Disruptive banking: The good, the bad … and the opportunity

first_imgDevelop a plan – Implementing the technologies to keep your credit union competitive won’t happen overnight. It takes time and resources, so set priorities that will best meet customer demands and your development budget. The term “disruption innovation” is as recent as the 1990s, but the action behind it traces back to the first human technology – the innovation of farming some 12,000 years B.C. Fast forward to the 21st century and high-tech innovations are causing market disruptions in virtually every industry so fast it isn’t hard to keep up with all of them – it’s impossible!So, why do some in the financial industry think we are immune to disruptive banking?Good news, bad newsEconomic journalist John Authers, whose Financial Times career spans 20 years, says banks are too heavily regulated to be threatened by startups, though he admits they must adapt to new technology. JP Nichols, writer/adviser to financial and fintech firms disagrees. He says banking will always exist, but probably not current bank infrastructure – a subtle distinction missed by some of the more complacent in the industry. And Chris Skinner, independent commentator on the financial markets, is in the middle, believing banks and credit unions “are not being disrupted, just re-architected … with new business models, new ways of doing business, new opportunities to do things different and new technological concepts.” Sounds a lot like market disruption!The good news is most industry watchers don’t believe financial institutions are hovering on the edge of extinction … yet. But they do predict the need for change – and fast. Embracing the technologies that meet consumers’ demand for banking any way they want is no longer a “nice to have, it’s a necessity.” Even better news is that disruptive forces are causing a good number of banks to rethink their digital strategies, delivery processes and customer interactions, while forging a savvy course to strengthen their position in tomorrow’s marketplace.The bad news is lack of imagination coupled with the many external factors stressing banks today, such as non-financial market entrants, influence of mobile and commoditized products. Some institutions have yielded to pressures on resources and bottom lines by opting to merge or be acquired. Others say too many banks and credit unions are committed to preserving their legacy systems and processes, discounting the digital changes around them.Opportunity callingIn a disruptive banking environment, adaption is the entry, with customer and member relationships holding the key. Consumers today – especially the large and highly influential millennial generation – are fast embracing new technologies. Consider how quickly people of all ages have adapted to smart phones. More than 60 percent of American adults now carry them, according to the Pew Research Center. Many use them daily to access online services, including mobile banking.But the ease of using smart phones has also raised the bar on expectations about convenience. Thanks to online access by phone, quick-start tablets and wearable smart devices, people’s patience with yesterday’s manner of banking is waning – particularly among young adults. A 2013 Viacom Media Network study found most Millennials believe the way we access money and make payments will dramatically change in the next five years – with 33 percent saying they won’t need a traditional “bank” at all.Still, banking, especially payment systems, will always play a critical role in society – and our industry enjoys long-standing control of this system. For outsiders, the entry barriers of heavy regulation continue to prevail in an space already crowded with internal competition. Plus, most consumers don’t like the hassle of changing their PFI – probably why 40 percent of U.S. consumers have kept the same financial institution for 10+ years.We can counter emerging threats, but time is growing short. You can start now by reinforcing customer relationships, and determining where to update your tools, technology and capabilities. Here are some pointers:Transform your thinking – The influence of disruptive innovation on banking is here and gaining strength. But while it may shift many institutions into unfamiliar territory, it also presents opportunities. Pay attention to disruptions in other industries and envision how they might be applied to your credit union.Assess your marketing and data-collection tools – To reach customers today, you need a robust customer database, variable-field capabilities and data-mining programs to create messages directed to their needs and interests. Partner with a firm that has the tools and know-how to not just send personalized messages to customers, but also to help them easily respond to those promotions online. Omni-channel strategies – Integrate your consumer touch points – in-branch, website, call center, email, mobile, social. Make it simple to move from one channel to another, while keeping the look, feel and messaging consistent.Disruptive innovation has reached our industry, ready or not. Consumers want the convenience of banking anywhere at any time, but they also welcome personalized advice and resources to help manage their money and budget their spending. In fact, a 2014 study by Accenture shows that 25 percent say they would be willing to pay for it right now. Your customers are adapting to technology innovations; they’re waiting for you to do the same.center_img 13SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr,Jesse Boyer Web: https://www.nihfcu.org Detailslast_img

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