By: Elizabeth Rowe, Financial Services Strategist
With 2019 nearing, the industry’s crystal balls are fired up to tell us what’s ahead. First among the prognosticators is Financial Brand with its five trends/innovations that will define credit unions’ New Year.
While none of these trends and innovations are new, strategic planning executives will want to assess the changing landscape of prioritization of each. This is a strong list, capturing the overarching industry focus on “targeting, expanding services, re-configuring delivery channels, delivering proactive advice (and) integrating payments.”
Below are Financial Brand’s five big trends for 2019:
|1. Serving a Segment of One|
|2. Expansion of Open Banking|
|3. Commitment to Phygital Delivery (Physical branches meshing with Digital services)|
|4. AI-Driven Predictive Banking|
|5. Payments Everywhere|
- Serving a Segment of One: The phrase “segment of one” first appeared in retail financial trade publications in 2000. That means that it has been a holy grail for almost 20 years, but, finally, big data is bringing us ever closer to its realization. How can we, as an industry, create truly personalized products, services and the marketing of those services that anticipate the needs of the individual? Can we monetize those best products to build loan volumes, inspire the use of credit union payment methods and capture true primary financial institution relationships? Big data allows credit unions to see where members are going, what they’re buying and what they’re hearing from influencers about the newest, best things: When credit unions know the individual’s story – the one that may include kids heading off to college, babies being born, homes being bought, new cars being shopped for, then marketing messaging can be developed and honed months before those events occur.
- Expansion of Open Banking: Open Banking is coming to America. Credit unions will see increased pressure from members and regulators to open their cores to more Application Programming Interfaces (APIs), so that retailers, investment advisors and billers may directly access a member’s account. To avoid becoming mere gateway providers that only connect members with external resources, credit unions must craft strategies to interject themselves into what can otherwise devolve into a two-way conversation. How? By using their own sites as communication platforms to promote payment products as a way of deflecting the efforts of retailers to encourage ACH payments. Remember, the largest retailers are deploying/perfecting strategies to move their customers’ payments to ACH and away from interchange-based products right this very moment in their European marketplaces. There is no time to dawdle. Credit unions can win this game by focusing on their fintech relationships, the security of their payment products and incentives they can offer to offset the messaging members will receive from third parties.
- Commitment to Phygital Delivery (Physical branches meshing with Digital services): As you know, traditional branches are expensive. More big financial services providers are creating digital only banks or sub-banks as ways to compete against digital de novo institutions and to save money, but is that the right way to go? Members know branches, but almost certainly, they don’t know all of their credit union’s digitally-based services. Promote those. An April 2018 J.D. Power survey found that the least satisfied members are those who are digital-only users and those who are branch-only users. And the most satisfied? Those who use both branches and digital.
- AI-Driven Predictive Banking: As previously discussed, it is big data and artificial intelligence that will move credit unions from a rear-view perspective of their members to becoming anticipatory solution providers. As Financial Brand says, “In the end, the focus is no longer on putting together good information and waiting for someone to look at it; information is now shown with the goal of proactively changing customers’ everyday behaviors, with figures and insights contextually delivered.”
- Payments Everywhere: Each of the previous trends is imbued within the payments industry in powerful ways. Credit unions will continue to see a convergence of channels and molecular level customer segmentation infused by big data that will allow them to offer the right payment products, with the right features to the right members. Open banking will give third-parties such strong platforms for member engagement that competition for the payment (and the member relationship) will drive down interchange fees. But that lost fee revenue can be remediated by leveraging the data gleaned over long member relationships, and that knowledge will give credit unions a non-duplicable advantage over other players.
What Does this Mean for the Credit Union Industry?
Credit unions have to stay on their paths of innovation and personalization while leveraging big data to serve their members better than all others. A source of well-earned pride for credit unions is their knowledge of their members. New tools and resources are coming online that can enrich that knowledge and place credit unions in the role of anticipatory providers of solutions. That’s how credit unions keep their white hats.
The Financial Brand article, “Five Innovation Trends That Will Define Banking in 2019” is available at: https://thefinancialbrand.com/77869/innovation-trends-banking-ai-api-personalization-payments/