In far-reaching remarks that touched on everything from broadband (get ready for it), CRM (a poorly executed buzzword), competition (now it even reaches into cars with OnStar) and more, Mark Sievewright told credit unions they must constantly rethink just about everything related to technology.
Speaking to the Midwest Technology Symposium, sponsored by the Indiana, Iowa, Michigan, Ohio and Wisconsin leagues, Sievewright, president of the Needham, Mass.-based research and consulting firm TowerGroup, said banks are wrestling with even more technology dilemmas than credit unions, but are often able to bulldoze obstacles using budget alone.
What credit unions' biggest competitors have most of all, said Sievewright, is the ability to invest in technology. Citigroup, for instance, spent $5.6 billion in one budget cycle on IT. Sievewright said Citigroup's IT executives indicated to him their plans are to cut IT investment by using the Internet, and that the company believes it can chop $2 billion in expenses by doing so.
"At the end of the day you have something they would probably pay $5.6 billion for, and that's the trust and high level of loyalty your members have," said Sievewright. "But if that's true, why don't you have all the product and service business of your members? Nobody really does. As they get bigger they lose the customer touch that credit unions bring. But you can't bring it without technology."
Sievewright said that research shows consumer households average approximately eight financial accounts. "Three- quarters of those in a survey said they would like to have one relationship," he said. "And what some of these companies are doing with great success, particularly Bank of America, is working on financial relationships. Wells Fargo wants 25% of their revenues to be non-banking revenue. They're also spending a lot of money on CRM."
He added as an aside, "CRM, by the way, is just a buzzword. It's been a failure for most."
More Mergers Foreseen
Sievewright noted global financial services generates about $1.6 trillion annually in revenues. The top 50 players worldwide, Sievewright said, account for about 50% of all revenues. He suggested one ramification of that will be further mergers among CUs, and predicted that by the end of the decade there will be approximately 6,000 credit unions.
"I was at the board meeting of one $1-billion credit union that said 'Our members may be better served by being a bank.' Community charters are beginning to encourage consolidation. If you want to get into small business banking, the fact is that most of your core processing systems weren't built for it and can't do it."
Sievewright pointed out that only one-third of credit unions of less than $20 million in assets have an interactive website. "Outsourcing is the only way to do it," he said. "The good news is it's much more affordable."
Sievewright dubbed account aggregation, "account anchor-zation," saying that once a credit union makes the investment it has the member forever.
What are the drivers behind consolidation? The primary driver, he said, isn't regulation but consumer demand.
"In my opinion, outside of credit unions, the most innovative financial services organization is Fidelity," he said of the mutual funds firm. "They spent $1.5 billion last year on IT R&D. They have a chief wireless officer, a CWO." He noted that in a demo at Fidelity, he got into a car with an OnStar system, and after pushing the OnStar button, a rep responded almost immediately. Sievewright told her he wanted to talk about Fidelity, and within a moment a Fidelity rep was available to answer any customer or prospective customer questions.
"Like it or not, this is what consumers want. They never ask for anything. They demonstrate it by adopting and changing behaviors. Once broadband becomes a mass-adopted technology, wait until you see what that does to delivery channels," Sievewright continued. "You'll be able to beam in a financial advisor and be able to see them, and decide if I want them to see me. People want an answer now. And the streaming in of personal advice will become a reality as soon as we have broadband acceptance."
How technology is used in financial services has changed, said Sievewright. "Technology used to be all about automation, like automating check processing. Today most institutions look at technology as a way of developing new services," he said. "About 12% of technology spending is on the Internet, and 9% on CRM. So you've got about 20% of technology spending on technologies that didn't even exist 10 years ago."
One lesson that's been learned, he said, is that the Internet has not delivered the type of cost savings originally envisioned. "I haven't met a credit union that is closing branches. Where does deposit growth happen? It happens in the branch. Internet traffic does not displace traffic at the branch."
As an aside, Sievewright said most banks are plagued by an abundance of in-house systems that don't speak to each other. "Even if CRM at your credit union is a bunch of Post-It notes, you are 10 steps ahead of some banks," he quipped. "That's why spending money on technology is not the solution. If you haven't trained or educated the organization around your initiative, you're just spending on technology.
What's key to building business, according to Sievewright, is the ability to interact personally with members, especially in products that generate revenue. Human beings, the most expensive delivery channel, are critical to the high-touch, high value strategy, he said, and for increasing new accounts and cross-sales, encouraging personal contact for maximum impact, and reducing attrition risk.
Internet Users Are Branch Users
Sievewright noted that the number of branches are growing, and that research conducted in conjunction with CUNA found that even heavy users of e-services are heavy users of the branch and the ATM. He said he likes the idea of shared branching to boost convenience, but thinks it's a poor strategy for improving relationships or cross-sales.
"What we see is that the use of direct calls into agents will decline, and the use of e-mail and video interaction will grow," he said.
One way to improve e-mail response, he said, will be intelligent software that can auto-reply, although Sievewright noted that technology can be lacking. In one famous case a customer who e-mailed his bank on how to change his address was given the following automated response: "Move house."
Some of Sievewright's other thoughts:
* Everyone has heard of aggregation, but less than 1% of online households are actually using aggregation. Yet that number is a positive, he said, as 50% of people using online services have indicated they are interested in aggregation.
Sievewright's view on aggregation: Do aggregation or be aggregated.
* CRM. What's behind most success stories are rudimentary forms of Customer Relationship Management, suggested Sievewright. He said research has shown that in most cases credit unions that claim to do CRM do not; instead they do simple-level MCIF processes.
"CRM is a sales and service solution, nothing more, nothing less," he said. "You have to unify knowledge of your members with the core inquiries that you get. You have to be able to give holistic information, and you have to train everyone in the organization on how to act upon the information. A true CRM environment requires a re-engineering of the whole organization."
* EBPP. Thirty-billion bills are paid each year in the U.S, and less than 10% are paid electronically. "EBPP is not a mass adopted technology," said Sievewright. "But, if you've taken the trouble to set yourself up for EBPP as a customer, you never want to do it again. Once you've done it, typically with the institution that has the checking account, you're locked in."