• Jon Ungerland

Three Simple Steps to Creating a Credit Union Strategy in a Post-Community FI World

Updated: Nov 13, 2019

I recently wrapped up my annual credit union client planning session circuit. Once again, I was honored to facilitate catalyzing and horizon-expanding conversations with some key clients across the country.

As is always our CUSO’s goal, our dialogue with clients focuses on core strategic and technological factors which willimpact their futures as community financial institutions. However, unlike other firms and facilitators, we provide an elegantly simple set of variables the institution can impact and control, including (1) radical emphasis on centralizing and controlling member/consumer/community data; (2) a useful and modernized understanding of ‘community’ and an awareness of how communities are now hybrid digital-physical phenomena; (3) a core business strategy that turns on use of modern technologies to engage consumers and communities using numbers 1 and 2, above.

In contrast, this year’s panoply of industry phrases and buzzwords included “digital transformation,” “becoming a platform,” “digital experiences,” “machine learning,” “AI lending,” etc. What struck me wasn’t that these phrases were predominant -- of course they were! But, as I see it, if we don't overcome these alluring and familiar distractions, our very presence and purpose are in jeopardy - which is to say the future of affordable, valuable, fair, democratically owned and controlled financial services is uncertain.

It’s almost as if we’re being (or allowing ourselves to be) intentionally distracted from contemplating or discussing existential problems and possibilities, to the benefit (and ultimate triumph) of our actual competitors – technology companies and large banks.

Deeper reflection is needed.

For example, I heard many discussions about needing to modernize online and mobile banking and fight the magical digital self-service vendor to solve for some fanciful finalization of “digital transformation.” Yet, I heard zero discussion or awareness (apart from our instigation of it) around the reality that money itself is becoming digital and mobile and consumers can now store it, spend it, save it, borrow it, earn interest on it, etc., without a bank (defeating the purpose of fretting about and debating the ‘best’ online and mobile banking platform!). And, if I did encounter anyone aware of the virtual global wildfire of digital currencies and digital assets, it was usually a CFO or a Board President scoffing at ‘the dumb bitcoin bubble which is just the latest Dutch Tulip Bulb craze.’ These are peculiarly backward pontifications from prominent roles in our industry, especially out of touch given the opinion of international banks, central banks, and world governments on the immanent reality of digital currencies and digital assets!

If I wasn’t mortified by the misguided opinions around cryptocurrency and digital assets, I frequently encountered ample desire to get into the business of AI (artificial intelligence) or machine learning lending. Ironically, those conversations were usually being driven by Chief Lending Officers woefully unaware of the fragmented, siloed, and generally uncentered/uncontrolled nature of their loan origination systems and loan processing data. Sure, I believe AI lending is going to be a boon for financial services firms and consumers. I also believe it’s going to (must) be built on a foundation of deep, consolidated, and ruthlessly guarded/controlled data (the thing about machine learning is that it needs to learn … and the way it’s taught is by being fed data!). Don’t mistake my pessimism for skepticism; I’m confident AI/Machine Learning is going to be disruptive. I simply doubt whether most in our industry are positioned or prepared to ensure it’s a constructive disruption! Why? Simple, because most community financial institutions don’t have enough consolidated control over their own member data to relevantly or securely deploy such solutions. Hence our elegantly simple formula for relevant strategic success, above.

Anyway, onward … as always, credit unions are worrying about what to do with their (20 year-old) core processing contracts and vendors. However, instead of discussing the fundamental shifts in payments and global currencies/banking, instead of discussing whether their institution will be able to maintain a valuable and relevant position in the economy and transactional lives of their future consumers and communities, they’re wasting time wondering which core processor is going to be most appealing to their frontline and most compatible with the myriad of bolt-on technological boat anchors (oops I mean vendors). The credit union industry isn’t registering that billions of dollars in payments, loans, and profitable transactions are moving to entirely new digital and disbursed networks. Today’s community FIs are essentially the dinosaurs wandering around and arguing over which tree tastes the best or which tar pit has the most pleasing temperature; meanwhile extinction level event sized ‘asteroids’ appear to be hurling into communities in record volumes and with disturbing frequencies.

The sky isn’t falling (yet); and I’m certainly not Chicken Little. I anticipate 2020 being full of entertaining characters and consulting firms pointing out the problems and panicking about the future without putting forward any solutions. However, if you’re reading this and thinking, “Damn, are we doomed do to yet another traditional annual planning session?” take heart; there are simple things you can do!

Map out your vendors and platforms and start to garner some semblance of control of your data and move it towards a centralized, secure, extensible environment (which will probably involve modernizing your core technology and core operations philosophies).

  1. Don’t dismiss the reality that money is morphing. Make a plan to get educated in 2020 about digital assets, cryptocurrencies, and new transaction networks (which nullify the consumers need for your existence). Here’s a good place to start (thanks to our partners at NetQash). a.If you’re already aware of this reality, and you want to make sure your institution stays connected to the future of transactional networks and currency economies, partner with people who care about your future and are offering strategic solutions like this.

  2. Focus on modernizing your understanding of “community” and “experience,” and focus on using your powerful digital tools to establish a data bridge to your brick-and-mortar retail locations. This is what all the big-box retailers are doing OUTSIDE the financial services space (i.e. it’s the reality that’s driving consumer expectations on a daily basis). Develop a plan for extensible and engaging self-service solutions which pull consumers and communities into your orbit.

  3. Position your institution to be a local and trusted partner in safeguarding consumer and community data (via a modern core strategy and core technology), and communicate to your member/consumer that you’re in the business of custodianship, care, and constant value return to them and their data.

As the industry’s premier fintech owned by credit unions for credit unions, we’re here and happy to help you drive these (and other critical) conversations forward within your community financial institution!

About DaLand CUSO:

Based in Rocky Hill, CT, DaLand CUSO is a next-generation CUSO comprised of the sharpest minds in the industry defining the future of relevance and sustainability for community FIs. Like a fintech, DaLand is the first and unparalleled proponent of the core-centric philosophy, helping credit unions regain control of their data, eliminate vendors, and extend their cores to membership for self-service consumption. DaLand realizes core centricity through its Vendor Strategy Services (VSS), allowing CUs to cut through the spaghetti pile of vendors and establish a relevant technology strategy; Strategic Project Services (SPS), empowering CUs to transform investments in technology into revenue centers through unrivaled project management; and CODE Division (Core Optimized Digital Experiences), that optimizes, automates and extends relevant core technology. CODE fintech mindset allows CUs to regain control of their data, reduce costs, and deploy modern, relevant, digital experiences to members via self-service portals. Additional information is available at www.dalandCUSO.com.

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