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Banking and financial services are becoming purely digital. Already, nearly everything your members engage with at your credit union is a digital service. Cash handling has dropped dramatically over recent years. Member finances, mortgages and accounts exist as digital entries in large databases. For a few more years members will be willing to deal with a tangible pile of cards, but this won’t last. By 2025, the majority of cards or the credentials they represent will be stored and accessed through a mobile device.

Transforming banking into a purely digital business translates into convenience and accessibility for your members. For credit unions, online distribution models drive efficiency.

Disruption fueled by digitization

Kodak, Blockbuster, Tower Records, traditional taxi services – what do they have in common? They went out of business or were severely disrupted because one or more new entrants were able to meet a consumer need better than the incumbents.

  • Digital cameras made capturing a moment more convenient and cheaper than traditional cameras did.
  • Netflix offered a more convenient way to access entertainment, as did Spotify and the iTunes store.
  • Uber transformed the dependent taxi customer into an empowered Uber customer.

As discussed in previous posts, a Jobs-To-Be-Done webinar and the customized Jobs To Be Done Credit Union Research, the key to member growth and improving member experience is to identify the jobs to be done. What jobs do members actually hire credit unions to do? By identifying these jobs, we can better estimate who has the advantage in delivering these jobs and how.

Enabling daily spending and supporting life events

The two key jobs that members hire credit unions for are enabling daily spending and supporting financial transactions related to major life events. For both of these jobs, traditional financial institutions often fall short in actually solving consumer needs. New entrants are well positioned to solve these jobs more effectively.

Fintech startups tried to answer these demands by offering slim, no frills and purely digital offerings and distribution models, leveraging the latest technologies. Banks have tried to be innovative by developing bigger and faster solutions.

However, when addressing the actual customer pain points and exploring the jobs that customer expect their financial institutions to solve, purely digital banks miss the mark. When it comes to daily spending, members engage in complex ecosystems and value chains when completing the transactions required to survive everyday life. People do not feel they are in control of spending. Recipes are stored, then quickly thrown away. Bonus and loyalty programs are disconnected. Alerts are not integrated. Spending is not actively monitored and managed. In fact, it feels like a jungle to navigate spending. The complexity that consumers have to deal with is enormous. Just think of the complexity involved in buying a house: complexity after complexity. The role of credit unions in these complex processes is very limited today, where only the actual financing is often the one concern.

The future of financial services must focus on solving jobs for members and relieving some of the pain points that are currently built into the complex processes, value chains and eco-systems that members are navigating. The disruptive move for credit unions is not to make existing services more efficient. This is a necessary step for keeping members happy and move along with society that in general is becoming more digitized. The disruptive win is not achieved by delivering faster horses. The winning platforms will be the ones that integrate into the current member world and eco-system, delivering increased value and making people’s lives better.

If credit unions position themselves as an integral part of their members’ lives, they will be able to not only capture transactions, but also inject additional financial advice and new products and services along the way. If credit unions can’t make this leap, they will be reduced to commodities, solely providing access to the financial infrastructure, leaving the member engagement and experience to the new entrants.