Transforming credit unions into technology giants

Consumers today are, in many ways, spoilt for choice when it comes to the technology available to help them make living, eating, working, shopping and communicating faster and more tailored than ever.

In turn, this has created higher expectations than ever for financial services companies, especially experience-centric organizations like credit unions. Many start-ups and challenger banks have risen to the occasion, building their digital service offerings from the ground up while jettisoning traditional ways of doing business, such as call centers, brick-and-mortar branches, and so on.

More established credit unions, however, don’t have the luxury of starting from scratch. They have the added challenge of needing to build on top of their existing processes, infrastructure and architecture – a tall order for legacy businesses in any industry, but even taller when considering the unique features of the banking industry.

So, what are the unique challenges that credit unions are encountering as they look to modernize? And more importantly, how do they effectively navigate these obstacles to offer a compelling, engaging and personalized experience in line with what customers are seeing in other industries?

Organizational Siloes

One of the primary hurdles credit unions must overcome on the road to digital transformation is organizational siloes. Established credit unions have naturally developed siloes as they have grown over the years, bolting on departments, capabilities and expertise. While this compartmentalization may have worked well in a more analog world, it does not lend itself well to customization and the seamless omnichannel experience today’s customers and members expect.

First, these siloes result in an overly complex IT architecture due to a phenomenon known as “Conway’s Law”: The complicated organizational structure of the credit union is reflected in its IT systems, leading to a decrease in uptime, scalability and developer effectiveness. It becomes increasingly difficult for different departments to communicate with each other, and individual departments’ investments in processes and technology may not ultimately “play well” with that of other siloes. This, in turns, hampers the innovation power of the credit union as modifications to the system become harder and harder.

And not only does this impact your ability to innovate and retain a competitive edge. You also end up with customers frustrated with having to ping pong between departments and communication methods to have their needs met.

Compliance Demands

The financial services industry is highly regulated in a way that many other modern sectors are not. Consider the example of Uber, a business that emerged in a space with a very limited regulatory regime, which enabled it to quickly grow and aggressively innovate.

In contrast, credit unions looking to enhance their digital capabilities operate within narrower, more complex constraints – narrower still if they do business across multiple jurisdictions. Regulatory compliance can significantly slow the pace of innovation and deployment of new solutions, a burden made heavier the larger and more complex the organization is.

The Skills Gap

But perhaps the most pressing challenge credit unions face is the technology skills gap. This is a problem that businesses across many industries must grapple with, as sophisticated technologies like artificial intelligence, data analytics, machine learning and automation play a larger and larger role in day-to-day operations – while not enough employees have the essential knowledge to manage and leverage them effectively.

In fact, according to Manpower’s Talent Shortage 2020 study, more than half of companies report being unable to find the skilled workers they need – meaning the competition for highly capable IT employees is higher than ever. And amid competition to attract the best and brightest tech talent, it is increasingly difficult to retain those employees as other companies attempt to woo them away.

Solving the headache

All of these challenges may be daunting, but credit unions aren’t powerless. Just as there are three obstacles, there are three steps to overcome them.

First, credit unions need to take an internal inventory to identify where they are falling short in terms of their long-term technology goals. There are many ways to go about conducting this sort of audit, but some of the chief areas companies should evaluate are:

• Can they retrain their existing staff to meet new technology needs?
• What steps are required to break down the siloes? What tools will allow product teams to retain ownership of the product life cycle, from development to production?
• Is there buy-in from top level management to make these changes? Is there awareness that this transformation affects more than just IT, and has implications for finance, compliance and HR, among others? What steps should these departments take to enable the product teams?

The second step is evaluating external technology solutions. Maintaining a technology platform and minimizing disruptions to employees and customers alike can be a costly, resource-intensive undertaking. Managed hosting – that is, turning to a third party to do the heavy lifting of managing and running the credit union’s underlying technology – can help alleviate the burden. A managed service can help ensure technology stays continuously up-to-date, secured, and above all, online.

The third step is identifying who to tap for technological expertise. While some credit unions may choose to aggressively recruit to fill the skills gap in-house, outsourcing IT needs also remains a viable and cost-effective solution. Outsourcing provides access to experts with a highly sophisticated understanding of not only the latest technology powering the digital banking ecosystems, but also the compliance challenges and needs unique to the credit union sector.

The benefit of tapping external resources to support digital needs is that it frees up the credit union to focus on what drives the bottom line: customer experience and satisfaction. Instead of worrying about how to manage technical details, credit unions can instead focus on how to work hand-in-glove with digital partners to tailor the latest technology to their customers’ needs. This is something many other industries have discovered and deployed to great success, from healthcare facilities leaning on IT service providers to enhance their digital capabilities amid a pandemic, to manufacturers leveraging partners to implement IoT safety solutions.

It is time for legacy credit unions to embrace that same spirit of innovation and break down barriers. As they look ahead in 2021, they must adopt the mindset of a technology company, embracing speed, innovation and agility, in order to offer their users, the same rewarding and convenient experiences they’ve come to expect in all other areas of life.