The race to future banking glory between banks and credit unions has the makings of a David versus Goliath contest. And the reason the credit unions are in with a chance is that the (American, but globally representative) millennials have leveled the playing field by proclaiming (in the Millennial Disruption Index study) among other things that one bank is pretty much like the other, that Google, Apple and Amazon are likely to come up with more exciting financial offerings than banks, and that they don’t really care about big banking brands.
Technology has leveled the playing field some more by fragmenting the banking market into little disruptive-innovation niches, and threatening to disintermediate banks from their own business.
Clearly, size no longer matters as it used to.
But before credit unions can sneak past the ruling champions, they will need to reinvent themselves for the digital age. Here’s a summary view:
With the balance of power in the banking relationship swinging towards the end points, credit unions will have to put customer need and interest ahead of all other considerations. They must recast business processes, strategies, decisions, and even their business models, to reflect this shift. Digital tools and technologies will be key to implementing this.
As financial services continue to splinter, banking customers will start banking with an ecosystem of providers, rather than a single entity. Credit unions need to integrate and collaborate with this ecosystem and get it to work on their behalf. The use of APIs will be key to achieving this.
Customization and context are redefining the consumption experience. To succeed, credit unions must replace generic commoditized offerings with insight-driven products and services that are personalized and relevant to the immediate context. Advanced analytics will be key to creating these.
While this may sound like a tall order for credit unions, most of whom still lag the industry in digital adoption and budgets, they can take confidence from the fact that they already possess some of the core values required to succeed in the digital age – they have always worked in the interest of their customers; they know what it is to be part of a larger community; and their intimate knowledge of customers is second to none. Read more in our recent survey report, conducted jointly with Cornerstone Consulting, about digital capabilities in credit unions
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