SCOTTSDALE, Ariz.—Are credit unions ready for the future of digital banking?
While most credit unions will respond that they are, close analysis of a new study from Cornerstone Advisors—combined with the firm’s own dealings with credit unions—indicates many CUs are not prepared.
Sam Kilmer, senior director with Cornerstone, believes that overconfidence is not going to help credit unions.
“Unlike many of the executives surveyed, Cornerstone believes digital banking is nowhere close to being future ready in credit unions,” said Kilmer.
In the report, “What’s Going On in Banking 2017,” and in a section examining executives’ perspectives on how “future-ready” their institutions are, Cornerstone asked leaders of community banks and credit unions to rate the future readiness of various functions on a five-point scale: 1) Not at all future ready; 2) Not future ready, and falling behind; 3) Not future ready, but making progress; 4) Somewhat future ready; and 5) Very future ready.
“Among credit union executives, the scores vary but the overall order of the functions is in line with the bank executives’ ratings,” explained Director of Research Ron Shevlin, the study’s author. “Compared to their bank counterparts, credit union execs are even more complimentary of their digital banking future readiness, with 48% rating them as somewhat future ready, and 13% saying that they’re very future ready. So six of 10 respondents say at least somewhat future ready in digital banking.”
Shevlin said one major reason Cornerstone disagrees with the executives’ ratings is that from the company’s interactions with credit unions it has learned that many CUs need to work on their digital banking capabilities.
“In many institutions, mobile banking has barely covered the transactional bases, and is nowhere on providing service support, personal financial management advice and guidance,” said Shevlin “And 42% of credit unions think that they’re at least somewhat future ready regarding payments? With mobile payments still in its infancy, and no one knowing what is really coming down the road in digital banking, how could they possibly know that they’re future ready?”
Another disconnect, according to Cornerstone, is credit unions’ perception of future readiness around marketing, including not being future ready in the contact center and analytics verticals, the study shows.
Shevlin pointed out that marketing is increasingly becoming a data-driven function.
“If you are not future ready from an analytics perspective, then it seems to me you could not be future ready from a marketing perspective,” said Shevlin. “Forty-two percent of respondents said they were somewhat future ready from a marketing perspective, and 13% said they were very future ready. That’s 55%—whereas just 25% said they were future ready from an analytics perspective. So, again, how can you be ready for the future of marketing, which is now data driven, if you are not ready for the future from an analytics perspective? The answer is you can’t.”
Kilmer said he is not surprised that credit unions rated their data analytics capabilities low.
“Data analytics has been an ongoing struggle for credit unions,” said Kilmer.
A key word CUs should focus on from the report is “perception,” said Shevlin.
“We did not in this report evaluate how future ready any credit union is or is not,” noted Shevlin. “We never defined what future ready meant. We just asked them how future ready are you. This is all about perception.”
Shevlin acknowledged that when he began the study he thought credit union executive answers around future readiness would be conservative.
“I expected the numbers to be far lower, because we felt we were dealing with a pretty conservative group,” said Shevlin. “We thought there would be enough fear and loathing of the big banks and the billions they spend on marketing and digital banking, and enough fear and loathing around the fintechs, to drive more conservative responses. We expected CUs to grade themselves more harshly, with concerns about falling behind. But what we got back is credit unions think they are in pretty good shape in digital banking.”