Why digital transformation and faster payments don’t have to be hard for small credit unions
Industry shifts are cyclical, and while these shifts do happen regularly, the fintech wave is something we haven’t seen before. What we saw with Check 21, we’re now seeing with the faster payments movement. That said, there’s more reason today for traditional financial institutions to digitize than solely the fear of becoming the new Blockbuster. Credit unions must have the ability to support innovation and rapid change for the members they’ve built relationships with over the years—and in some cases, decades.
There are many reasons smaller FIs are sometimes hesitant to implement new technology. This article will delve into why that is, considerations for a longer-term strategy in an increasingly digital world and why this doesn’t have to be hard for smaller organizations—painting the picture of how the banking industry needs to shift to support a modernized future.
Weighing New Tech
It’s not surprising that small FIs in a previously analog industry are behind on moving to paperless technologies, but there is a major reason these FIs, including credit unions, are hesitant to implement new tech: Like in any organization, key stakeholders can be too focused on immediate ROI. It’s time to flip the narrative, consider the long-term ROI and double down on your motivation for digital transformation. This requires credit unions to look at who their account holders are, what they need and ultimately what they are trying to achieve. What are the top expectations for users, particularly those expectations that influence their FI of choice? How fast is fast when it comes to faster payments? Millennials and Gen Z (your current and future members) want everything to happen now. They want faster (if not immediate) payments and user-friendly technology to get it done.
On the operational side, this begs the question: Why are we complacent about flawed and outdated systems? There are institutions that still require employees to memorize hundreds, if not thousands, of codes and manually perform job tasks that can easily be automated. Instead of spending countless hours training on manual and analog processes, new employees should be learning to utilize a single interface that’s technologically equipped to streamline and simplify. In addition to saving time, assets like artificial intelligence, including machine learning, minimize the risk of human error. This balance between efficiency, accuracy and member satisfaction is the key to growth and success.
What Long-Term Digital Strategy Might Look Like
It’s possible that when you find what works for you and your members, faster payments won’t matter—maybe. However, you do need to start thinking about your strategies now. Many FIs have gotten caught up in implementing quick and easy technology initiatives instead of creating plans that are sustainable. Credit unions’ long-term strategies need to consider existing and future gaps in service delivery and growth opportunities as well as new needs that may emerge in the future. This means whatever platform you choose needs to be flexible—like allowing for the use of different payment routes (FedNow, TCH’s Real-Time Payments, etc.)—as well as a platform that serves your diverse members’ needs—for both business and personal use, for example.
Your credit union may also need to start looking at “long term” through a different lens. Instead of five-year plans, being set up for success may now require two- or three-year plans instead, as technological advancements are happening fast and are continual. Any successful plan will now need to anticipate change and be led by those with an open mind. It’s no secret that digital transformation, faster payments and really any sort of change can be painful in the short term. However, keeping up with the times in the financial services industry is paramount and will be the difference between successfully navigating the waves of change and struggling to stay afloat.
Kevin Olsen is SVP/payments solutions for VSoft Corporation, Atlanta.