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Metaphorically, Which Would You Rather Be, Amazon or Blockbuster?
Monday, February 13, 2017 6:45 AM

Dean Borland, SCMS, CUDE, VP Product Development, Credit Union Resources

Blockbuster and Kodak had very successful business models, but they did not evolve with consumer preferences. Blockbuster and its 9,000 stores and 60,000 employees are gone. Kodak, the world’s leader in film and photo developing is a shell of its former self, having chosen to bury the concept for digital photography which, by the way, was pioneered by a Kodak engineer.

I have not spoken to a single credit union leader who said, “I want my credit union to end up like Blockbuster and Kodak.” Unfortunately, there a many things to consider as you adapt to changing consumer preferences for financial services. Here’s my short list of big things to think about as you ponder your strategic future.

  • Talent Acquisition. We’ve heard that there are many credit union CEOs who will be of retirement age within the next five years. And many CEOs serve boards whose average age is greater than their own. What, then, could possibly be more important than leadership succession?
  • Member Preferences. Credit unions emerged into America’s financial services mainstream by delivering caring, personalized service, competitive deposit and loan rates, and low fees to the Silent (born 1927-1945) Generation, Baby Boomers (born 1946-1964), and Generation X (born 1965-1980) members through sponsor-hosted and/or community branches. Indications are that Millennials (born 1981-2000) and Gen Z’ers (born after 2000) will continue to want access to personalized service, but mobile may be their first-line preference for delivery of financial services. How will your credit union continue to serve the needs of members who prefer personal service with the demands of future members whose primary preference is remote service delivery?
  • All Things Mobile. Forecasters suggest that everything financial institutions do now will need to be replicated across remote delivery channels in the future. Not just transactions, but the wide spectrum of services most credit unions are comfortable offering only in a fact-to-face environment today—things like new membership enrollment,; new account opening and maintenance; loan application, approval and closing; and error resolution. If you have not heard the term already, you will: “omni-channel” delivery of the full member experience across all channels.
  • Technology. With fewer opportunities to become acquainted with members on a face-to-face basis, credit unions will have to learn how to “know” members though digital channels much in the same way Amazon and other e-retailers assess customer care-abouts. Data analytics, in addition to core processing driven by technology and all forms of remote service delivery, will be expensive and necessary, necessitating a comprehensive technology plan that complements, but is separate from, the credit union’s strategic plan.
  • Branch Transformation. As routine transactions migrate to remote delivery channels, the focus of the branch will likely shift from transaction processing to relationship management. Credit unions will continue to support branches, but the look, feel, and function of the branch of the future may bear little resemblance to a “traditional” paying and receiving branch platform.
  • Contact Center. As mobile delivery escalates and branches transform, credit unions will feel increasing pressure to provide extended-hour availability for person-to-person “moments of truth” through telephone, electronic chat, and likely even interactive video. Once a “call center,” the contact center may become a necessity to support an omni-channel service experience.
  • Financial Performance. All of the above issues will come at a cost. Credit unions will be faced with enhancing front and back office technology while rolling out new electronic delivery channels, transforming branches, building extended hours into contact-center infrastructure, and developing a talent pool of new leaders and staff. At the same time, issues like AICPA’s proposed “CECL” loss accounting method and perpetual conversation about taxation threaten credit union profitability. As another “plan within a plan,” credit unions may find it necessary to prepare multi-year financial projections as they prepare to balance infrastructure investment with opportunities for income/profitability.

Forecasters project that some credit unions will follow Blockbuster into demise because they will not adapt to evolving consumer demands. But, there will likely also be credit unions who, like Amazon, adapt to deliver financial services when, where, and how consumers/members prefer. The question is, which will your credit union be?