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According to research and advisory firm Forrester, “To win, serve and retain today’s empowered customer, firms must digitize the very core of their business, and 2018 will be the year when that process starts at scale.”

As with any organization today, the future success of credit unions hinges on our ability to not only implement technological innovations, but to apply them across the ecosystem, streamlining processes, uncovering critical insights about business performance, and ultimately providing a cohesive experience to members – one that doesn’t feel like a game of connect the fragmented dots.

And, that takes integration.

Integration Is Innovation

Across our industry, we talk a lot about digital transformation – but what does it mean to digitally transform, and where does integration come into play?

For credit unions, digital transformation involves the redesign and advancement of systems and processes with one central objective in mind: to elevate the member experience. As a strategy, it starts by anticipating the needs, preferences and aspirations of the end user – and then applying innovation accordingly.

Data and integration go hand and hand, says CO-OP Chief Information Officer Nick Calcanes. “The more you know about your members, the more efficient, insightful and proactive you can be.”

This is why, he adds, the best thing for credit unions to do right now is implementing machine learning, an application of AI capable of diving deep into complex systems and deciphering patterns and trends from volumes of data.

In order for AI to deliver on its promise, though, systems, platforms and applications must be tightly integrated across the environment – and APIs hold the key. Implementing an API-driven architecture across the enterprise ensures the seamless flow of data – your most valuable asset when it comes to leveraging AI in service to members.

“AI and machine learning have a mystique about them, but they operate on a very simple premise,” said Calcanes. “The more data you can gather, the more analytics and models can tell you about your customers, and the better service you’ll be able to provide.”

Calcanes gives the example of a member who buys a car about every three years: “If you have a system in place that predicts when the next car purchase is coming based on the last decade of data, you can send that customer an offer for a car loan.”

Easy, right?

 Open APIs Open Doors

By now, we are all familiar with the concept of Open Banking. Open Banking is based on Open APIs which set global interoperability standards for connecting financial institutions and their partners so they can share data and innovations at scale to benefit customers. While Open Banking as a concept has advanced quickly throughout the E.U., here in the U.S. it is gaining momentum as well.

According to The Financial Brand, “Open APIs will enable banking organizations to gather actionable data from various internal and external sources, including buying habits, financial goals, rick tolerance and even social interactions. Insight derived from this data will enable more proactive (and accurate) multi-channel marketing, moving from reactive sales pitches to proactive solutions and advisory services. In other words, the difference between ‘rear-view mirror’ notifications and ‘financial GPS’ recommendations.”

Open Banking plays to credit unions’ strengths and has enormous potential to advance our movement. Unlike big banks, which tend to be extremely competitive, CUs have the advantage of viewing other similar organizations as key resource centers and collaborators.

“It is core to credit union DNA to work together and on behalf of the movement,” said Calcanes. “If you can align groups of credit unions with similar goals and create a shared understanding of key metrics, then you can collaborate on strategic solutions that scale much faster with higher quality.”

While innovations such as Open APIs can unlock technological doors, the first step in moving forward in any strategic endeavor is to pinpoint the problem you wish to solve.

“Then set some achievable milestones around it,” said Calcanes. “It might be to grow your membership by 5 percent, for example, or increase your member satisfaction score by two points. Establish a goal. Then look for a partner that can help you move the dial. Seek out an ongoing partnership where you have mutual understanding of the goals, expectations and timeline. Finally, select the technology – be it AI, machine learning, Open APIs and/or analytics – that can help you get there.”

 Technology, Talent and Credit Union X.0

When Accenture evaluated ten digital technologies across eight industries, they found large companies that leverage the “right combination of new technology” could increase their market capitalization by an average of more than $6 billion.

Accenture calls the shift “Industry X.0.” It’s an action plan for becoming more adept at embracing technological change and profiting from it.

What can credit unions learn from Industry X.0?

Credit Union X.0, according to Calcanes, operates according to similar principles. It calls on credit unions to leverage economies of scale by working together to innovate on behalf of all members. “Think about architecting your technology with member experience at the center of the universe as opposed to the siloed account or transactional model,” he said. “Next, identify talented individuals who can implement the changes required for a more agile, digitally integrated business.”

Millennials, while taking a different approach to work than the “old guard,” are packed with digital native skill sets that won’t require an extraordinary expenditure on training; or more pointedly, on trying to shift an archaic mindset.

Bonus: Millennials, many of whom are still in the early stages of their careers, are also highly motivated by purpose-driven organizations, a core quality of credit unions. “Get involved – and get involved early from a data and digital perspective, grow your talent internally, and tap the resources of local universities,” says Calcanes.

 Unlikely Partnerships

While credit unions and other FIs revolve much of their business models around payments, outside our industry payment apps are popping up all over the consumer landscape – and this has implications.

Consider the popularity of Venmo, PayPal’s social payment app that has caught on with Millennials like wildfire. According to TechCrunch, “Banks have been caught asleep at the wheel in the Digital Age. It was left to PayPal, Square, Mint and others to build the online services that are top of mind for consumers today. On mobile, more people default to Facebook Messenger or Venmo to transfer money to a friend rather than a bank app.”

The question remains: Could credit unions become the payment source for a mega-brand like Costco – and should they partner with P2P players like Venmo and Square?

 How Credit Unions Will Win

As an industry, we are at an interesting inflection point. The opportunity to leverage a socially conscious business environment alongside the plethora of technology to enhance member experiences surely sets the foundation for the next phase of credit union growth.

Through advanced, data-driven thinking, intra-industry collaboration and the right combination of new technology, partnerships and talent, credit unions will outperform the competition – with the wide adoption of digital integration as a core business principle.

Moreover, credit unions will certainly offer the “big guys” some things to write home about.

Quick Takeaways: 

Good companies create new technology. Great companies integrate existing technology. Integration is the new innovation.

Open Banking plays to credit unions’ strengths and has enormous potential to advance our movement.

Architect your technology with member experience at the center of the universe.

Advance your digital transformation by attending a CO-OP Roadshow near you. View the agenda and more details for each location below:

July 17, 2018
Boulder, Colorado
Register Now

August 21, 2018
Detroit, Michigan
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August 23, 2018
Des Moines, Iowa
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September 26, 2018
Irvine, California
Register Now

October 2, 2018
Philadelphia, Pennsylvania
Register Now

October 4, 2018
Boston, Massachusetts
Register Now