RANCHO-CUCAMONGA, Calif.—The next year for credit unions will be all about digital transformation, says CO-OP Financial Services.
Todd Clark, president and CEO of CO-OP Financial Services, said the three big trends impacting credit unions in 2018 will be greater utilization of data, new open banking standards that will force more transparent and real-time interactions, and computing power and telecommunications that will make everyone’s lives easier.
“We’re heading into an omni-digital reality—dominated by mobile, online and connected experiences—that is going to change the way we approach our business,” said Cark. “People are demanding excellence in their digital delivery. Time is the limiting factor now, so people are interested in anything that’s faster and easier. Think of self-driving cars and the amount of time you could recapture if you didn’t have to focus on driving.”
People also want personalization, Clark noted.
“They want some sign that their financial institution knows them and is harmonizing their needs with their experience. This points again to the utilization of data,” he told CUToday.info. “As we’ve said for years, financial institutions have a great deal of data. Now it’s time to aggregate and harness it to learn more about members, predict their future behavior and needs, and monitor the security of their data and accounts.”
Best-Of-Breed Digital Solutions
While CO-OP has always worked to be a competitive resource for credit unions, the company’s focus is squarely on technology and providing credit unions with best-of-breed digital solutions, Clark said.
“What’s changed in the past year is our capacity to do this. We’ve done a lot of foundational work at CO-OP to be able to deliver an integrated client experience, aggregate data, implement new technology like machine learning, and prepare for an agile future. We’ll continue that process in the next year and beyond, but our progress over the past year puts us in a much better position to deliver the products and services that will keep credit unions competitive. We’re a different organization than we were a year ago today.”
Clark said that digital transformation is a consistent theme across CO-OP’s platforms and efforts, but it’s playing out in a variety of ways as the company makes progress.
“The work we’ve done to create and optimize the CO-OP ecosystem positions us to take advantage of machine learning, for example, or venture into predictive analytics,” he said. “All of this work helps make CO-OP a more valuable partner. Through our work and shared expertise, credit unions have access to constant innovation.”
Todd Clark
Clark emphasized that consumers are placing an extraordinary demand on credit unions and CO-OP to provide digital excellence.
“Their expectations are being set by companies like Amazon and Apple. Meanwhile, one of the challenges we face is the technological debt created by legacy systems,” said Clark. “I’m really looking forward to the time when we are designing products and delivering services without having to work around legacy technology. When we move the bulk of our systems into a cloud-based environment and we’re operating in a world where everything we have is written in modern code and is prepared for an agile future, that’s when the fun can begin. Once the engines are humming the right way, we’ll start turning out products and services rapidly.”
As CUs work to meet the demands of a digitally driven culture, fintechs are elbowing in on the financial services space, reminded Clark.
“Recently, Apple launched Apple Cash. Now you can hold assets at Apple and move money around through P2P. If every credit union member pulls $100 out and holds it at Apple, what does that do to our deposit base?” asked Clark.
Time To Be Agile
How can credit unions respond?
“Think about everything in terms of digital and how you solve it with technology. Be agile, because the ways of the past are not going to be the ways of the future. Your partnerships with technology providers like CO-OP and in initiatives like Zelle, which are controlled and owned by the financial services industry, are important,” Clark said. “But also, don’t get too far out over your skis. We continue to live in an extremely regulated environment. That regulatory oversight and burden is challenging, but it is also a barrier to entry into our space. It is not easy for a startup to duplicate what we do. While I would stop short of calling that a competitive advantage, it is a reality. I also encourage us internally to embrace regulatory oversight. Don’t look at it as a pain, but as an inducement to always do better.”
What will really impact credit unions in the not-too-distant future are open banking standards, Clark said.
“They are going to change our industry,” said Clark. “For those who don’t know, open banking is already taking root in Europe, where it’s becoming a mandate in the next few years. Open banking sets standards for sharing data between financial services and creates standards for innovation – including APIs – that encourage the open sharing of technology. For the credit union industry, this means it’s no longer going to be possible to close off our systems and still be relevant. We have to prepare for a different competitive model.”
Clark explained that these challenges aren’t at odds with the digital transformation work CO-OP is doing.
“The two go hand in hand. The future is all about change, and we see this as an opportunity – not just for CO-OP, but for all the credit unions we serve,” he said. “We did not start out as a technology company. We brought in people who love and embrace technology and let them do their work. If we can transform a company that’s the size of CO-OP – $300 million in revenue when we started this move, and $425 million now – then you can transform any organization. It’s all about being willing to lean into it.”