DIGITAL SECURITY : BY MICHAEL CARTER, CMO OF D3 BANKING
Has your credit union’s approach to online banking locked you up in digital jail? If so, there are ways to work around getting at the customer behavior habits you need to offer your members the personalized experience they’ve come to expect from all their Internet activities.
According to Wikipedia, Stanford Federal Credit Union was the first financial institution to offer online Internet banking services. That was October 1994. It is not surprising that a credit union owns this historic marker, since credit unions answer to member owners as opposed to institutional investors and operate under a non-profit structure. They are often more willing to deploy innovative services as well if it means their members can enjoy more convenience and choices. Ever since Stanford FCU made its foray into online banking, credit unions have developed an impressive range of e-channel offerings. But all too often – for a variety of reasons – these services have been rolled out as disparate channels. This disparity results in a poorly optimized member experience and places credit unions at a competitive disadvantage because they cannot easily access the data required to offer personalized services.
Before 2007, online banking existed as a singular digital channel. Adoption was occurring, but no one would have called it a revolution. Most financial institutions were using first-generation online banking solutions and were able, more or less, to meet the needs of the users of those systems. Then, Apple introduced the iPhone, which served as the beginning of a tsunami of digital devices that was to wash over the landscape of financial services.
While this digital revolution was transpiring at financial institutions, other things were happening on the Internet. Retailers such as Amazon were using data based on customers’ previous habits and purchases to introduce them to a personalized, predictive experience. This targeted approach has now become the baseline for what is expected whenever consumers access services via the Internet.
In an effort to keep pace with this rapid rate of change, most financial institutions deployed separate mobile banking channels. When personal financial management, P2P payment and other innovative services came along, these organizations simply added another tab or button to their online and mobile offerings. Unfortunately, this multi-channel digital delivery strategy created an environment where an Amazon-like digital banking experience was nearly impossible to achieve.
Amazon is able to do what it does today because it has access to the data it needs about customer behaviors. Most financial institutions have this same information based on Web site behavior, but it is locked in the “data jails” created by each disparate system or service they use. Even with Marketing Resource Management (MRM) systems, credit unions struggle to analyze their data because their digital channels were built in a reactive, rather than strategic, mode.
What’s a credit union to do? There is no shortage of opinions, of course, but most fall into one of three categories. 1. Core Processing Renewal: Some believe that converting aged core processing systems that are account-based to a more member-centric, modern option is the way to go. While there is no doubt that there are a lot of core processing systems in need of renewal, such a high-risk and
long-term project does little to simplify the data analytics needed to offer a personalized level of service across disparate digital channels.
2. User Experience Portal: This approach has a similar flaw – constructing a user experience layer to sit between disparate digital systems. Moreover, the member does nothing to create Amazon-like e-banking if a credit union still has to manage multiple products and if separate data jails remain intact.
3. Data-Driven Digital Strategy: This strategy requires credit unions to think about e-banking in a new way. Specifically, they must consider a data-driven strategy, one that focuses on how to best gather and analyze data about members’ activities in the digital channel without a predisposition toward
the existing digital banking infrastructure.
To see data analysis and application as key to competitive differentiation, credit unions must change from a stakeholder view of their business to a member-based view. Too many still think of and organize their businesses by the very silos that have become the problem. Instead, they need to break that mold and be willing to abandon their existing infrastructure in favor of a user-centric view. If a credit union wants to take this path, it will need to look for solutions with a modern architecture that is both API-based and built on a “data first” foundation. Some credit unions that are taking steps to break that mold include:
• Digital Federal Credit Union (DCU): Mass.-based DCU is a good example of a credit union that understands that digital is the branch. Whereas the physical branch used to be the main channel for members, now digital is the first place members think of when wanting to connect with their credit union. By evaluating how to push the services available in the physical branch into the virtual branch, DCU is taking an important step toward improving online member engagement.
• San Antonio Federal Credit Union (SACU): By building an in-branch kiosk that presents a user experience, one which mimics a mobile app, Texas-based SACU used the same trend DCU is leveraging to deliver a more intuitive experience to members. Because of the ubiquity of apps on the digital devices used by members, using apps in the branch simplifies how the member accesses the services needed. SACU understands that in a digital world, when a member enters the branch, we shouldn’t be handing them paper and a pen.
• Navy Federal Credit Union: When Vienna, Va.-based Navy Federal launched its mobile channel about five
years ago, it had trouble with adoption and user experience. Today, it is the most frequently accessed channel by the CU’s members. What happened? According to Meghan Gound, assistant vice president of eChannels at Navy Federal, the primary difference was a commitment to make whatever transformations were necessary to meet members’ needs, both internally and externally. Power and money, the nemeses of innovation, are often at the core of the stakeholder approach. Navy Federal addressed these concerns by being willing to change its way of doing things to offer a member-centric approach.
Whether your credit union has chosen its digital future strategy or is still trying to decide, the fluidity of the landscape means flexibility is critical to any organization that plans to be a leader. The unique structure of credit unions allows them to more quickly and comprehensively take the steps necessary to personalize the member’s interaction. Delivering an Amazon-like digital banking experience should be the goal of every one of these special organizations. Achieving that goal will predispose consumers to consider a credit union over the other options they have for a financial partner. However, failure to achieve that goal will erode the very things that credit unions advertise as their core values.