The 4th Industrial Revolution: Will your Credit Union go the way of Saving Banks or grow like a FinTech!

A new paradigm, the 4th industrial revolution, BIG data, AI, deep learning, robotics, self-driving cars, the Internet of things, retail disruption – and so much more is upon us! It is all about data and digital and it is RIGHT NOW!

Yep it is real and 80% of CUs have self-identified that they are 2 or more years behind banks, Fintechs and Big tech (BIG Consulting research). Gartner says that 80% of financial institutions will be out of business by 2030 (11 years from now!)

The digital revolution is:

• The biggest challenge the industry has ever faced
• It is a compete leveling of the financial services playing field (we no longer need hundreds of branches and thousands of people to serve a metropolitan area or reach millions). Just look at the explosion of over 140 national credit unions and hundreds of regional players.
• Resulting in the most important opportunity we have had in 80 years to double our market share.

The time is now.

Where does it start?

A realization that everything in the retail business model has been disrupted. The dye has been cast. Old line major retailers fall each month and so soon will financial services providers if we don’t learn from their demise – brick and mortar is now a support system to digital delivery, not the other way around.

Digital transformation powered by the omnipresent and ubiquitous web, Wi-Fi (soon 5G), mobile apps and data (the exploding fuel of digital transformation) is now the dominate retail model and member service channel. Nothing else compares. Growth, service, lending and everything now must be digital first and digital efficient in order to win market share. There are no questions about this.

What should CUs do?

Strategy – revamp your CUs entire strategy to be digital/mobile first, data holistic and integrated (Omni channel) and recognize that the culture has to substantially evolve in order to be analytic and digitally focused. There are two major challenges to our eventual success- credit union culture (deeply engrained in member service, non-analytic decisions and lacking urgency) and the technology platforms we operate on (a little more on this later)

Everything is digital. Marketing (micro segmentation, next best products, etc.), lending (mortgages, consumers, commercial, loan decisioning, etc.), onboarding, risk analysis, funding, finance (ALM, profitably, pricing, etc.) and operations (account opening, fraud prevention, process automation, etc.). Strategy and decisions start and end with a digital interaction powered by data.

In order to support this new world a complete rethinking of the technology architecture needs to occur. Yesterday’s core centric, in-house model will not support the digital world that connects everything with best of breed services fueled by data that doubles is size very 2 years (yes, a Moore’s law of data!)

Cloud is essential!

In order to compete, win market share, create an Omni channel digital experience (the new definition of service) the core is no longer the essential technology, it is very important but it is not the center of technology universe. An integrated data warehouse that connects all systems (core, lending, marketing, risk, fraud, payments, etc.) is that center. Accepting that access to data will power your cus ability to digitally serve and that there will be an unending appetite for data, then it is clear that your CU can no longer prioritize a computer room and server based platforms. You must go to the cloud, it is the only answer. Cloud can take many forms – private, segregated, shared services, etc. but accepting that you cannot keep an ever-exploding amount of data in the computer room is one of the first step towards a digital transformation.

Best of Breed is the IT Strategy of Future!

CUS can no longer go to one core (haven’t been able to do so for a decade) or provider for all of the instructions tech service’s needs. No one firm provides the best deposit, commercial loan, online banking, consumer loan, mortgage loan, busiess services, marketing, payment system options that your members need. It doesn’t exist. A best of breed strategy is required. No if, ands or butts.

A new architecture!

If you want to win at digital (and you really have no choice is you want to be of value to your members) you must change the technology architecture to be data centric (data model that connects all platforms), cloud based, mobile first, Omni channeled etc.

A new business model!

In order to win in this new digital world, each CU also has to change how they think about business – analytic first – no gut, service is digital, decisions are fact based, fast and part of a learning process. This is what every competitor is doing. CUs cannot choose to be different, if that difference makes them less effective. Poor decisions are not member service.

Bottom line – CUs cultures have to change.

CUs can and should win in this new world.

The winning proposition starts with a strategy that recognizes that digital is the primary service channel and all channels are deeply connected. Data is the key. It not only fuels all things digital but also must be at the center of every decisions.

The way to inact digital transformation is to redesign the tech architecture and rebalance the skill sets to put digital and data first. Best of breed, analytics, data warehouse, API services, analytic tools and Omni channel services require new tech skills. Running the technology should be left to the cloud. Integration, data tools, data governance, RPAs, machine learning are the essential ingredients of a financial institutions tech skills.

It is a new world where cu is absolutely set to win but only if they change strategy, technology platforms and their culture. Yep just about everything. These opportunities only come around once in a generation. If we change we win market share, if we do not we lose our business.