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Where Do We Go From Here?
Thursday, October 27, 2016 6:45 AM

Vicky Salkeld, Vice President of Sales, Credit Union Resources

It’s that time of year again. Credit union boards of directors are meeting to evaluate the past year and determine their paths for the future. They're asking, what has worked well and needs to continue? What hasn’t worked as well as hoped and needs to be revised or discarded? 

Most boards are pretty good at the normal, stay-the-course goals. Where they often need help is identifying, exploring, and mapping out uncharted territory. For many experienced board members, the rapid advancements in technology are challenging. They realize their grandkids think and act differently than they do or even when they were their age, but question how that relates to the future of the credit union. They're asking, what appeals to these younger generations and what are we doing to attract them? What about the economy?

These are just a few of the questions that credit unions should be asking themselves as they engage in strategic planning:  As a financial institution, the economy is a driving force in everything we do. What do we expect in the coming months and years? What is the source of our future growth, and what steps are we taking to make that happen? What new regulations are we facing? How will we maintain compliance?

Credit Union National Association produces an annual publication to assist credit unions in the strategic planning process. The newest Environmental Scan gives credit union leaders a look at the issues facing credit unions. According to the 2016-17 edition, these are the Top 10 Trends identified:

  1. Transformation
    Disruptions in financial services, along with consumers’ demand for more engagement and convenient service, call for a transformation of the credit union business model. In this environment, planning should focus on how to stay relevant.
     
    Companies such as Zappos, Groupon, and Zynga credit their culture of innovation as a driver of success, which requires values such as passion, creativity, and permission to take risks.
     
    Transformation requires a true understanding of your future members to ensure your products meet their needs. Tools such as an empathy map and life simulations will help you define a relevant, future-focused business model. Also, leading your teams through transformation means providing a clear vision, proper resources, and a solid action plan.
     
  2. The Fintech Revolution
    More than 1,200 startups have entered the payments space in the past two years. These new financial technology (fintech) companies are revolutionizing how consumers transfer funds, make loans, and transact with merchants. Plus, many target millennials, a key demographic.
     
    Fintech firms also are strong competitors in financial services such as savings, online investments and budgeting, and person-to-person lending. They provide “frictionless banking," and garner consumers’ business because of their customer-centric product design and processes. Re-engineer your lending procedures to compete.
     
  3. Strategic Marketers
    Marketing and business development can’t afford to focus only on tactics. Delivery channel selection, brand voice, and product development will result from a better understanding of your credit union’s strategic footprint. Knowing which audiences to target—and which you don’t want to target—will allow professionals to sharpen their focus and resources.
     
  4. Regulatory Burden
    “Enormous” and “growing” are two terms you’ll hear from credit unions to describe the compliance burden. CUNA’s Regulatory Burden Financial Impact Study revealed the cost of compliance was as high as $7.2 billion in 2014. That’s money credit unions could put toward higher savings dividends, new products, and member service enhancements.
     
    Legislators need to know the direct impact that regulations have on your operations and how members pay the price in higher loan rates, fewer products and services, and less access to modernized technology.
     
  5. Data Analytics
    As more analytics tools emerge, expect concerns about member privacy. The two increasingly will intertwine. Analytics tools provide insights into consumers’ financial behaviors, guiding credit unions to customize services, design strategies, and drive deeper engagement for their target markets.
     
  6. Mobile-First Strategy
    A mobile-first strategy is a necessity to meet members’ desire for convenience. That’s because 87 percent of U.S. adults have mobile phones, 71 percent of which are smartphones. Members using mobile also have lower attrition rates and, on average, use more products, including credit and debit cards.
     
    A mobile-first mindset paves the way for technologies not yet widespread but very appealing to consumers because of their convenience factors, such as artificial intelligence, wearables, and digital assistants.
     
  7. The CU Difference
    Talk to members in a language that consistently underlines the credit union difference as member-owned, not-for-profit financial cooperatives. CUNA’s National Member Survey shows that 73 percent of nonmembers ages 18 to 30 would patronize businesses involved in the community of those considered socially responsible.
     
    CUNA’s Member Activation Program (MAP) is a shining example of member advocacy in action. MAP mobilizes members to share advocacy messages with legislators. The MAP “Strong Credit Union. Strong Middle Class” social media campaign is engaging this year’s presidential candidates with a unified message, highlighting credit unions’ role in serving the working class.
      
  8. Consumer Experience
    Your unique member research is important. But as credit unions transform, research that identifies consumers’ digital lifestyles, purchasing behaviors, and financial stresses should be as critical. Here’s why: Consider that many fintech startups and retailers, such as Amazon and Netflix, have figured this out and are already leveraging the tools and technologies millennials use.
     
    Make the most of your trusting relationship with members, your access to their data, and your knowledge of the regulatory environment. This broader view of members today and tomorrow informs your strategic plans, marketing efforts and tools, sales and service training, and technology offerings.
      
  9. Cybersecurity
    NCUA will continue to evaluate credit unions’ cybersecurity risk management and data breach response programs. Expect the agency to incorporate the FFIEC’s cybersecurity assessment tool into its exams. Growing areas of risk include security patches, mobile malware and ransomware, and fraud, especially involving new payment methods.
     
  10. Economic Growth
    Expect greater financial market stability and more engaged consumers this year. Strong growth is ahead for lending—especially auto loans and mortgages—and member business loans.
     
    On the horizon: Plan for gradual increases in the federal funds rate. The resulting rise in market rates could cause some members to seek higher returns for their savings and investments. Overall, credit unions should experience healthy earnings, but the pressures on noninterest income will continue as mortgage refinancing revenue slows.

Strategic planning is the time set aside to explore the possibilities and chart the course. Where will you go from here?