By Nicholas Calcanes, CO-OP Chief Operating Officer
This article originally appeared in THINK Review
The unprecedented COVID-19 crisis is in the process of transforming the financial services environment at a pace we’ve not seen. Many credit union clients have told us that they’ve been able to activate more change in the last quarter than they have in the last ten years. Due to necessity, digitally nomadic consumer behavior and engagement trends that have been steadily evolving over the course of years and decades, have taken hold practically overnight. We have seen firsthand the data cited by the recent RTI study, that 33% of consumers have ordered groceries online and had them delivered for the first time. And 54% of these consumers plan to continue shopping this way after COVID-19.1
This is not a new script. Some of the most innovative business ideas are borne out of crisis. The 2003 SARS epidemic in China set the ecommerce giant Alibaba on its path to market dominance because they grabbed hold of the market opportunity and were set up to do so. 2 The pandemic has sped up many of our credit unions’ plans – plans that may have been “nice-to-haves” prior to this time. Our industry has had to figure out how to activate and operationalize new strategies at a pace many of us have never before experienced.
All this being said, we believe this is your moment. Trust is the currency you’re growing right now. And not only do credit unions already have it in spades, you’re building it through your actions in response to this crisis. Bold strategic bets require a bedrock foundation of infrastructure, operational dexterity and routines that make swift action and agile delivery possible.
Over the past three years, my team has been integrating the technology and infrastructure to support CO-OP’s multi-year strategy to transform into a platform business. Doing the hard work to modernize has enabled us the flexibility to quickly pivot to respond to the crisis on behalf of our clients and employees. We are living proof that investing in your foundation will pay off not only in the day-to-day, but at unexpected times when meeting your members where they are matters most.
Following are a few of the primary credit union opportunities that surfaced during this year’s THINK Virtual sessions, filled with information for responding to COVID-19 now and next:
Opportunity: Leverage Payments as the Center of the Consumer Financial Ecosystem
Building member relationships requires engagement based on their current behavior and their needs at this moment – most of which are remote and digital. This empowered consumer environment points to payments as a service and driver for interacting with members in their daily lives. Financial services as a whole is rapidly moving toward a remote banking, digital self-service paradigm. Credit unions have long wondered, “How can I get my members to adopt this new technology?”
Now, members don’t have a choice. They are adapting quickly and so are we.
We know lending is the traditional fuel for our movement’s economic engine; however, the transformation of member behavior has created a connectivity between use cases. Payments are the daily lifestyle driver of life stage lending. It’s time to leverage both to attain the entire lifecycle of the member.
During THINK Virtual, CO-OP polled online attendees about which consumer payment trends they thought would continue after COVID-19. Nearly 70% of responders selected the increased use of digital payments; 42% selected high adoption of contactless cards; and 34% selected a continued decline in the use of cash.
These results are no surprise. According to a 2019 Federal Reserve payments study, non-cash payments reached $174.2 billion annually and the total value of payments totaled $97 trillion in 2018.3
Our suggestion? Accelerate your roadmap for contactless cards and new innovations within the card environment. Traffic may move away from car loans and toward credit card flow, so understand that volume and revise your service model based on member usage across your portfolio of services.
According to Ryan Battles, Principal, Americas Financial Services Banking and Capital Markets at EY, we are witnessing a “revolutionary shift in behavior” that is rapidly accelerating the digitization of the payments landscape. The primary obstacle to this revolution is on the merchant side, as many retailers lack the capabilities to support the shift to digital commerce from brick-and-mortar interactions. But in the first few months of the pandemic, innovative stores adjusted quickly due to necessity. Credit unions being there to support a more convenient, frictionless purchasing experience demonstrates that we are showing up where and when our members need us.
“Digital First is the new normal strategy for BOTH growth and risk avoidance,” as CO-OP President/CEO Todd Clark likes to say. And according to Battles, organizations that were early adopters of the cloud, remote technology and digital technology are much better positioned to withstand the current crisis.
We have seen how digital self-service, along with other services like drive-thru tellers and contactless payments, has proven to be a vital tool for maintaining efficiency, while ensuring the physical safety of credit union members and staff. Digital service tools have facilitated and simplified the processes for allowance of late payments, loan deferrals, fee waivers, and Payment Protection Program (PPP) loan applications.
The challenge many of our clients are struggling with is how to better integrate their operations to actively connect solutions across the enterprise to deliver this expected and continued capability. This is the time for swift backend operations to facilitate the proactive, front-end member experience. The CO-OP ecosystem is designed to help our clients do exactly that – our suite of integrated solutions ties together backend and front-end systems to enable a seamless experience for credit unions and their members that is both expected and essential today.
Opportunity: Accelerate the Future and Rethink Credit Union Operations for a Revitalized Workstyle and Workforce
COVID-19 has also hastened credit unions’ transformation in how they structure their staffing and operations. The crisis has forced credit unions to put innovation on the front burner and figure out how to transition their staff to a largely remote working environment.
According to Battles, it is prudent to plan to keep back-office and middle-office positions working remotely until a COVID-19 vaccine is found.
Credit unions have not traditionally been at the forefront of the “gig economy,” but Battles suggests thinking creatively to address credit unions’ current challenges by outsourcing certain key tasks that require specialized expertise not available in-house. For instance, since the IRS tax deadline was extended by three months this year, contracting with independent CPAs and tax preparers to help credit unions process the massive volume of PPP loan applications represents “an almost perfect use case.”
Above all, Battles suggests credit unions start to reimagine what the physical return to work will look like.
“One of the upsides of this experience is that many organizations have seen how effectively you can work virtually, so the need to be physically present will go down and the need to travel will go down,” Battles says. “Telecommuting – having Zoom meetings versus flying people to meetings – is now the new norm for a few reasons: primarily the need for safety and the pure reduction in business expense. How we design this way of working to optimize the way we deliver service is on every leader’s mind.”
Rapid investment in technical infrastructure, infosec, talent and modernizing all the processes that run through the backbone of your organization creates flexibility, speed and security. It enables both the modern platform and a way of working that makes it possible to serve members from anywhere. Many of us were caught off guard when this happened. We don’t have to put off the investment in transforming our operations because it’s critical to our member service, engagement and usage regardless of how our members want to do business with us.
Opportunity: Demonstrate Financial Wellness is Core to Who You Are for Employees and Members as the “Compassionate Banking Alternative”
Credit unions have been here before. This time we can do things differently.
“The roaring 20s of this century might turn out to be more like the 1930s of last century,” says Jean Chatzky, financial journalist and the host of CO-OP’s THINK Virtual conference. “While this is a challenging time for credit unions, it can also be a moment of clarity — people need you,” says Chatzky. “Anything that builds a friendlier, more trusted relationship with members is essential.”
A Gallup study reinforces the point that members’ trust in their FI is strengthened by taking a personal approach, providing thoughtful products and now more than ever offering member-centric services that help with financial management and wellness. Credit unions have an edge as they’ve consistently outperformed big banks across the board on these fronts. After the 2008 financial crisis hit, the long and painful recession with high job losses, plummeting home values and consumer dissatisfaction with big banks created a movement to find a better banking alternative. This culminated in 2011 with Bank Transfer Day, helping credit unions gain 2.2 million net-new members.4
But the digitization of our environment a decade later has shifted expectations. It’s easy to shift services to other providers and consumers have slim patience with a less-than-desirable experience. They now need experiences that help them in their financial lives.
According to Battles, consumers will give us a pass on the experience we delivered in March and April; but now, their expectations on digital delivery will be higher than before COVID-19. The well-executed support of government relief programs like the PPP was one of the most important actions credit unions took in the onset of the pandemic. We have seen how credit unions and other community financial institutions offered the best response to small businesses applying for PPP loans, while big banks turned many eligible applicants away, preferring to focus on their mid- to large-size corporate clients.
At CO-OP, we supported our frontline teams with “CO-OP Cares” pay to thank them for their service – for showing up for our clients when they needed it most and to manage the many challenges families are facing during this pandemic. Many of these teams were experiencing the same hardship as members and our empathy across both populations counted. We understood the need to support our employees in order for us to support our credit union clients and members. CO-OP acted quickly to transition many employees to work remotely and to implement safety procedures and physical distancing for onsite employees across all offices. Ensuring we did not overlook the impact of such quick and drastic work and personal lifestyle shifts these changes caused, we’ve encouraged and supported everyone at CO-OP to also take the time needed to focus on their mental, physical and emotional well-being.
Many credit union members are struggling – even well before this current crisis. Take this opportunity to focus on your members’ long-term financial wellness and integrate it into your delivery and engagement methodology to develop a deep, emotional connection with them. Giving members transparency and control in their daily engagement is another way of delivering financial wellness education by helping them understand an aggregated view of how they are performing. This is the essential foundation for establishing a Primary Financial Relationship and for being seen as the “compassionate banking alternative.”
This is Your Time
From the Great Depression to the Great Recession, credit unions have maintained the best interests of their members at heart during a crisis. Crisis is a time of opportunity. It’s a time to get things done. It’s a key reason why consumers have traditionally gravitated toward the cooperative movement during our nation’s most challenging periods.
Watch on-demand recordings from CO-OP’s THINK Virtual event series, centered on how credit unions can respond to the current crisis to support their members and the opportunities this challenge presents for the future of the movement: insights.co-opfs.org/think-virtual