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July 29, 2015

New Credit Union Survey Highlights Digital Readiness

Posted by Amit Dua (View Profile | View All Posts) at 9:14 AM

New Credit Union Survey Highlights Digital Readiness

Slow and steady wins the race. Nice advice and an old maxim. But does it really apply to the digital age and especially to the financial services space? That's what we at Infosys Finacle wanted to find out when we collaborated with Cornerstone, a financial services and technology consulting firm. The study focused on a small corner of the vast financial services world that is often under-reported and under-represented when it comes to surveys: the credit unions.

For the uninitiated, credit unions are hybrid institutions. Like banks, they give loans and take deposits from customers. But they're not open to simply anyone who has the money to bank there - at least, that's how they were born. Credit unions are members-only financial institutions that revolved around a certain segment of customers, so the idea was that the loan officers and bank tellers who worked there knew more about the needs and concerns of, say, a construction worker or a telephone company employee.

Credit unions are also non-profit institutions that are owned by their members. Membership in an institution that lends money can have its obvious advantages. Loan rates are typically designed to address that community of workers. For decades they were looked upon as ultra-conservative. But then the global economic crisis happened, and being ultra-conservative became an asset. Many of them braved the global financial crisis because they were extremely conservative in terms of how they lent money and to whom. So many credit unions and their members came through the crisis proving that good, old-fashioned banking principles, like knowing the person to whom you're granting a loan, still hold up in today's fast-paced, digital world.

It was against this backdrop that Infosys Finacle and Cornerstone sought to understand what kinds of mobile and online banking features have had the most impact on the credit union sector. Have traditionally cautious and conservative credit unions approached the digital economy in the same steady way that they have approached community banking in general? And how significant are digital strategies to credit unions in general? These questions are important if someone wants to consider what the benefits of online and mobile solutions are to their own businesses and industries. A 'one size' online and mobile strategy certainly does not fit all. That's why it's more important than ever for an organization - financial services or not - to have appropriately tailored information technology designed for the unique needs of its customers.

Of the many significant findings in the survey of North American credit unions, the one that is perhaps the most noteworthy is that more than half of respondents said they do not offer business online banking to their members. And the relatively few that did, reported unimpressive utilization rates. A full 80 percent of credit unions that offer business online banking reported 'Low' or even 'Very Low' member utilization rates. No credit unions reported 'High' or Very High' business online utilization.

Our survey discovered that credit unions are attempting to expand into business banking but without the right technological tools needed to get them there. The survey polled participants to provide their utilization rates for business mobile banking. The result? Not a single credit union in the survey said they offered business mobile banking. It turns out that the traditional information technology solution providers are vital here: They have been slow to add business or commercial features into their mobile platforms.

Again, you might be reading this blog and saying to yourself: I don't run the technology function in my credit union. What does this have to do with me? It turns out that a lot of this information affects you, whatever your line of business. It's about being ready for mobile and online ways of doing business. Your customers might very well be ready but if your institution isn't, then they could go elsewhere. The Cornerstone survey reveals that many credit unions don't even market themselves online. Then there's this amazing information: Over two-thirds of the respondents reported that their customers heavily use online banking. Combine these two pieces of information, and it doesn't take an expert banking analyst to realize that many credit unions stand to lose business unless they address the online and mobile expectations of their members now.

When I read in the survey that 'mobile payments' was listed as the most strategically important feature for mobile banking, and yet only about half of credit unions have implemented this vitally important feature, this is certainly a wake-up call. A business and its leaders may not find something to be strategically interesting, but when their consumers are expecting it, they had better respond with the best IT program available.

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