NEW YORK— The former general manager of financial innovations for PayPal offered credit unions five ways to innovate in what he called the “new normal” market. It’s a market where this same person sees credit unions having a potential “leg up.”
Dan Schatt, who led hundreds of partnerships in financial services while at PayPal and who is now the chief commercial officer with a company called Stockpile, told PSCU’s MoPro meeting that the market is rapidly approaching the point where it’s not enough to meet a member’s needs, credit unions must begin to anticipate those needs.
Schatt, who is also the author of the book “Virtual Banking: A Guide to Innovation & Partnering,” said it’s vital for CU leaders to recognize that they live in what’s become called the Internet of Things, that is all things are connected.
Dan Schatt speaking to PSCU's MoPRO meeting.
“People don’t want to go to someplace to do something; they want to do it in whatever context they are in at that time. They want their credit union to come to them,” he said.
The new normal in financial services, and all retailing, he said, is a world that is online only, mobile driven and which offers real-time tracking and payments. Providers aren’t building their own platforms any longer but plugging into best-of-breed applications and putting it all in one (mobile) place, he added.
Four drivers Schaat said he is paying particular attention to are mobile, local, digital and social. “These are some pretty profound changes related to each of these trends,” he said. “With mobile, we will begin to anticipate a customer’s needs.” (As an aside, Schaat offered, “I’m still not convinced Apple Pay will be the winner, because they have just 15% of the market with iPhones.”
In terms of “social,” Schaat observed that “Increasingly we’re seeing non-financial institutions integrating with Facebook connect when logging into your app. What’s interesting is that in 2011 40% of people in a survey said that ‘maybe’ they would trust a non-financial institution for finances. In 2014 that figure had doubled.”
So how can a Fis Innovate in this new normal? According to Schatt:
- Adopt a Platform Mentality.
“It took me a while to understand while at PayPal what this meant,” said Schaat. “Most companies when they build a product have all kinds of functionality that they want. But they can never get to everything. So imagine if you could not just harness the people within your credit union or a partner, but you could harness anyone with a great idea,” he said. “I think credit unions really have a leg up, because you have shared infrastructure. There is an opportunity here for you to propel yourself past other FIs.”
Schaat urged credit unions to build their own developer platforms and to feature their own app stores. “Connect to Other Platforms. Go where your seeing traction, and see if you can partner with some of these providers. Get your members in there first.” The other option: license a developer platform.
2. Embrace new Models
“Everything is blurring between online and offline,” said Schatt. “It’s no longer e-commerce, it’s just commerce.”
3. Alternative Currencies.
Schatt said he believes BitCoin is ahead of its time, and that eventually financial institutions will become “custodians of value.” That means that at some point CUs might run on a Bitcoin rail. “If you can be the financial custodian linking into Bitcoin, you can actually stay relevant with your members.”
4. Big Data.
“I think credit unions do a better job here than banks,” said Schatt. “Poor use of data leads to disconnected customers. Fifty percent of Millennials think the bank doesn’t understand their needs at all. The financial services industry has never had a better opportunity to personalize its offerings.