where are your credit union and members on the …where are your credit union and members on the...
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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?
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.
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
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
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
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
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
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
■ 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
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