If a credit union operates as a commodity, Pete Hilger says in today’s financial services environment it will become irrelevant and will become irrelevant quickly because there are so many competitors.
Hilger, president and CEO of Allied Solutions, Carmel, Ind., said all credit unions combined do not spend enough to add up to the amount being invested in fintech companies.
“We are aligned with you, so our existence depends on you being relevant,” he told the audience of credit union professionals. “You are competing with competitors you have never seen before. They are making loans fast and cheap. They depend on volume.”
CUs are investing millions of dollars in technology because their members are changing dynamically, Hilger continued. He noted yesterday’s member preferred visiting the branch to make transactions, did not have technology and did not have a lot of loan options.
“Your future member prefers making digital transactions online or through mobile apps, and he/she wants variety,” he said. “People buy a car online now without ever looking at the vehicle. A lot of younger people know the information available at their fingertips is so powerful, they don’t want to talk to people.”
However, only 25 percent of consumer banking products are available online. Hilger said as an industry, CUs do a “poor job” of figuring out how to be relevant to their respective memberships without requiring them to do a face-to-face transaction to obtain a loan.
Everyone is talking about big data, and everyone says they have the solution for big data, but Hilger insisted that is hot air. “I say they don’t. Data is powerful. The speed to buy is critical and services must be customized to specific consumer needs.
“Relationships are changing, so how will you nurture member relationships? How will you stay connected and remain meaningful? How will you avoid becoming a commodity? You need to identify needs and provide solutions in a digital world,” Hilger said.
With new car sales declining, historically low mortgage interest rates and more competition for all types of loans, credit unions need to increase their breadth of lending options, Hilger continued. He suggested CUs “get creative” with lending, but not by taking on more risk.
“Your average member probably has three or four loans elsewhere, so create solutions for them,” he counseled. “Engage with members after a transaction to find out what else is out there. If they have a car loan with you, I’ll bet you that household has another car loan, or two, somewhere else, and you don’t even know it. You have to be creative and you have to partner with some other organization. If you try to compete alone you will fail because there are a lot of companies investing a lot of money to take opportunities away from you.”