In advance of the pandemic, many Credit Unions were already struggling to keep pace with larger banks and online competitors, as well as the rapid growth of digitalization. The pandemic has not only accelerated the market’s appetite for “virtual” transactions with financial institutions; it has altered the underlying dynamics of the Credit Union industry’s workforce for the foreseeable future…and perhaps forever.
Credit Unions are currently dealing with a two-fold operational challenge. First, the demand for online services has increased the sheer volume of functions and cases that their back-office staff must manage, as well as the levels of member stress they must deal with. Reflecting the uncertainties and hardships of a prolonged pandemic, members now are often more anxious and demanding than in “normal” conditions. Customer-facing personnel, as well as internal staff, are often required to spend more time and energy to meet member expectations.
The second, and perhaps most disconcerting operational challenge facing Credit Unions involves the physical welfare and career-related motivation of their personnel. Over the past two years, some staff members have struggled to work remotely, while others now have no desire to return to a traditional office environment, either because they have enjoyed working from home, or for fear of contracting Covid. As widely reported, many American workers have re-examined their lives, and chosen to leave the workforce altogether; either retiring early, starting their own businesses, or exploring alternative career paths. Finding qualified team members is both difficult and costly, with the reported cost of staff replacement rising more than 20% in some cases.
This “perfect storm” – an evolving technological evolution combined with a long-term Black Swan event – has increasingly served as the catalyst for Credit Unions to explore outsourcing as a solution to address their operational staffing shortage, and to invest in technologies that will make their existing workforce far more efficient across several key functions, ranging from fraud mitigation to dispute management, KYC compliance, mortgage & loan processing, and customer support.
Selecting the Right Outsourced Partner is a Challenging Task
Although some Credit Unions maintain CUSO relationships, for many of them, this may be the first time they’ve considered using an outsourced resource of any kind to manage operational tasks, much less functions that are so critical to revenue generation and member loyalty. Because of the high stakes involved, the process of identifying, vetting, engaging,and managing an outsourced partner is a challenging, and oftena stressful responsibility.
Over the past 20 years, as a provider of outsourced services for Credit Unions and other financial institutions, we’ve been scrutinized (and often selected) as an operational partner to assist with technology-related and managed services responsibilities. We’ve been analyzed by Credit Unions that had a very clear understanding of their needs, and a disciplined and fair process for selecting an appropriate partner. Conversely, some Credit Unions either had fuzzy goals, or a process that resulted in selection of an outsourced partner for the wrong reasons.
From our perspective as an outsourced candidate that has both won and lost assignments, we’ve learned first-hand many of the best selection practices that Credit Unions apply. We’ve also witnessed what we consider to be selection practices thatCredit Unions should avoid, which may be more instructive. Here are our top 5 practices to avoid:
1. Avoid hiring a partner based primarilyor exclusively on pricing.
We do not dispute the importance of pricing in all business matters, but when it comes to selection of an outsourced partner, there are other criteria that need to be considered. Notably, the changing nature of financial services and the availability of labor means that Credit Unions won’t necessarily be able to hire more people. They will need to lean more heavily on technology, both to improve efficiency of their current workforce, and to address higher levels of member support. A Credit Union’s outsourced partner should be well equipped to lead them on their digital transformation journey, in a cost-effective manner. Avoid outsourced partners whose value proposition is based solely on low-cost “butts in seats,” keeping in mind that even the most highly priced partner is likely to provide an advantage of 50% or more over FTE costs.
2.Avoid hiring a partner that lacks Credit Unionexperience.
Members now expect to receive the best of both worlds from their Credit Union: the convenience and access to services on a par with bank competitors, combined with a personalized level of service that exceeds banks. An outsourced partner must possess an understanding of the Credit Union culture, a willingness to meet member expectations, and the ability to deliver its services in a seamless manner that’s consistent with established practices. This “plug and play” capability, resulting in no disruption to the member experience, can only be gained by an outsourced partner through experience working with Credit Unions. Avoid outsourced partners that lack Credit Union expertise, or claim their bank credentials are equivalent.
3. Avoid hiring a partner without strong project management capabilities.
Project management has always served as the cornerstone of an outsourced partner’s ability to deliver on its service level agreements. With the current Covid-related disruption – creating a performance gap between the digital front-end expectations and the back-end delivery capabilities – project management discipline has become even more important for Credit Unions. Outsourced partners should be expected to demonstrate in detail the methodologies it will use to manage projects, track results, analyze member data, resolve issues, avoid re-work or inaccuracies, and to maintain member satisfaction. They should also provide a detailed explanation of their onboarding process, and how well prepared they are to be fully operational in 30 – 45 days. Look for process improvement capabilities, and their ability as a long-term partner to scale up or down as market conditions change. Avoid outsourced partners that are reluctant or unwilling to get into the weeds regarding these details.
4. Avoid hiring a partner that lacks technology and automation expertise.
More than ever, Credit Unions are seeking ways to invest in technologies and tools that can automate a broad range of tasks, with the goal of cutting costs and freeing up the workforce to improve the member experience in every interaction.With the proper direction and support from an experienced outsourced partner, Credit Unions are better prepared to address current market conditions, and to adapt quickly to future challenges and opportunities. Seek an outsourced partner that understands your business model and operating platforms, knows how to integrate without disruption, and has demonstrated the ability to automate key functions using BI tools. Avoid firms that lack those capabilities.
5. Avoid hiring a partner that cannot provide 24x7x365 support.
We live in an on-demand world, where members expect the same level of immediate attention from their Credit Union that they receive when they place an order on Amazon or call Uber for a ride to the airport. Members want tailored service at all times, regardless of whether it’s outside of “normal” business hours, or on a weekend or holidays. For many Credit Unions, the ability to provide members with in-house round-the-clock “live” service – whether by phone or chat – is often not cost-effective. Providing members with service agents,available on a 24x7x365 basis, who are informed, responsive and respectful is what’s required for Credit Unions to gain competitive advantage and maintain member loyalty. Avoid outsourced partners that are incapable of delivering that level of support.
The legendary management visionary, W. Edwards Deming, concisely summed up the tangible benefits of selecting theright outsourced partner for any type of business. Deming noted that, “The result of long-term partnerships is better and better quality, and lower and lower costs.” Toward that end, Credit Unions would be well served to avoid candidates that are unwilling to act as a true partner, by being accountable on that basis.
Sriram Natarajan is President of Quinte Financial Technologies (www.quinteft.com), a New York-based firm that combines human expertise with technological innovation to help Credit Unions achieve operational efficiency, strengthened member loyalty and competitive advantage.