Editor’s Note: After credit unions were for the first time rated below banks in terms of customer satisfaction in a recent national survey, CUToday.info has launched expanded coverage over what may be driving the change. As part of that series, Anne Legg is examining a series of service-related issues and also offering free resources to CUToday.info readers.
By Anne Legg
In the first article in this series, I discussed member journey, friction, and the Amazon Dffect as drivers of decreasing credit union member satisfaction. This article will cover two more: disruption and innovation.
Disruption:
Industry disruption occurs when a new market entrant solves an existing problem in a new way. A recent example is the ride-sharing companies' impact on the taxi industry. In the credit union industry, THRIVE’s research has found that PayPal is a significant disruptor. For a $1-billion credit union located in the Midwest, more than $4-million in funds left the credit union in 60 days. This was significant payment activity for this credit union.
While the credit union does offer a similar payment service as PayPal, it was not being utilized in the same capacity. While payments systems are not a direct competitor, it is the other offerings that a payment system may make that are. PayPal, for example, offers loans and credit cards, which they market to users directly in their transaction stream.
The ease in applying and quick access to the loan or credit card inside the PayPal app is downright seductive. While product run-off may be slow, it can quickly increase to the point where credit union products are no longer being used. When a member ceases activity on a credit union credit card, it is honestly too late to attempt to save the relationship. Just like the taxi drivers to ride-sharing services, they didn’t see the flight trickle away until it was a deluge.
Innovation
Innovation is the process of taking a current item and using it in a new way or designing a completely new product/service. Many methodologies exist as to how to innovate, but in reality, innovation is a challenge at most organizations and especially in highly- regulated industries, like credit unions.
Why is innovation so important? In times of disruption and friction, the ability to generate new solutions using existing tools to current problems is tantamount to success. Most business leaders believe that innovation is best hired from the outside and is expensive. INSEAD Professor of Entrepreneurship Morten Hansen and London Business School professor Julian Birkinshaw disagree and have created an internal innovation process. Their process, called the Hansen - Birkinhaw innovation value chain, consists of three phases: idea generation, idea conversion, and idea diffusion. This process allows the innovation to be created as a process and not as a single entity.
The benefit is directly building an innovation capability within the organization, meaning they are creating a culture change at the same time—and yes, that a BOGO (buy one and get one free).
Credit Union Actions
Actions that credit unions can take right now:
1. Perform a disruption assessment. Identify current disruptors like PayPal and others that are in your members' wallets today to assess the flight risk and determine corrective action.
2. Create innovative solutions to increase member engagement and value through a defined process.
To learn more about the elements of a disruption assessment or the innovation process, please click https://www.anneleggthrive.com/services to enter your email to receive instructions on how to access free, exclusive CUTODAY disruption assessment and innovation as a process deck and explainer video.
Anne Legg leads Thrive Strategic Services and can be reached at anne@anneleggthrive.com.
Other Feature Stories in this series can be found here, here, and here.