Hindsight makes it easy to see how the Internet has impacted industries such as music, books and travel. Credit unions, too, continue to be impacted as digital channels become increasingly important to members, and traditional brick and mortar services cease to be prominent member service and member acquisition strategies.
As the industry as a whole moves forward, perhaps the most valuable lessons can be learned by examining the failures of companies that have already been through similar challenges and opportunities. In 2004, Blockbuster was steadily growing and was valued at more than $8 billion. How then did a giant like Blockbuster fall from its leading market position, losing more than 95% of its market value in a very short time period, and ultimately filing bankruptcy in just six years? Many factors contributed to the demise of Blockbuster, namely broadband, but perhaps the most devastating mistake was the company's failure to recognize emerging companies such as Netflix as competitive threats, and mistaking inaction, or taking a wait-and-see approach, as a viable strategy.
Blockbuster's CEO at the time, Jim Keyes, was quoted as saying, "I've been frankly confused by this fascination that everybody has with Netflix. Netflix doesn't really have or do anything that we can't or don't already do ourselves." Blockbuster was aware of the competition in the market, but chose to ignore the threats posed, dismissing them as passing trends and viewing them as media hype and buzz.
Unfortunately, many credit unions find themselves in a similar position when it comes to mobile wallets, ignoring the very real threat posed by third-parties launching competitive digital wallets or, even worse, dismissing mobile wallets as simply a buzzword sensationalized by the media. Credit unions that choose to wait for mass consumer adoption to launch a comprehensive mobile wallet strategy will have missed a valuable opportunity to gain market share, especially among the prized younger demographic.
Missed Opportunities
Blockbuster missed several key opportunities by underestimating the competitive threats, and by choosing not to adapt their business model to the evolving needs of its customer base. In today's increasingly mobile society, credit unions cannot afford to continue business as usual, ignoring the real threats posed by alternative payments providers that are reaching out to members with the promises of a central, digital wallet.
I am reminded of a conversation I had in 1995 with a credit union executive regarding the advent of online banking. The executive told me, "You keep talking about the Web like a foregone conclusion it will take off. I'm hip and tech savvy, and my friends are too, and we are not online." I think we all remember what happened in the following years as online banking quickly became the norm, and conducting your banking in a branch soon became antiquated.
We are facing yet another evolutionary event, and the way your members conduct their banking will again be drastically changing. History has shown that any new, important and disruptive technology begins with low consumer usage, and follows the classic "law of diffusion of innovation"; it follows the product adoption life-cycle from innovators to early adopters, early majority, late majority and finally laggards. The tipping point is generally between 15%-18% market acceptance. Starbucks usage of its mobile payment app is at 14%.
The Point: Anticipate Trends
The point is to identify and even anticipate trends in order to protect businesses from game-changing technologies that have the potential to dis-intermediate or displace revenue streams. Blockbuster should have anticipated streaming video replacing analog DVDs rented through brick and mortar retails branches, yet saw its business value decline from over $8 billion to less than $250 million, while Netflix increased from $50 million to more than $20 billion.
Is your credit union poised for success and ready to serve the next generation of members, or are you waiting on the sidelines and simply hoping mobile wallets are a passing phase? Now is the time for credit unions to take action.
Paul Fiore is CEO and founder of CU Wallet, a credit union- owned mobile payments provider.
