‘Forced digital modernization’
Implement technology that meets members where they want to be.
As the coronavirus (COVID-19) pandemic accelerates the move to digital channels, credit unions need to keep pace with the financial services industry’s largest institutions, says Chuck Fagan, president and CEO of PSCU, a CUNA associate business member at the premier level.
He offers insights into the top challenges facing credit unions and zeroes in on the competitive challenges facing all financial services providers.
CUNA News: What are the top issues and challenges facing credit unions?
Chuck Fagan: There’s still uncertainty about how long the pandemic will stick around at its current level.
We’re weighing the data and figuring out when we can get back to a normalized environment. We think we’ll see the economy and access to in-store retail open up in April or May.
We’ve zeroed in on 10 areas as we work with credit unions:
1. Forced digital modernization over the next three to five years. The pandemic accelerated this trend in a condensed time frame.
Credit unions need to keep their digital footprint strong because we don’t know what the branch will look like when we come out of this.
2. The role of branches. Digital channels will get the transactions while branches will facilitate life-changing events, such as buying a house and planning for retirement and education.
One of the primary drivers of new membership growth is the branch network. Digital channels will strengthen the new member process in an online environment.
3. Increased financial pressures. The effect of stimulus checks, unemployment, and what will happen with loan repayments is unknown.
A lot of CEOs feel good about where they wound up in 2020 and are hopeful we’ll be able to stay the same in 2021.
4. Increased emphasis on community. Credit unions' local and community focus will take on an extra emphasis. Credit unions have had a big impact on small businesses, their membership, and the community at large.
5. Increased importance of data. We've talked for a long time about member experience, and we’re at the stage where it's advancing into a personalized member experience. As we move more into this digital area, we need to know our members better.
Credit unions are losing member touch points as they shift to self-service, and we need to address that.
6. Increased consolidation. We've seen some healthy mergers between strong credit unions who’ll expand their footprint and scale in the future. We’ll probably see more of that.
7. Changing revenue channels. The downward trends with indirect lending will continue this year. Credit unions’ traditional strength in auto lending will give way to other new channels.
8. Greater focus on payments as a driver of noninterest income.
9. Openness to new technology. Credit unions need to make sure their technology footprint is strong and meets members where they want to be.
10. The changing workforce. We're all learning how efficient and effective we can be in a remote environment. How much of the workforce will return to work, how many will be remote, and can it be a hybrid model?
A bonus issue I’ll throw out: training and developing employees. Now is the time to double down on that.
An easy financial move is to pull back on training and developing your team, but that’s a short-term decision that will have ramifications down the road.
Tap into management programs and use this time to develop staff.
NEXT: Top two areas to address
Q: If you could pick one or two of these areas to focus on, what would they be?
A: The digital channel and linking that intersection with payments are absolutely critical. The checking account used to be the primary driver of the member relationship, but payments have become every bit as big, if not a bigger, driver of that.
How you use application programming interfaces and your technology partners to make yourself look like the bigger national financial institutions from a technology perspective is a key consideration.
The second area is financial health. Credit unions did a lot in terms of increased allowances for loan loss. But the unknowns around 2021 put this in the top two.
Q: How is PSCU helping credit unions compete with national financial providers?
A: We’ll never know the member as well as the credit union does, but if we can add to the service experience, that's a win.
Our call center is a great place to start. We're answering 23 million calls a year from credit union members. If we can handle those calls in such a way that the member does not know PSCU exists, that’s a win and we’ve gotten close to the experience the credit union delivers to members on its own.
That gives them 24/7 access where we can take loan applications and answer questions about any aspect of the relationship the member has with the credit union.
On the digital payment side, we must continue doing what big banks with massive budgets can build on their own ecosystems.
Credit unions are choosing best-of-breed partners, and how they integrate is key. The technology we enable aims to always keep the member within the credit union’s URL. We help them look like the big guys.
Q: What new innovations does PSCU have in the works?
A: We launched Lumin Digital, a cloud-based digital banking platform that’s built much like Netflix and Google. We can implement revisions and enhancements without any downtime.
As part of that, we allow members to customize alerts and controls. We're all used to getting our plastics in the mail with an 800 number to call to activate.
We know when a member hasn’t activated. Let’s use the data and prompt members on their mobile phone: “Would you like to activate your card now? Authenticate and it's done.”
You don't have to leave the channel you're working in, make that phone call, and hope the number on file matches the number you're calling from. Because if it doesn’t, you have to go through authentication. That’s a big piece.
We’ve made digital issuance available on a broad scale. If you’re involved in a fraud situation or you lose your card, we can now insert a card immediately into the digital wallet and tokenize so you can continue making purchases interrupted.
You get one shot to get your card top of wallet and we want to make sure the credit union is protected there.
Q: Do you have any New Year’s resolutions?
A: I do. My daughter had twins this past year, and she also has a three year old. It’s become increasingly important to me to spend more time with their family. So that will be a focus this year and beyond.
On the business side, we’ve done a lot internally to put our culture front and center. We have an incredible culture at PSCU, and we're on the cusp of being a Gallup Great organization.
High on my list are continuing to focus on our employees being our greatest asset and making sure our employees succeed in their roles.