Businessman pressing an Innovation concept button.
Drive keeps going
The importance of a service culture, advances in lending technology and a focus on both mortgages and data analytics were all part of the second day of CU Direct's annual Drive conference in Las Vegas. More coverage from the conference can be found here, here and here. Read on for more.
Jim Marous, Digital Banking Report - CU Direct Drive conference 2019 - CUJ 052019
"We must disrupt ourselves"
What was once disruptive now is commonplace, so the financial services industry must disrupt itself.

That was the message from Jim Marous, co-publisher of the Financial Brand and owner/publisher of Digital Banking Report. He told Drive attendees, “We must disrupt ourselves.”

“Anyone under 25 has never not had smart phones or iPads,” he noted. “Today’s consumers are unlike any previous generation. People want to touch things proactively. They consume differently. They communicate differently, and they want us to reach them instantly and tactically with the information they need.”

The faster those involved can see where the financial services industry is going, the more they can offer services to consumers, Marous continued. He said consumers want to be seen, want to be heard, want to be known – if your credit union can give them something valuable. As such, CUs will need to use data analytics to know what people want.

“Competition for members is more difficult than ever, so you have to differentiate,” he counseled. “The ability to deploy data is the hardest challenge. Use data to personalize communication.”

Today’s FIs need instant data availability and accessibility, and they need members/customers to have information instantaneously. McDonalds is using advanced analytics to drive video menus based on the time of day, the day of the week and even the weather.

“If McDonald’s is using AI for the benefit of its customers, shouldn’t we?” he asked.

For credit unions to succeed, they have to simplify their members’ lives, Marous argued. He said there is a large segment of the population that wants the convenience of ordering everything from home. People are looking for time, so if a CU can make any step in a process easier it will be appreciated.

“Consumers want friction eliminated. Every business needs to eliminate friction to make it easy to do business with us, and you need to offer proactive suggestions.”

The member journey is going to change, he said, and the member’s expectation about that journey is going to change. He noted voice devices such as Amazon’s Alexa have been adopted faster than any other technology, including smart phones.

“The future is being proactive on behalf of the consumer, and the consumer will get frustrated if not. Place small bets, disrupt yourselves, and make sure you stay relevant.”
Sean McNaboe, Trelliant - CU Direct Drive conference 2019 - CUJ 052019
Don't tip your table over
Mortgage lending is like a three-legged table, and if a lender tries to skimp on one of those legs, the table topples a little. Skimp on two and it falls over completely.

That’s according to Sean McNaboe, senior director for Treliant LLC, a compliance, risk management and operations advisory firm, speaking during a breakout session at the 2019 Drive conference.

“The mortgage business is a people business – that will never change,” McNaboe said. “Beginning with people is the easiest place to add value, costing nearly nothing and showing immediate rewards.”

McNaboe noted increasing compliance costs since the Great Recession have hit small credit unions and banks the hardest. Mortgage lenders also are being hurt by rising home prices. McNaboe said affordability reached a 10-year low in Q4 2018, according to Attom Data’s Affordability Index. Purchasing a median-priced home in Q4 2018 took 35% of the average American’s income, which is 3% higher than the historical average.

“After people, the next most important step to reducing costs is process automation,” he said. “There is a lot of button-pushing in mortgages, and technology to automate those processes is readily available. If you are not already automating your processes, then you are behind. The basis for the digital mortgage is automation.”

McNaboe counseled CUs to evaluate where in their processes there are opportunities to standardize.

“It goes without saying that none of this works without technology,” he said. “Strengthening digital and IT capabilities enables a boost in efficiency while reducing costs and improving the borrower experience. When buying technology, make sure it fits in the bigger picture and is not a shiny new toy. Make sure data is accessible to employees, but also is secure. Data privacy regulations are increasing. The more you digitize, the more you need to address cyber security as part of your technology plan.”

Credit unions need to keep in mind what McNaboe termed the biggest point of all – a mortgage is about the member and the member experience. He said lending is shifting from a price-driven market to one that sees loyalty based on the experience people receive. He said satisfied borrowers are open to cross-selling by an exponential factor.

“By 2020, customer experience will overtake price and product as the key brand differentiator in retail,” he predicted, adding, “Great marketing will get people to talk to you, great execution will keep them coming back.”
Ron Kaufman - CU Direct Drive conference 2019 - CUJ 052019.JPG
All about service
There is a difference between service excellence and having a service culture. For Ron Kaufman, author of “Uplifting Service” and several other books that topic, it all starts with agreeing on a definition of the term “service.”

“Everyone in business lives and works in a world of service – you serve someone and someone serves you,” Kaufman said. “Credit unions serve their members, and they have partners that supply them with technology.”

Service, Kaufman said, can be defined as: “Taking action to create value for someone else.” This definition, he insisted, applies to every industry and every business all over the world.

When it comes to service excellence versus having a service culture, he noted a company might have a “service rock star” who really gets into giving great service. However, if the company’s service culture does not reward that person, he or she will give up and leave, or give up and stay.

There are six levels of service, Kaufman told the audience. At the bottom is what he calls “criminal,” or not even “basic,” the bare minimum second level. The third level is “expected,” which is perceived by most people as average. The fourth level is “desired” – service done the way people like it. Even better is level five, “surprising,” when people get more than what they expected. “Unbelievable!” is the top level.

“Excellence” is not one of the six words, Kaufman noted, leading to the question, where does it belong on the six levels? He said part of the answer is understanding the six levels of service are not steps, they are an escalator that is always going down.

“If you do something excellent for your member, the first time it will be unbelievable, the second time it will be a surprise, then it will be desired, then expected, then basic, and if you don’t do it your service will be criminal,” he said. “Therefore, ‘service excellence’ is a moving target.”

Service excellence requires taking the next step up to create more value for members. Kaufman said a service culture exists when everyone in the organization follows this principle every day.
Hailey Middleton, CU Direct - CU Direct Drive conference 2019 - CUJ 052019
Data isn't just about numbers
The lending business is all about numbers – but how can credit unions get quality out of those numbers to shape employees’ behavior in a positive manner?

“Credit unions have more data on their members than Amazon does on its customers,” said Hailey Middleton, director of product and data services and analytics for CU Direct. “Let your data be your asset. Start with what you have and hone in on that.”

Middleton said data tells a CU more than just raw numbers – it can help determine if a loan has the right level of risk for the credit union

“You need to marry quality with quantity,” she told a breakout session audience. “We are not just taking numbers, we are looking at the story behind the numbers. Do you know the cycle time for a loan? How to cut down that time? What is the pull through? Do underwriters kick back a loan 40% of the time? If they do, that is not good efficiency.”

CUs need to provide the right level of transparency for employees, because transparency creates accountability, she said. For example, credit unions can create gamification for various metrics – loan officers might be measured by the number of days since they last touched a loan, measured against their peers.

According to Middleton, feedback loops create self-sufficient teams that learn from their performance and the performance of their peers. “You are giving them information to change their own performance. Accountability at the staff level increases, creating overall organizational efficiencies. If teams evaluate themselves, it allows them to work better.”

Every credit union has a certain way of doing things, Middleton noted. She suggested management look for the behavior behind the data story to give users the “what” and let them figure out how and why.

“You know your secret sauce, so let data insights drive the performance of your staff,” she advised. “Starting small is huge. Maybe start with the highest-performing team. Underwriting or processing – something that has high touches. When one team implements, other teams will want to and you get buy-in from other teams.”
Roger Hull, CU Direct - CU Direct Drive conference 2019 - CUJ 052019.JPG
Fixing a "missed opportunity"
CU Direct is preparing to launch technology to help credit unions better compete in the mortgage space.

Roger Hull, chief product officer at the CUSO, told CU Journal the company will be launching Origence, its new enterprise origination platform, in July, starting with seven credit unions.

“There is a missed opportunity in bringing mortgage lending together with consumer lending,” he asserted, noting about 54% of the mortgage business is done by non-banks, including Quicken Loans and other fintechs. “The large mortgage LOS vendors have not tried to unify those two, which is what we are doing.”

Hull said the platform will allow members to research qualification and numbers within three minutes without providing personally identifiable information.

“Most people would prefer to deal with a digital channel like this rather than formally apply for a loan,” he said. “We have done a lot of work to integrate the front end and the back end so we can pre-fill applications, for both members and non-members. For non-members we can pull info from Equifax. No longer have to load statements, which makes it a fast and easy shopping experience that can be done on a mobile phone.”

Hull said the system will be able to do the same functions with consumer loans and account openings. He said CU Direct is developing capabilities to eventually get a credit union membership set up in just 3-to-5 minutes.

“Millennials are a very important group for credit unions to tap into, but credit unions need to be able to open their accounts on a mobile device and do so quickly. Making a frictionless process helps all involved.”