Underground Thriller Coverage: The Difference Between the ‘Do’s’ and the ‘Dies’ in Credit Unions
Is it really a do-or-die moment for credit unions? Potentially, but it doesn’t have to be, according to four people who offered differing perspectives on that question and how to respond.
Their viewpoints were shared during a panel session at Mitchell Stankovic’s Underground Thriller event in Las Vegas, which was held in conjunction with the Money 20/20 conference.
Participating as panelists were Andrew Morris, global director with SEON; Asha Connors, chief services officer with Trellance, and Steve Castagna, chief revenue officer with AKUVO. Stephen Bohanon, chief strategy officer with Alkami, served as moderator.
Going, Going…
Bohannon said credit unions need only look to the industry statistics to see the “die” piece of the equation, noting the industry has been shrinking every year, primarily due to mergers. If that trend continues, as it’s expected to, he said the total number of financial institutions in the U.S. today—approximately 9.500—will number between 2,000 and 2,500 by 2030. One byproduct of that, he said, is the talent levels at those institutions will only be stronger.
“You’ve really got to think about that and put yourself in that mind,” Bohannon said. “Everyone, on average, is going to be larger, they're gong to be stronger, they're going to be more formidable as a competitor. And that means consumer expectations are therefore going to be higher as a result. Are we going to be one of the ones that are almost out of business or are we going to be one of the ones that are thriving because of the decisions we started making now?”
Is It Really a Do or Die Moment?
To his fellow panelists, Bohannon posed the question of whether they believe it’s a do or die moment and, if so, what they think needs to be done?
Morris responded by pointing to data showing the average age of a CU member is 53, while the average American is age 39. But he said the age issue doesn’t just apply to membership.
The Other Age Issue
“The other thing is leadership and management,” Morris said. “What do you think the average age of leaders is in credit unions? On the management team, on the board? The biggest thing for me about leadership is empowerment and listening to the younger generations that are coming through that have the ideas, that have the energy, Empower them. That's the biggest thing. Don't say, ‘You have no experience, you don't know what you're talking about. You don't know how it applies in the real world’.”
Morris said when he asked his own 15-year-old daughter what’s most important to her from a financial services provider, she responded by saying “community support and sustainability.”
Yes, It’s Dangerous, But…
Meanwhile, Morris said, credit unions must stay attuned to artificial intelligence.
“AI is dangerous but it's also a huge, huge benefit,” he said. “Everyone has a different purpose, everyone has a different concept of what community support is. AI can help us understand that. It can help a credit union actually be bespoke in how we distribute the monies across the community.”
A Different Look at the Issue
Trellance’s Connors agreed with Morris, but added she believes future-proofing credit unions doesn’t just have to be about lowering the average age of membership.
“There’s all this talk about the average age of members, but I actually think having a healthy Gen X membership is not a death knell,” Connors said. “It's a bad thing, it’s actually a plus point. If you really have a healthy Gen X membership, make sure you're attending to their needs. You shouldn't have to look at only the Zoomers and what they want.
‘Both Parties Stand to Lose’
“If you don’t serve your Gen X members now and they don't get what they're looking for from you, both parties stand to lose. Gen X folks are going to be inheriting the largest amount of wealth in America's history,” Connors continued. “They are a sandwich generation taking care of both children and parents. They're making decisions for themselves, for parents and for their kids. They're trying to figure out how to invest their inheritance. There are so many financial challenges that these folks are going through and they're looking for somebody to partner with. They want a financial institution that they can trust, somebody that will stand by them and help them navigate these challenges.”
What Should a Credit Union Do?
Asked by Bohannon what a credit union should do specifically in response to the points she was making, Connors responded by saying understanding their needs must be the first thing.
“Look at the data look, at who you have already within the system,” she advised. “You also have membership in the same household. Sending a message into that household may reach more than just that one member; it can actually span multiple generations…I think it all comes down to data. Credit unions need to learn to use the data they have. It's not just the internal data on the members,
Getting to 2030
Getting to 2030 will require understanding what is often considered the “boring” side of the business, according to Akuvo’s Castagna.
“I'm on the collections software side, so it's one of the boring areas, but when I go into implementing customers and say you need to be thinking about this, what I usually hear is fear of failing,” he said. “It's not because of our software. It's the fear that I don't want to do something because if I'm wrong in my decision, am I going to be looked down upon? I hear this more and more from credit unions.
Placing Blame
“There are those credit unions that are like, ‘Let's try this. Let's see what happens and if we fail that's OK.’ There's not that many of them though,” added Castagna. “There's more that say, ‘I don't know if I really want to touch this ship and I'm going to blame priorities. I'm going to blame my strategy. I'm gonna blame something else.’ But at the end of it they're feeling the fear of failing.”
For that reason, Castagna said credit unions must have cultures that include outcomes related to both successes and failures and which value learning from failures.
Such a culture, according to Castagna, allows for implementation of a broader, more conductive strategy,
A ‘Core’ Challenge
He acknowledged, however, that an aging core system can thwart the ability to make many changes and upgrades, including fintech implementations.
“What I usually hear is, ‘I'm going to let the next guy deal with that core system upgrade, because I don't want to touch it. My job’s on the line’,” he said. “But if people say it's OK to fail, we're going to be a much better industry to allow for us to take advantage of all these cool fintechs we're bringing to the table.”
The Difference Between the ‘Do’s’ and the ‘Dead’
Bohannon asked the panel participants for their views on what would be the common themes for those CUs that “do” and those that “die.”
• Connors: “Understanding your members and their needs. The ones that are going to survive are the ones that have taken the time to learn their membership and their needs and are working with them, alongside them, to provide the services they really require. Again, it's going to come back to the data, it's going to come back to the talent that you have. If you don't have the right skill sets, then you have to start being creative, you have to upskill your staff or bring in external help, whatever it may be. But you need to address that problem now. Don't put it off for later.”
• Castagna: “I agree. We have to understand this data to really understand where we need to go and it goes back to that outcome that Keith (Sultemeier) was talking about (see separate story). If we understand how we failed or we understand how we're being successful, those are going to be the winners, They are going to survive. I agree it does come down to the data, but it’s also the member experience. How do we take what we talked about earlier with the younger generation that looks at this as a nonprofit industry. We should be engaging with that more and more and making sure they understand the value of it. But we're only going to do that if we have that data that supports that.”
• Morris: “The ones that ‘do’ are the ones that take action now. You can spend hours analyzing data; just take action. Don't fear failure. That's the biggest reason why fintechs are so agile. That's the reason they're getting the consumer market.”