Gather a group of financial industry experts and analysts around a table and there will be a gigabyte or more of opinions and predictions. But as one such recent roundtable showed, today those opinions and predictions carry with them any number of attachments in the form of asterisks and caveats.
Harland Financial Solutions recently hosted a group of such analysts for a discussion during its recent Connections conference in Orlando. Away from the crowds touring the exhibit hall or taking notes in breakout sessions, discussion among the group in the room inevitably focused on what the future might hold for the banks and credit unions that were in attendance (Harland has more than 3,000 clients of both charters).
During the hour-plus discussion, Harland's executive management team sought to frame the discussion around "six trends."
Compliance. "This administration is enacting rules much more quickly than in the past," noted Scott Hanson, EVP-business development, adding it is impossible for all but the largest institutions to plan for every regulatory scenario that might come out of the various agencies. "We are looking at what the different permeations might be and we are planning business requirements for all of them, even though we know that four out of five will go out the window."
The "real unknown," observed one person, is the issue of pre-emption and how that will affect financials. For instance, what will be the definition of a "reasonable default?"
Harland Financial Solutions' President Raj Shivdasani noted that in addition to the 2,000-pages-plus bill passed by Congress and all the interpretation to come from various agencies, there are still the consumer protection rules to be enacted, followed by how all of that will be enforced, and then how all of that is to be synchronized.
Continuous Efficiency. For those at the table, the phrase means cost-cutting beyond the low hanging fruit and moving to the deployment of shared services. "You must create a culture across the institution that creates efficiency," said Shivdasani. "Spending a lot of money on multiple systems is just not worth it.
Observed Sam Kilmer, VP-market development, "Leading organizations are focused on ongoing process improvement. Business processes are not an easy fix." Where are institutions still most inefficient? "Lending integration," answered Kilmer.
While credit unions have not entered the market to the degree banks have, Hanson said efficiencies in the commercial lending space are particularly lacking.
"The other area of inefficiency is in real-time processing, even extending to home capture. Unlinked channels just don't make sense anymore," added Shivdasani.
Risk Management. That credit unions need to reduce exposure and build capital is a given. But moving forward, CUs must also improve their loan portfolio data transparency and quality, and make collaborative, data-based decisions, and there is another threat not often recognized, noted Kilmer: Compliance risk. "The notion of speed and pace in risk management is also becoming very important," said Kilmer. "You need to be able to show the board and show regulators" steps that have been and are being taken.
Agility to Differentiate. It was stressed that this is not the "ability" to differentiate, but rather, how quickly the credit union can respond to new regulations and market conditions, whether it can do real-time strategic planning, and whether it's flexible and innovative.
"Differentiation can be fleeting," said Hanson. "I think people have become desperate for ways to differentiate."
"Know your core competencies and don't sit on your laurels," reminded Shivdasani. "Think about segmentation."
Part of the reason many CUs (and banks) have struggled is that for a good many years posting black numbers and showing metrics with all the arrows moving up wasn't that difficult. "The country spent a lot of years where the pie was growing quickly and you could grow just by riding the wave," said Shivdasani. "But now it's not growing as quickly, and it's about taking the pie from the other guy. Many community financial institutions have seen their slices get smaller."
Creative Sourcing. This is how Harland refers to responding to opportunities using shared services and leveraging expertise across a wide-cast base. This includes credit unions that have outsourced regulator maintenance on their core solutions, for instance. "Many (FIs) should not be running in-house systems," said Shivdasani. "Look at business process outsourcing."
Increasing Reach. This is a reference to using outreach marketing to improve retention and new technologies, such as online account opening, to reach new prospects. "Stay focused on growth," said Shivdasani. "You must be in a multi-channel environment. Look at how not to open bricks and mortar anymore."
Shivdasani, who sees a future with just 2,000 credit unions, said he believes the real key to "owning the account" will increasingly be "owning the payments stream." It's one way, several people noted, to manage the transition from the mobile member to one who comes into the branch.
Frank J. Diekmann is publisher of Credit Union Journal and can be reached at
