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Fintech’s Impact on Credit Unions 

gears with dollar signs and golden sparkle
By Ken Burns, CCE

6 minutes

Re-imagining the lending experience

Sponsored by Origence

How will financial technology impact banks and credit unions in the future? It’s a question being asked by every financial services organization, and certainly by financial institutions.

First, what seems clear is that the future is here. Amazon, Apple, Facebook, and Uber are just the tip of the spear when it comes to technology that, if ignored, can have you waking up to a dream that’s become reality.

In the hopes of anticipating how this technological reality might impact us or, more importantly, position us to deliver the capabilities our customers and members expect, many a C-suite is applying scenario planning.

The discipline of “scenario planning” has proven itself invaluable in a time when the rules of engagement (think consumer engagement) are being rewritten at whirlwind speed, creating a technological fog for many to navigate through. What was once leading edge is now table stakes—one just needs to look at such technologies as online banking, voice response, instant issue and voice over IP (internet protocol).

Scenario planning entails much more than a swag of what the future might bring. The future is a product of known trends associated with uncertainties that, when correlated, can help provide the basis for probable future outcomes.

Thus, we see the “Amazon effect”: delivering the right product, to the right customer at the right time, and by the fastest means possible.

Amazon, Apple, Facebook, Google and Uber all represent known trends that can be unpacked to expose such competencies, disciplines and innovations as robotics, machine learning, artificial intelligence, digital streaming, virtual reality and voice control apps (i.e. Alexa, with its thousands of new skills, including financial ones).

Enter COVID-19, a black swan event that was nearly impossible to predict that has had a tremendous effect on both our lifestyles and our economy. Yet, those financial institutions with a competency in remote service delivery have been able to quickly pivot and continue serving their customers.

Finding a Positive in Light of a Crisis

In times of crisis, there is greater latitude to re-evaluate old processes, traditions, costs and business expectations. Crisis also provides a time to identify needs that materialize as a result. For those in financial services, it means re-evaluating high-cost delivery systems that can represent 70% or more of total expenses but deliver only 10% of transaction volume. A survey of 1,000 consumers by Lightico found that 82% of Generation Z (adults born after 1997), making up 40% of U.S. consumers, want a great online and/or mobile experience. Only 28% want more branches or ATMs.

Many companies are now finding that remote employees are just as productive or more so as they settle into working from home and access the business through virtual private networks. For example, “modern, web-based agent desktops mean that representatives with a laptop and internet connection can log in and start handling calls from virtually anywhere… The cloud has become far more secure with the growth of public cloud providers like Amazon Web Services and Microsoft Azure…,” notes Ryan Brogan, director, CUES Supplier member and strategic provider Cornerstone Advisors, Scottsdale, Arizona.

In addition to remote access, financial institutions need to hone their skills in automated decisioning. Key survey findings from the FICO and American Banker 2020 Executive Survey indicate confidence is low regarding decisioning capabilities:

  • Anticipating customer needs 61%
  • Consistent customer service 44%
  • Personalized customer service 44%
  • Accurate, real-time decision-making 41%
  • Integration of analytics into existing systems 39%
  • Empowerment of non-technical business users 32%

A 2018 study by the Federal Reserve Bank of New York found fintech mortgage challengers processed applications 20% more quickly than traditional lenders—without engaging in riskier underwriting. How is that accomplished? Anticipating customer needs, automated decisioning, personalized customer service and integration of analytics.

Re-Imagining the User/Borrower Experience

To remain competitive, financial institutions must reimagine the entire user and borrower experience from point-of-sale to closing, by streamlining and automating the entire lending journey. Increasing efficiency through automation, focusing on cycle time reduction, staff productivity and unified systems, plays a vital role in delivering this new experience.

Further, lenders need to replace manual steps in the origination process with an automated solution and integrate marketing and CRM into point-of-sale transactions and loan origination, keeping borrowers on track and engaged.

With today’s financial technology, lenders have the ability to not only be competitive but to be market leaders. “A lender can now facilitate and manage all types of product acquisition, including indirect, consumer and mortgage, as well as account origination, without the need for multiple vendors and integrations that are so common in our industry,” notes Tony Boutelle, CEO of CUES Supplier member CU Direct, Ontario, California.

Lenders are realizing the benefits of such technology as the Origence marketing & CRM platform, which provides lenders advanced marketing automation and data warehousing capabilities. Such platforms are built on the idea that synchronization with financial systems for loan and deposit offerings (consumer, mortgage, business, checking, etc.) will deliver personalized updates and offers to borrowers and depositors.

Financial institutions taking advantage of today’s marketing and CRM technology can experience dramatic improvement in onboarding efforts, pull-through rates and customer satisfaction. Lenders using the Origence CRM platform are experiencing as much as 20% growth in lending pull-through rates and increased customer satisfaction scores, even as time to closings are lengthened due to high demands. The platform’s intelligent account onboarding campaigns have delivered 12-15% growth in product cross-sell ratios.

According to WikiFX, “non-banks” are aggressively advancing their presence in the marketplace, becoming more prevalent by advancing their financial service offerings:

Google, which announced plans to offer an extension for its Google Pay app, “Project Cache,” in partnership with Citigroup and Stanford Federal Credit Union. Google’s Felix Lin, VP/payment ecosystems, says the accounts will be branded upfront as coming from these FIs.

Facebook recently announced a new digital wallet that’s to include digital currency. Visa and Mastercard, and internet companies like PayPal, Uber, Spotify and Booking.com will each invest approximately $10 million to fund development of the currency, and will become part of the Libra Association, an independent consortium of 28 founding partners that will govern the digital coin independently of Facebook.

The future is here and evolving at breakneck speed. Given the current pandemic, we are seeing the velocity of change move from years to months in digital banking. What’s the right approach for financial institutions to take to remain competitive and retain market share?

  • Maintain a sense of urgency.
  • Expose gaps in service excellence (if it isn’t broke, but isn’t meeting customer expectations, fix it.)
  • Identify best in industry solutions.
  • Invest in technology to delight depositors and borrowers (i.e. digital access to all offered services).
  • Develop a competency in engaging partners who are knowledge experts and who are embracing/developing leading-edge technologies.

Lean in and re-imagine delivering the capabilities that today’s financial consumers expect. We hope to meet you on your journey.

Ken Burns, CCE, is a seasoned financial services industry executive who now serves as EVP/sales and business development at CUES Supplier member Origence Marketing and CRM, a division of CU Direct, Irvine, California. Burns has vast experience, and his expertise includes successfully serving as CEO for three large credit unions: Bay FCU, Tech CU, and Patelco. He has re-focused his financial institution talents with Origence, providing automated marketing programs and services to the credit union industry.

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