Why Is It So Hard For Credit Unions to Compete Digitally?

Why Is It So Hard For Credit Unions to Compete Digitally?

Why Is It So Hard For Credit Unions to Compete Digitally?

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Mobile banking is on the rise as consumers increasingly rely on their smartphones to get things done. In fact, statistics from JP Morgan show that the company’s mobile user base grew by 17 percent year-over-year in the third quarter of 2016, with more than 75 percent of the firm’s new accounts opened in digital channels during the quarter.

Bank of America research indicates that 54 percent of U.S. adult consumers who own a smartphone use a mobile banking app, with 35 percent of mobile bankers accessing the app at least once a day, and 84 percent at least once a week. And Javelin research estimates that 81 percent of U.S. adults will be mobile bankers by 2020.

While most credit unions recognize the pivotal role mobile platforms will play in their future growth and success, designing and deploying the right solution can be a complex undertaking.

“I have seen many credit unions develop brilliant, differentiated digital strategies,” said Brian Bodell, CEO of Finivation of New York, N.Y. “However, internally they are consistently challenged by budget and staffing constraints, while externally they are challenged by selecting and managing the multiple vendors that are needed to design, architect and implement the differentiated solution. They usually end up with a crazy list of customizations and integrations that make their budget and timelines become both large and unpredictable.”

Designing for Today’s Mobile Members

According to Bodell, to better prioritize their efforts, the most successful credit unions in the mobile banking space do internal research up front to understand how their members are already interacting with them both on- and off-line.

“Analyzing member data and speaking with credit union staff takes time and resources, but is an essential first step in developing an informed mobile strategy,” he said. “So is researching best practices from outside of the credit union movement. Every credit union should study the mobile apps from the both industry and out-of-industry leaders, ranging from USAA and Venmo to Facebook, Netflix and Amazon.”

What consumers expect, Bodell adds, is a fast, easy, secure and visually pleasing experience that delivers valuable functionality. First impressions count according to Business Insider Intelligence research. Twenty-three percent of consumers abandon an app after one try if it is poorly executed.

“On the functional level, research highlights the importance of features like P2P, remote deposit capture and bill pay,” said Bodell. “It also helps drive growth if credit unions allow for account opening and lending from the mobile channel.”

The Importance of APIs

So just how can credit unions create an engaging and differentiated mobile experience, especially given the depth and breadth of legacy technology driving their backend systems? According to Bodell, that is where APIs come into play.

“Technical acronyms can be annoying on multiple levels,” said Bodell. “However, it is important that credit unions learn about APIs (application programming interfaces) and ESBs (enterprise service bus), since these architectural components can help credit unions better differentiate themselves, while becoming faster, more innovative and more secure.

Credit unions can first design their own look, feel and flow (internally or working with an outside design/user experience shop), says Bodell. They can then plug into APIs (sitting on top of an ESB) to exchange data with key systems (e.g., core, credit/debit, credit bureaus, data warehouse) and ensure the members experience with the credit union is consistent both on- and off-line.

“With this type of architecture, the credit union is more in control of both the mobile member experience and the data that is needed for service, marketing and fraud detection purposes,” said Bodell. “Credit unions are getting away with weaker solutions, architectures and data use now, but they won’t in a few years. They need to start planning and investing in this new reality where mobile, data and connectivity rule.”

Mobile as a Strategic Investment

While investing in mobile will clearly help serve members well into the future, the right platform can pay off substantially in the near term as well. “Research shows that the operational cost for a digital transaction today is just one tenth that of a branch transaction,” said Bodell.

He emphasizes, though, that implementing a new mobile banking solution should not be viewed as a “one and done” proposition, and that credit unions should expect to invest in their digital presence on an ongoing basis.

“Mobile fintech is advancing at the speed of light, with new developments in payments, biometrics, cloud computing and distributed ledger technology topping the headlines every day,” said Bodell. “So make sure you partner with providers who understand the complexities of this industry and who can offer the expertise and vision to help you navigate the future of mobile.”