothing—which, as noted above, will most likely not end well.

A “fast follower” strategy can be just as powerful as “first mover advantage” for credit unions with limited resources. Just keep the focus on fast following, otherwise not only will you never catch up, you’re likely to get snared from behind.

In short, build your team and be ready to fight for your turf. Your collective brains are your credit union’s most valuable asset.

It may well become necessary to cannibalize some of your own products. But by all means stay a step ahead before someone else can take a bite out of them.

You didn’t think we’d get through a zombie metaphor without a crack about brains, did you?

JOHN BEST is president/CEO of Best Innovation Group, a CUNA consulting partner supporting CUNA’s efforts in advocacy, compliance and keeping credit unions informed.