Make sure you have a strategy for the next decade of trust-based competition, financial health platforms and life-event subscriptions.
The next decade is poised to deliver an exponential rate of change in consumer financial services. As described below and in the EY report, NextWave Consumer Financial Services Insights, the key drivers of exponential industry change will include competition based on consumer trust, artificial intelligence-driven financial health platforms and subscription-based consumer financial services. More than just bolt-on products to existing infrastructure, these trends represent fundamentally different ways of doing business.
To thrive in the coming decade, credit unions will need to embark upon strategic planning that integrates NextWave concepts into a comprehensive value creation model that prioritizes innovation, agility and scalability.
A New Approach to Trust
Although consumers trust their credit unions, the financial services industry suffers from a trust gap. According to the 2019 Edelman Trust Barometer, financial services is the least trusted industry among those surveyed. The top-ranked technology sector will surely seek to exploit their advantage through services that encroach upon financial services.
Credit unions have the unique opportunity to respond with a competitive offering that guarantees honesty, transparency and responsible use of data as part of customer-centric engagement. By demonstrating a strong understanding of data usage, cybersecurity and operational excellence, credit unions can differentiate themselves from technology companies, while delivering the best value in exchange for customer information.
We believe that promising consumers ownership and discretion over the use of their personal financial data will not only rehabilitate the image of financial services, but also attract new customers.
Convenience Through Financial Health Platforms
Consumers tend to believe that they’re more financially healthy than they are, leading to complacency in financial planning.
Those perceptions can become reality with consumer adoption of AI-driven financial health platforms that offer daily, relevant and interactive engagement. Rather than just reporting on amounts saved and invested, these financial health platforms will automatically analyze customer data and offer guidance on preparation for life events, show trajectory toward meeting goals, and offer specific, data-driven suggestions for areas to improve. These capabilities will touch upon highly personal and emotional decisions, with the potential to change patterns of spending, saving and investment.
Consumers generally feel ambivalent or negative about their financial health, which implies that customized messaging would be a strong complement to financial health platforms. In this regard, credit unions possess the core values to become essential partners to customers in improving their financial health.
The main challenge will be competition from technology companies using open banking APIs to build third-party financial health services. Through strategic planning, credit unions can become the central point of contact for harnessing the capabilities of financial health platforms.
Subscription Model for Financial Services
Mass-market financial services consist of everyday products, such as checking and savings accounts, credit cards and investments. Yet consumers think most about financial services during major life events, such as starting a first job, getting married or having a child. This disconnect gives credit unions the opportunity to acquire younger customers by offering subscription-based programs that provide holistic support for reshaping one’s balance sheet during a major life event.
Open banking has made it easier for any provider to assemble a best-of-breed set of products, but given their trusted role, credit unions should lead the way in providing value-added subscription services to the mass market.
NextWave trends shouldn’t be addressed in isolation, but rather through a consistent value-creation model that integrates key success factors into a single, interactive blueprint for continuous transformation. The foundation of this model should be based upon:
- People and purpose: value-driven mindset around innovation that promotes customer and employee acceptance of the higher purpose of the credit union brand.
- An agile value chain: flexibility to adapt to changing trends and new offerings, with the ability to acquire, manage and distribute value throughout the optimized customer experience
- A scalable platform: a modernized and scalable collection of infrastructure components (including APIs, systems, data stores and ecosystem partners) that serve as building blocks to meet customer needs
This integrated approach creates long-term value by anticipating future scenarios, guiding capability investments and establishing real-time metrics to ensure progress toward success. Credit unions that embed NextWave into strategic planning will have the appropriate vision and strategy to meet the challenging transformation demands of the coming decade.
Ryan Battles is Americas financial services advisory banking practice leader for EY, headquartered in London. The views reflected in this article are those of the author and do not necessarily reflect the views of the global EY organization or its member firms.