Why CUs can’t afford to ‘set and forget’ their digital strategy

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Often times a “digital strategy” is defined by member-facing technologies, such as websites and mobile apps, but experts say there is much more to it. But finding a balance between a “set it and forget it” and an “over-tweaked” digital approach is not without obstacles.

“A digital strategy requires a comprehensive approach to bringing digital capabilities to your business. Digital is thought to be limited to customer-facing solutions,” said John Newlin, managing director in banking practice at Accenture. “However, leading digital strategies persist from customer solutions through the back office and across the enterprise.”

Chris Sachse, CEO of the Baltimore, Md.-based Think|Stack, explained that organizations must create a strategy that can support digital change and stressed that there is not “one shining innovation” that will transform a credit union. A foundational digital strategy, he added, should include technical infrastructure, culture, innovation, values and priorities.

“The technical infrastructure must be scalable and nimble, and provide enterprise-wide data extraction. Innovation must be a way of life — exploring, mapping and cultivating new ideas,” said Sachse. “The culture must be creative and empowering. Values and priorities must be clearly defined and understood.”

Among Think|Stack’s clients is Canvas Credit Union, a $2.4 billion-asset institution based in Lone Tree, Col. Formerly known as Public Service CU, the credit union supports 240,000 members.

“Our members aren’t comparing us to the bank down the street or the credit union down the street,” said Tansley Stearns, Canvas CU’s chief marketing and strategy officer and a former staffer at the Filene Research Institute. “They compare the experience they have with us to the experience they have with Apple, Amazon and every app they rely upon. That means we have to strive to make the experience simple, fast and easy.”

Strategy or plan?

One executive, however, isn’t comfortable with the term “digital strategy.”

Chris Howard, SVP at Callahan & Associates, prefers a “digital plan” or “digital channel.” The term “strategy,” he said, risks oversimplifying things and overpromising results.

“Digital execution and delivery channels are just what you need to do to stay relevant as a full-service financial institution,” said Howard. “Like having ATMs or a call center, all of those were new once, too. In other words, it’s not a strategy in the true sense of the word. Strategy involves a long-term – preferably differentiating – objective.”

Whether a digital strategy or digital plan, many credit unions have traditionally struggled with the process due to contractual vendor relationships that limited technology offerings, explained Chad Ritchie, Chief Information Officer at Solarity Credit Union. When he assumed his post three years ago, he said, the Yakima, Wash.-based credit union, which supports more than 50,000 members, didn’t have a sound digital strategy.

“When I arrived it was your typical credit union landscape with outdated legacy vendors for online banking — basically whatever the vendors were driving as the tools to use,” said Ritchie. “In 2014 or 2015 we started to see fintechs coming through offering much more competitive digital interfaces. We took this opportunity to start over and built our technology stacks from the ground up. We have moved everything to Amazon Web Services at this point.”

While Ritchie added that the CU is still “locked into a core” due to being a financial institution, he and his team are continually reducing the dependency on the core. By this time next year he said the core will simply be a transaction agent.

“Part of our digital strategy was to develop an application programming interface [API] strategy to where every technology that comes into this organization has to have an API,” said Ritchie. “If it doesn’t have an API, it doesn’t come in. We can now plug-and-play technologies easily.”

Balancing act

Years ago when a new technology hit the proverbial street, credit unions were faced with balancing member wants with ROI. So whether it was a mobile app or video chat, credit union executives had to determine how that new technology would serve the bottom line.

While fiscal due diligence remains a key factor to a credit union’s success, the way in which technology is factored has considerably changed, explained Ryon Packer, Fiserv’s SVP of strategy and marketing.

Too many CU digital strategies, Packer said, were tantamount to a “keeping up with the Joneses” approach. Executive conversations centered on determining if the then new technology would create ROI, increase transactions and reduce costs.

“This was responsive to the marketplace rather than being proactive,” said Packer. “Now it is determining how to build the credit union around the core (digital) concept. When executing a digital strategy, you have to rethink fundamentally the way the credit union operates because in a digital world things are completely different than in a physical world.”

Digital road map

Accenture’s Newlin said credit unions should view a digital strategy as a “journey” opposed to a “singular event.” And whether a third party consultant is hired or the credit union develops an in-house position, such as digital director, he said a road map is required.

“A strategy should be defined and a roadmap created that will dictate when digital capabilities will be delivered to the organization and the value that each will provide. The roadmap should continually be evaluated and adjusted to ensure that capabilities being delivered continue to align with the digital direction of the organization,” said Newlin. “In order to manage this ongoing evaluation and delivery, many organizations appoint a digital director that has oversight of the digital strategy and delivery of the digital solutions.”

When it comes to implementing a digital strategy, there are always hurdles to overcome. Canvas CU’s Stearns said “pace of change” is always an obstacle.

“We have so many dreams and want to do so much. Our team includes so many passionate rock stars and they want to make the experience better for our members,” said Stearns. “We have so many ideas; it is sometimes hard to prioritize. We also know we must move quickly because if we don’t exceed our members’ expectations, they have lots of other choices.”

To Ritchie’s earlier point, Stearns conceded that, like many credit unions, “there are system limitations,” but these vendor-related issues aren’t keeping the CU down.

“The great news is that we have a leadership that won’t let that stop us,” said Stearns. “Our IT department is just exceptional at rarely saying ‘no, we can’t do that,’ and instead saying, ‘let’s figure out how.’”

In the final analysis, Callahan’s Howard said that digital channels are a “just another necessary component of basic product and service” delivery. Since state-of-the-art digital tools require new skillsets to design and implement, he said it makes sense to hire specialized experts to install the tools, but ownership, he implored, “needs to be internal and at the most senior level.”

In Howard’s experience, the greatest digital planning risk to an organization is a middle manager who pushes back and interferes—the “lifer” who confuses “what he is doing” with how he is doing it.

“Checks are not about paper, they are about moving money. When technology allowed for imaging and debit cards, checking accounts became about the transaction,” said Howard. “That’s what digital is doing to everything, allowing more focus on the essence of the value proposition and less on the technology involved.”

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Technology Data strategy Digital banking Strategic plans Strategic planning Data and information management