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Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery The Digital Banking Landscape At one end sit financial institutions that are product-centric. This group sees digital as a channel to enable access to products and services they offer. For them, digital banking is a pull play, where capabilities the institution has created or enabled are made available for consumers to use if they choose. There is no real desire to engage in the digital sense, so this end of the spectrum is all about access. At the other end are the financial institutions that are consumer-centric. They see digital as a combination of information (what they know about the consumer); location (where the consumer is right now); context (the likely reason the consumer is contacting the financial institution); and action (what the financial institution can make available to resolve the consumer’s need or want). These financial institutions make their products available within the company’s other offerings, such as car loans within auto-buying apps. For this group, digital banking is a push play, where capabilities are made available within the consumer’s normal life. There is a real desire to engage beyond the bounds of traditional banking. We should note, however, that as of the end of 2015, there are very few financial institutions at this end of the spectrum. Measuring Your Position Your financial institution is somewhere along this spectrum. How far along only matters when you compare that position with your stated strategy. Answer these 10 questions to help identify where you currently sit: One of the trickiest parts of any discussion about digital banking is defining what the term actually means. As with every term overused in the media, it probably means something different for you and your financial institution than it does for others. Digital banking is more than just online or mobile banking. It is not omni-channel banking, but it does enable it. It is not myriad mobile wallets and payment mechanisms, where financial institutions clearly do want to be included in those discussions. So what does the digital banking spectrum look like?

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Page 1: Where Are Your Credit Union and Members on the …Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery The Digital Banking Landscape At

Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery

The Digital Banking Landscape

At one end sit financial institutions that

are product-centric. This group sees digital

as a channel to enable access to products

and services they offer. For them, digital

banking is a pull play, where capabilities

the institution has created or enabled are

made available for consumers to use if they

choose. There is no real desire to engage

in the digital sense, so this end of the

spectrum is all about access.

At the other end are the financial

institutions that are consumer-centric. They

see digital as a combination of information

(what they know about the consumer);

location (where the consumer is right now);

context (the likely reason the consumer is

contacting the financial institution); and

action (what the financial institution can

make available to resolve the consumer’s

need or want). These financial institutions

make their products available within the

company’s other offerings, such as car

loans within auto-buying apps. For this

group, digital banking is a push play, where

capabilities are made available within

the consumer’s normal life. There is a

real desire to engage beyond the bounds

of traditional banking. We should note,

however, that as of the end of 2015, there

are very few financial institutions at this

end of the spectrum.

Measuring Your Position

Your financial institution is somewhere

along this spectrum. How far along only

matters when you compare that position

with your stated strategy. Answer these

10 questions to help identify where you

currently sit:

One of the trickiest parts of any discussion about digital banking is defining what the term

actually means. As with every term overused in the media, it probably means something different

for you and your financial institution than it does for others. Digital banking is more than just

online or mobile banking. It is not omni-channel banking, but it does enable it. It is not myriad

mobile wallets and payment mechanisms, where financial institutions clearly do want to be

included in those discussions. So what does the digital banking spectrum look like?

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Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery

QUESTIONS SCORE SYSTEM SCORE

Do you feel you have a consistent DEFINITION of what Digital Banking is within your organization?

This can be anything from a better channel strategy to a completely new way of doing business.

Score 1 point for each 10% of your organization that has a consistent definition. For example, if you think 30% are agreed, your score is 3.

Do you feel you have a consistent Digital Banking VISION for what you need to achieve?

Your vision should combine ambition with a pragmatic perspective of what is possible and when, and be understood and preferably agreed upon by everyone.

Score 1 point for each 10% of your organization that has a consistent vision.

Is reaching your Digital Banking Vision a PRIORITY for your organization?

Is every department working towards the same goal, with the same sense of urgency?

• Score 8-10 if appropriate budgets and resources have been allocated across all departments.

• Score 5-7 if some budgets and resources have been allocated, and discussions are being held for additional needs.

• Score 1-4 if funding and resourcing is haphazard at the moment.

• Score 0 if budgets have not

been allocated at all.

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QUESTIONS SCORE SYSTEM SCORE

Do you have a BUSINESS MODEL that shows (at any level) the anticipated changes to your institution should your digital strategy be fully implemented?

This could mean a sophisticated model from data you have gathered, or a simple spreadsheet based on valid estimates. The key to success is tracking the estimates and adapting as you progress.

• Score 8-10 if you have a model built and a plan to review against expectations as you go along.

• Score 5-7 if you have a model but no plan to review as you go along.

• Score 1-4 if there are a number of models that have been built, but they have not been combined at the organization level.

• Score 0 if you have no real idea what the economic outcomes would be.

Does your organization think of information as an ASSET?

Organizations that think of data as an asset use it to spot and create opportunities. Organizations that don’t think of data as an asset use it for reporting on the status quo.

• Score 8-10 if you think your organization does use information as an asset.

• Score 5-7 if there are at least some activities underway to use information as an asset.

• Score 1-4 if there are plans for these activities.

• Score 0 if there are not even any plans.

Has your organization performed a BENCHMARK against your competition, or against the perceived best practices, from the Digital Banking perspective?

• Score 8-10 if you think your organization does use information as an asset.

• Score 5-7 if there are at least some activities underway to use information as an asset.

• Score 1-4 if there are plans for these activities.

• Score 0 if there are not even any plans.

Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery

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QUESTIONS SCORE SYSTEM SCORE

Do you do any MEMBER JOURNEY PLANNING?

Good Journey Planning helps you understand how members really interact with you, particularly when furnished with data as to which journeys are the most popular. This gives you the chance to spot opportunities to improve.

• Score 8-10 if you have a model built and a plan to review against expectations as you go along.

• Score 5-7 if you have a model but no plan to review as you go along.

• Score 1-4 if there are a number of models that have been built, but they have not been combined at the organization level.

• Score 0 if you have no real idea what the economic outcomes would be.

Do you follow DESIGN THINKING principles?

You might characterize Design Thinking as: Based on the needs of people and not on the needs of the systems, based on the changes technology is likely to bring and not just on what is available today, and based on solving a business problem that has considerable future value. Design Thinking includes human desirability, business viability and technical feasibility in its approach.

• Score 8-10 if you think your organization does use information as an asset.

• Score 5-7 if there are at least some activities underway to use information as an asset.

• Score 1-4 if there are plans for these activities.

• Score 0 if there are not even any plans.

Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery

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QUESTIONS SCORE SYSTEM SCORE

Are you able to make real time offers to your members?

If you have the right data about your members, you should be able to determine what offer or suggestion to make in the context of the member, such as when they are at a POS or an auto-dealer.

• Score 8-10 if you have a model built and a plan to review against expectations as you go along.

• Score 5-7 if you have a model but no plan to review as you go along.

• Score 1-4 if there are a number of models that have been built, but they have not been combined at the organization level.

• Score 0 if you have no real idea what the economic outcomes would be.

Are you able to track the conversations your members are having in any channel?

Most FIs are not able to reconcile all transactions from all platforms into a single dashboard, so servicing members is made needlessly difficult.

• Score 8-10 if you think your organization does use information as an asset.

• Score 5-7 if there are at least some activities underway to use information as an asset.

• Score 1-4 if there are plans for these activities.

• Score 0 if there are not even any plans.

Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery

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Next Steps

You should now have a score between 0

and 100. If you have scored more than 85,

you are either the clear leader in the digital

field, or you should go back and reassess

your answers. However, your numeric score

is not as important as your position on the

spectrum relative to your member strategy.

These ideas go some way to measuring your

digital readiness, but if your strategy is to

have the greatest physical footprint in your

region and you have scored “poorly” on this

exercise, then you have not wasted your

investment dollars.

If, however, you do desire to be a leading

digital financial institution, a low score

is likely an indication that you are not

investing in the right places. If this is the

case, data from this exercise can be used

as justification to create an internal team

focused on driving the digital experience.

This team would be responsible for formally

evaluating your offerings and then making

the recommendation to either allocate or

adjust investment dollars.

Measuring Your Members’ Position on the Digital Transformation Spectrum

This is a great exercise that allows you to

understand the digital situation from your

side, but your members do not act so easily

and simply. They are spread all the way

across another spectrum. Credit unions

seeking to develop or enhance their current

digital banking offerings need to have a

firm understanding of where their members

generally lie on the Digital Transformation

Spectrum, which may well be quite

different from where the credit union may

be currently positioned.

In a recent survey, we asked several key

questions to help credit unions gain useful

insights about their members’ in-branch and

digital/online behavior.

1. “When selecting a new bank or credit

union, do you care about how close you

are to a branch?”

We measured the specific answers “Yes,

I do the majority of banking in branch”

against “Yes, I’m sure I’ll use it occasionally”

and “No, if I need one I’m willing to find it.”

Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery

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The black line represents the leading edge

of the digital community. These are the

people who are primarily interested in a

digital banking environment, as compared

to those who are mostly interested in a

physical one. Currently, the leading edge

is set at approximately 45 to 50 years of

age. Prior to this age, a branch is used

occasionally (at best). After this age,

the branch becomes significantly more

important to the customer base.

2. “Assuming you could do any banking

transaction through each, select the most

important outlet you feel your bank or

credit union offers.”

The results again show a significant change

at the same age bracket, when comparing

web, mobile and branch.

Note the change starts to happen when

the consumer is 35-44 years old, and is

really important when they are 45-50,

which is where we have placed the

leading edge on this graph.

3. “Would you like to see your bank or credit

union partnering with local businesses

and goods so that they integrate offers

for you within their website?”

The significant shift when people hit around

40 years old is still there. If someone is

younger than that approximate age, they

are more likely than not to want to have

integrated offers from financial institutions

with local businesses. After that age, the

likelihood that is attractive drops significantly.

4. “If your bank was rethinking their

online and mobile products to be

more like non-banking products, which

experience would you prefer most?”

Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery

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As you might expect, there was a broad

range of choices for younger generations,

moving to essentially one choice as people

aged. Importantly, though, for the youngest

of those surveyed, only 30-40% feel that they

want to keep their banking how it is. Google

was the most popular choice of the younger

people. Selecting Apple as a model was

interesting, as approximately 10% of people

chose that option regardless of age group.

Uber as an insignificant choice may show

that people think that banking is much more

complicated than ride-sharing. That is not

surprising, but it does pour cold water on the

idea that financial technology companies can

‘Uberize” the banking model.

But yet again, the leading edge is around

40 years of age.

Notes regarding the survey data:

The total number of participants was 289

people, split as follows:

■ Male 56%, Female 44%

■ 18-24 15%, 25-34 21%, 35-44 17%, 45-54

18%, 55-64 17%, 65+ 12%

■ Midwest 30%, Northeast 18%, South 28%,

West 24%

■ Expected error: +/- 2.3%

Even though the error rate was reasonably

low, we elected to plot and measure trends

rather than absolute values because the total

number in each age segment is too low to be

statistically meaningful.

Resolving the Gap along the Digital Transformation Spectrum

What is the next step? We now have two

general spectrums: one shows how advanced

your digital thinking is and the other

shows that the leading edge of the digital

generation is around 35-44 years old.

How do we relate that to your strategy

going forward?

■ If your average member’s age is 50 or

greater, and your strategy is to gain a

younger demographic, you have 5-10 years

to complete your Digital Transformation,

depending on how much you want to

move your average age. This is because

that leading edge of digital thinkers is

getting older all the time, so the time gap is

compressed from both ends.

■ If your average member’s age is around 40,

you need to begin a Digital Transformation

project now, as you need to keep up with

those 40-year olds as they age. It is not

too late for you, but you need to act. You

might even consider cannibalizing some of

the efforts and resources you are spending

in your physical channels as they will be

less valuable (when compared with Digital

channels) as the population ages.

■ If your average member’s age is around

30, you also need to act now as you

are considerably behind the game. But

don’t throw all your eggs in one basket.

Remember that a quarter of young

people still think they will use a branch

occasionally. The key here is to use the

Digital information you should be recording

(Information, Location, Context and Action)

and using it within the branch context.

But how much change do you need to

make? If you refer back to the Digital

Readiness Spectrum, you should be thinking

of the following scores:

■ 60-80 if you have many millennials

and younger.

Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery

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■ 40-60 if you are aiming at an average age

of 40-50, but remember you need to be

moving to the right at a rate of 5 to 10

points per year.

■ 20-40 if you have an older demographic and

no desire to change that. You have plenty of

time to watch the market develop.

So the amount you need to change depends on

your current position in both demographics and

Digital readiness, your strategy for servicing

those consumers and the length of time you

have to act. Even if you think you don’t need

to do much at the moment, you are about

to (or at least need to plan to) undertake a

transformation exercise to change your entire

organization and that will take a long time

regardless of size.

Capability Examples along the Digital Transformation Spectrum

It’s clearly not feasible to determine an

individual financial institution’s required

capabilities, as that depends so much on

where you are on your transformation. But let’s

assume that you’re starting with a legacy online

banking solution delivered from your Core

Banking platform. What capabilities should you

consider as you forge ahead? To illustrate this,

we have defined a number of “plateaus”

of capability:

Traditional Digital Banking Platform■ Independence from, but connection to, the

core banking platform

■ Separation of user authentication &

authorization into a separate system

■ Support for user entitlements (typically for

Small Business Banking)

■ Extendable user experience beyond colors

and logos

■ Choice of bill pay provider

■ Application Programming Interface (API)

capabilities to access external platforms if

those systems support integration

■ Single Sign On (SSO) capabilities to access

external platforms for those that do not

■ Basic Campaign Management

■ Separate mobile banking and bill payment

platforms

Modern Digital Banking Platform■ Full control over the user experience, where

the same code base is used for online, tablet

and mobile banking

■ Integration with Content Management

Systems so all customer messaging, across

every touchpoint, is managed in a

consistent manner

■ Ability to extend the digital banking platform

storage schema, so additional metadata can

be stored and utilized. For example, add fields

to the Use Profile to assist in analytics

■ Ability to create and manage campaigns with

the additional metadata included

■ Ability to provide a Payments Hub/Money

Movement concept, instead of Bill Pay, P2P,

A2A, ACH, etc. as separate experiences

■ Auto-categorization of spending, with

graphical reports

■ Access to the same information for members

and all credit union staff (often, not all

transaction information is available to

every staff member)

■ Separate mobile payment applications

Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery

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Leading Edge Platform■ Integration with social media systems for

member engagement

■ Separated and differentiated user experiences

depending on consumer segment

■ Integration with mobile wallets and next

generation payment systems. For example,

providing banking information in context at

the POS

■ Predictive money management; for example,

Safe to Spend balance information

■ Real time payments, plus existing

payments models

■ Document and storage services

■ Remote teller and customer services

■ Wearable and IoT integration; for example,

beacons in branches

Next Generation Platform■ Fully integrated social media applications.

For example, providing account information

through social media platforms for individuals

or groups (imagine a local sports team

tracking season dues directly into a bank

account through Facebook.)

■ Offers delivered in the context of the user. For

example, real-time loan offers on specific cars

at the dealership, or mortgage offers during an

open house

■ Automatic loans and savings, including

sweeping into accounts and investments, and

debiting when required

■ Automated rules for regulation and

compliance

■ Block chain and smart contracts integration

PSCU Can Help

PSCU’s digital payments and product

development teams can help credit unions

create a digital services roadmap that aligns

with the needs of the credit union and its

members. Contact Jeremiah Lotz, VP, Digital

Payments and Experience at [email protected]

to learn more.

Payments | Risk Management | Analytics | Loyalty | Mobile 24/7/365 Contact Center | Marketing | Strategic Consulting

pscu.com | 844.367.7728 | 09.16

Where Are Your Credit Union and Members on the Digital Banking Spectrum? An Approach to Discovery