How to move beyond a buzzword project to effect true strategic change
Over the past decade, the leaders of many financial institutions have championed ambitious goals to reshape their operations through omnichannel and big data strategies, only to see those plans drift, sputter and, in some cases, fizzle out altogether. But the stakes of failing to deliver on the next big challenge—digital transformation—are too great to allow this ambitious undertaking to stall out like so many buzzword projects.
Defining digital transformation as finding new ways to engage with members, both internally and externally, underscores both its broad potential to improve every aspect of the credit union and the breadth of strategic vision and execution required to do so. Launching an internal project or hiring a consultant to develop a digital road map isn’t nearly enough to support true and ongoing transformation.
The following five imperatives can lay a strong foundation for the sustained effort and investment needed to remake financial services delivery in step with members’ current and future expectations and produce the ROI needed to fund continual digital innovations.
1. Build a Big Tent
Digital transformation touches not only all of the credit union’s products and services, but also its people, processes and technology. The foremost view of digital coming out of the pandemic is channel-specific, driven by the shift toward self-service online and mobile capabilities. The emphasis on delivery channels is elevated by Capital One’s ubiquitous TV ads promoting remote account opening within five minutes and by online lender Rocket Mortgage’s marketing blitz featuring its mobile app.
That being said, it’s more than front-facing member applications. It’s also internal processes. A common example of improving digital channel access in 2020 was the need to increase limits on remote deposits as branches closed and drive-thru lines spilled out into the streets. Credit unions committed to transforming their service delivery are now considering what else they can do to improve members’ channel experiences.
But digital also encompasses payments, which are by far the most commonplace transactions people associate with managing their money. Standards for easy, convenient payments are being set by the likes of Venmo, Square and Chime.
Traditional checking accounts are no longer the center of many members’ daily financial dealings. Thus, digital strategy must extend to protecting interchange income by encouraging members to keep their credit unions’ credit and debit cards on file with Netflix, Spotify and Amazon. Thoughtful engineering and ongoing process improvement for registering payment cards with a wide range of digital entertainment, shopping and utility services will position credit unions seamlessly alongside members on these everyday journeys.
Frontline employees staffing branches and contact centers have vital roles to play in guiding members to optimize their digital experiences and in incorporating digital support into their service delivery. Many credit unions are leveraging their mobile channels, for example, to support banking by appointment and video conferencing between financial professionals and members, wherever they may be.
2. Commit to the Long Haul
Digital transformation demands dedication and long-term fidelity to strategic goals and execution. It’s not a project that can be completed over a year. Or two. Or three. It’s a process—and it’s never done.
Operationalizing that commitment begins with understanding that the products, services and business models credit unions need today are different than what they’ll need in the future. And CUs must build for that future by looking beyond what competitors are doing to develop strategic aims that reflect the unique aspects of their members, markets and emerging opportunities for digital sales.
The breadth and magnitude of true strategic change can be daunting, so it’s helpful to start by identifying quick wins that inspire buy-in for long-term digital transformation—especially if those wins support reducing expenses and/or increasing income to enhance the ability to make future investments in digital infrastructure. Examples of quick wins include reducing technology expense through effective contract negotiation, closing underperforming branches and better leveraging marketing automation.
3. Aim High
The outcomes of digital transformation should exceed, not just meet, member expectations. Setting a goal to be available to members to do their banking wherever and whenever they want to do so is a minimum standard today. Credit union leaders must recognize that members’ preferences for digital accessibility often are set by their experiences in realms beyond financial services. When members can easily plan and book their vacations at a Disney resort on their smartphones, why shouldn’t they expect similar convenience in arranging for vehicle financing or making contactless payments?
Some credit unions are taking bold steps to embrace digital transformation. $965 million Marine Credit Union in La Crosse, Wisconsin, announced in 2020 that it would close half of its branches as it commits to changing the way it does business with members. That move goes well beyond the reactive measures that all financial institutions took during the pandemic and commits Marine CU to permanent, positive outcomes.
4. Get Specific
Adapting Marine CU’s approach, other credit unions might set such goals as penetrating a new market without branches, minimizing the number of assisted teller and member service representative transactions, or achieving channel migration targets. Those goals might include cost benefits, such as improving expense and efficiency ratios.
The more specific those objectives are, the better. A CEO might share goals like reducing expenses as a percentage of net income by X% through the migration of routine transactions to digital channels or getting 50% of new membership applications and deposits through digital channels within three years.
That level of specificity should drive the organization to operate in inherently different ways. It should transform the way marketing engages with member communities and select employee groups, the way branch employees talk about digital with new and existing members, and efforts to make processes more efficient and frictionless. Specific goals create a rallying cry that compels action.
“We want a better, faster member experience” is an admirable but squishy goal. Everyone wants to deliver a great member experience. But to do so, a credit union needs to address questions like why faster is better, what objectives and outcomes must be achieved to get to faster and better, and what changes must be made in what order. Identifying goals and objectives is the first step toward establishing guideposts about what’s important to the business model and how to prioritize the hundreds of tasks that must be completed to move forward with digital transformation.
In Cornerstone Advisors’ modeling, for every $1 billion in assets, at least $2 million in annual revenue is at risk among members looking for, but not finding, the digital services they expect from their credit union, and an incremental expense opportunity of about the same scope may or may not be realized. Without updating the branch business model in conjunction with digital transformation, profits will likely stagnate as digital increases are offset by branch erosion. In addition, failure to capture digital sales could cause declining revenue.
5. Attend to Culture
Aligning culture with digital transformation is as essential as process improvements and technology modernization. All of these elements must be grounded in strategy. A tightly integrated business strategy encompassing experience, delivery and sales, and technology forms the basis for the credit union’s target operating model. From that work, the transformation of delivery channels, payments and core systems can proceed, guided by ROI-based outcomes for streamlining processes, right-sizing and redeploying staffing, and optimizing payments, digital sales and other pertinent fronts.
All of that work can be bogged down if leaders don’t effectively manage change and implement enabling initiatives in support of the digital vision, goals and strategy. The credit union must commit to clear communication and training to execute on cultural, organizational and job-related changes.
In short, people must transform in step with digital processes and infrastructure to maintain and grow existing member relationships and attract new business. Once the executive team has formulated a digital strategy, leaders can begin to plot execution across the organization, including corporate and cultural alignment to guide internal and external communications about what the credit union aims to achieve and why all associates have a role in driving change.
Branch employees can feel threatened by an all-out push toward digital transformation. What’s in it for them to support this shift? A key message is that the need for change is existential: If the credit union does not embrace digital, it will lose ground financially and competitively, jeopardizing its mission and its ability to serve members’ and employees’ interests. If it succeeds, its business will grow—and so will the need for human capital and the range of professional growth opportunities for staff.
An intertwined message is that all people across the organization must be part of the journey to transform their roles, processes and technology. How can a digital-first credit union better support members’ financial health, personalize service delivery, and engage with new and existing members? Frontline and back-office staff have unique perspectives to share on how to deliver on those goals.
In support of digital transformation, some financial institutions have created new positions of chief experience officer or chief digital officer to lead change by taking a “member-in” view, not a “credit union-out” perspective. Another strategy has been to appoint digital ambassadors in every branch to educate associates so they feel more comfortable talking with members about digital services.
Employee incentive programs tied to achieving target outcomes for migrating transactions to digital channels can also foster the mindset that it’s everyone’s job to help the credit union do what’s best for members. Job descriptions should spell out each employee’s responsibilities for supporting this ongoing initiative. Friendly competition among branches to increase remote check deposits and other digital transactions by educating and reminding members about these convenient services is one more example of encouraging all employees to view digital transformation as part of their jobs.
It’s not hard to find real-life business cases for the need to embrace digital. Blockbuster’s demise continues to stand as an exemplary cautionary tale for failing to transform a business in response to shifting consumer preferences. Even as the company launched a streaming service in an attempt to win back customers, it continued to rely on DVD rentals and late fees. Meanwhile, Netflix steadily honed its digital offerings to the point where its personalized feeds based on subscribers’ viewing histories have become a model that many industries, including financial services, now seek to emulate.
Other high-profile examples of the price paid for ignoring the rise of digital include Eastman Kodak’s faltering as consumers embraced digital photography and the decline of retailers Sears and Toys “R” Us with the rise of digital retail models offered by Amazon, Target and Walmart.
To align themselves with the winners in these business equations, credit unions must change the way everyone from leadership to frontline and back-office staff thinks about and supports digital transformation. They can’t be content to introduce online account opening and loan applications and then stand back and declare success. They must be ambitious, bold and all-in in setting their sights on the next chapter of their digital journey. cues icon
Jim Burson is a managing director with CUES Supplier member and strategic provider Cornerstone Advisors, Scottsdale, Arizona.