Just in the first eight months of 2018 there were 21 transactions, compared to 12 in the prior five years, by the WSJ count.
What is going on here?
We put that question to John Weinkowitz, Head of Product Strategy, Community
Markets, Finastra, and himself an m and a expert.
Is this doing business with the devil?
Should this put into jeopardy the credit union tax exemption – as many bankers are insisting?
What drives the transactions? The need to grow, said Weinkowitz. FIs below a certain size find it more difficult to compete. So some put themselves up for sale. And others go hunting for acquisition partners.
The allure for credit union execs is an immediate increase in members, deposits, and also – in many cases – branches.
But are they factoring in predictable attrition?
Do they have a strategy for employee retention – which may be critical to making an acquisition work?
Before buying a community bank listen to this podcast. You don’t want to ignore that advice.
The podcast is here.
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Find out more about CU2.0 and the digital transformation of credit unions here. It’s a journey every credit union needs to take. Pronto
Carla Bienz is CEO of Partners 1st Credit Union in Fort Wayne IN – an institution where she has worked since she graduated from college and where she now is CEO. And she has keen insights into the plight of smaller credit unions and what they need to do to survive and prosper.
There was a time when community financial institutions owned the home mortgage market. No more. Fintechs dominate and mega banks aren’t far behind. Most credit unions are left to squabble over crumbs.
But just maybe there’s hope. At Finastra, Steve Hoke, Vice President, Product Management, Consumer and SME Lending, says the company’s Fusion Motgagebot Data Insights puts the power of data analytics in the hands of a community financial institution and the upshot is just maybe it can compete – successfully – against the fintechs and mega banks when it has data at its command.
What would it be like to go from being Head, Digital Customer Experience at Lloyds Bank in the United Kingdom – a trillion dollar institution – to being the VP for digital innovation at Colorado-based Canvas Credit Union, with assets around $2.5 billion?
Ask Lucy Donaldson, this week’s guest at the CU 2.0 Podcast. Listen here.
She made exactly that journey and she candidly talks about what a money center bank can do that a credit union usually can’t – but she also talks about the huge advantages a credit union has, from much better agility to strong, genuine community ties.
She’s seen both sides and she says what she likes about credit unions.
A key point Donaldson makes in this podcast is that it’s time to stop talking about a credit union’s digital transformation – and time to accept that has become its business transformation. A credit union is its bits and bytes and knowing that makes the job of plotting institutional success that much easier.
Here’s a related podcast with Tanan Miles of ENT, Colorado’s biggest credit union.
Ask Allan Brown – a VP and GM, Digital Community Markets at Finastra – what keeps him up at night and his answer is simple: it’s trying to stay on top of the digital revolution that is transforming credit unions and community banks. Brown also is very optimistic. His belief: community institutions that partner with the right fintechs can not only keep pace with the big banks digitally, they very well may be able to beat them at this game.
Along the way Brown discusses mega trends that are changing how financial services are delivered and two key trends, he says, are real time banking (it’s coming!) and much shrewder use of data to deliver better and smarter services to consumers.
“The future of financial services is going to be phenomenal,” says Brown.
Now explain this to me: I am a member of two credit unions, 2300 miles apart, both with assets over $1 billion – and yet they have the identical mobile banking app. Oh, sure, the branding window dressing differs – that is, the names and similar. But the actual guts of the app, what they in fact do, are identical. Not kind of similar. Identical.
How can that be considered thoughtful branding, 2019 style?
And how many credit unions are on mobile apps that literally 4000 other credit unions have?
Which is where this explosive report from card issuer Marqeta blows the doors off oldstyle thinking. According to it, Propeller Insights surveyed more than 2000 US and UK adults for Marqeta and the giant conclusion: the front door to a financial institution is an app not a branch.
Reported Marqeta: “One of the most striking results of the survey is how much more greatly people value the digital banking experience over the physical equivalent: 62% of Americans already do the majority of their banking online, compared to just 31% of Americans who say they primarily bank in person.”
Marqeta added: “When asked about how they would feel if every physical bank branch was closed down tomorrow, only one-third of US consumers (33 percent) and one quarter of UK consumers (23 percent) said they would be inconvenienced by this.”
Look through a random sampling of credit union trade publications and count the stories about branch remodels – you’ll see lots. Why? Is this even an issue anymore?
What are you doing to make your app distinctive? Unique? How many stories have you seen about that?
Can you in fact do anything at all or is an app shoved down your institutional throat by a vendor and you can take it or leave it?
Hold that thought.
Chew on this Marqeta finding: “69% of Americans expect to use their mobile banking app regularly in the next three months, while just 30% expect to visit a physical bank branch.”
Personally I do not plan to visit a branch and in fact the only times I set foot in a branch is when I am wearing my reporter hat and want to experience a branch first hand or when something has gone terribly wrong with my account and I am in the branch to shake things up.
Incidentally, Marqeta data say that fixing errors no longer is that compelling a reason for visiting a branch: “The physical branch didn’t even factor as important to consumers when they imagined having to fix an error that their bank had made: 28 percent of UK consumers and 23 percent of US consumers said it was important for them to be able to visit a bank in person to fix a problem, while 54 percent of US consumers and 51 percent of UK consumers said it was simply more important that it was fixed quickly, through whatever channel necessary.”
For 99% of us, 99% of the time there is no good reason to set foot in a branch. Ever.
I urge you to open an account with Chase or Capital One or USAA. Feast on their mobile apps and ask yourself, is ours as good?
Spoiler alert: it isn’t.
Marqeta goes on to warn about the threat posed by digital only banks – sometimes called challenger banks – but I don’t see much threat there. Not to credit unions.
But I see enormous threats from the mega banks with IT budgets bigger than the GDP of mid sized countries and when they go out to hire developers they look for people with strong consumer app experience, that is, people good at writing code that engages people and creates a fun experience.
Has anybody, other than the salesman who sold you your mobile app, ever described it as fun or engaging?
What can you do to make your mobile app your app?
Sure. I know a handful of very big credit unions – think over $5 billion – have custom mobile banking apps.
Good for them but what can the vast majority of credit unions, with much less resources, do to compete in today’s digital world?
That has become the critical question and it’s now a matter of life and death.
Forget the branch, it’s the app that matters – CUInsight http://bit.ly/37ehUa4
Name the single most important IT system in your credit union.
Spoiler alert: it’s not your core. Not anymore.
Who says that? Mike Hatch, a VP and national sales manager at Finastra, and a core expert. Hatch knows the core is crucial but he also believes that it’s the institution’s digital orientation that will shape its future.
Core is part of that.
But it is not the end all.
Another question: is your core system holding your institution back? Can you easily – and inexpensively – integrate cool fintech technology into your core?
Say no and you are telling the truth.
But it’s the wrong answer. You want an open core that lets you deliver the tech your members want.
Credit unions are looking for ways to be different, says Hatch. An open core helps there.
Think cores are boring? You won’t think this podcast is boring – and you just may find yourself wondering if now is the time to initiate a core conversion.
Scary? You bet. But going out of business is scarier.
Ford joined NEFCU via First Source Bank in South Bend (IN), where he was the chief information officer, responsible for infrastructure, cybersecurity, and application development. We asked him bluntly: can a banker in fact fit into a credit union’s philosophy? You can guess his answer but give it a full listen. He makes points to remember.
Will your superior teller experiences guarantee your future?
Believe that and – probably – you won’t want to hear this podcast on the rise of the digital first member. That member may occasionally step into a branch but usually they are unhappy. They would rather interact online.
And their numbers are growing.
Smart institutions know this. A Chase – in its heart – is now a technology company. Are you?
In this podcast, Jeff Bender – vice president, digital solutions at Diebold Nixdorf – tells about the future of banking as he sees it. And he sees a lot of digital.
Word of advice: bet now on cardless ATM access. That, says Bender, is the next must offer.
Bender also warns about offering a generic, off the peg digital experience. Do all your competitors offer the same mobile banking app as you? Think again if that’s true. “Find ways to personalize, to differentiate,” says Bender.
And keep thinking digitally. It is the future and it is now.