Each year, Callahan & Associates conducts a Technology Priorities Survey to better understand where credit unions have focused their virtual and self-service channel budgets and what those investments mean for the year ahead.
The 2014 survey targeted representatives from 72 credit unions ranging from $2.2 million to $12.5 billion in assets, with an average asset size of $1.2 billion. This year's quantitative data and qualitative responses shed light on eight trends for member-facing technology in 2015 and beyond.
1. No One Department Owns The Virtual Experience
More than half, 54.8%, of respondents said it is the marketing and PR departments that drive the credit union's mobile and website strategy. These highly trafficked channels are a main point of interaction for many members, so assigning their upkeep to the departments traditionally responsible for brand development makes sense.
However, the increasing complexity of these channels and their overlap with other areas of operation — such as lending and payment processing — means cross-ownership among multiple departments might be a popular approach moving forward. In fact, among 33% of respondents, IT already drives these efforts. Another 9.5% of institutions rely on their member services department to support these channels.
2. Plan To Hire For Key Roles Or Risk Falling Behind
Competing with other technology companies often means staffing like one, which might be why 98.5% of credit union respondents said they would either increase or maintain the size of their technology department staffing in 2015.
Additionally, 30% of respondents said their 2014 IT/eCommerce budget had increased by more than 10% compared to 2013. Beyond that, 40% reported an increase of less than 10%, slightly more than 26% reported no change in budget, and 3.3% reported a budget decrease.
Credit unions haven't just been changing what they spend over the past few years, they've also been changing where they spend. For example, once considered a fad, social media has now matured into a mainstream part of many credit unions' virtual strategies. Every respondent reported a plan to increase or maintain their social media investments in 2015.
How Does Your Spending Stack Up?
As part of Callahan’s annual Technology Priorities Survey, respondents estimated their technology operating expenses — including both member-facing and back-office — as a percentage of their total operating expenses for 2014. Responses were fairly divided:
36.8% spent between 5%-10%.
33.3% spent 11%-15%.
24.6% spent either less than 5% or between 16%-20%.
5.3% spent more than 20%.
Next: Big Data, Electronic Loan Applications
3. Big Data Is Making An Appearance
Survey respondents also provided examples of emerging technologies they either recently started using or planned to start using within the next two years. Although the responses varied, cloud or virtual storage — a prerequisite to collecting, sorting, and accessing large amounts of data — was a common response.
Respondents also described how they were planning to use data to enhance their outreach or user experience. Several credit unions cited demographic data, credit score information, and better reporting on existing member relationships as a way to drive targeted, relevant offers.
One anonymous respondent reported that their credit union is enhancing its data warehousing system to "ingest all external data sources (card data, core transaction activity, [online banking] statistics and activity, etc.)" and is also incorporating business intelligence software and dashboards to facilitate real-time analytics and tracking.
4. Mobile Enhancements Are On Everyone's Minds
Nine in 10 respondents already offer a native mobile app, and more than eight in 10 offer a mobile-responsive website. So it should come as no surprise that enhancements to the mobile experience — such as remote deposit capture (RDC), mobile wallets with point-of-sale capabilities, and mobile loan applications — were frequent contenders for recently adopted or soon-to-be adopted technology.
According to these credit unions, the new technology that members most raved about also skewed almost entirely toward the mobile channel, most specifically RDC.
"We added a number of additional features like RDC for mobile, PFM, [and Peer-to-Peer payments]," reports one anonymous respondent. "We've been optimizing the [mobile] platform to achieve additional adoption in an attempt to move transactions out of the member center and call center."
5. Applications Are Going Electronic
Online applications and, to a lesser degree, mobile applications for membership, consumer loans, and mortgage loans are gaining the attention of the cooperative industry.
Completing an electronic application process and closing a loan traditionally required an in-person visit. However, new technologies like digital signatures and advanced document upload systems have negated that requirement in some scenarios, especially among existing members.
6. Credit Unions Are Changing With The World
Slightly fewer than two-thirds, 63.1%, of respondents formally evaluate their technology strategies and identify new opportunities annually. Another 12.3% review their technology strategies either more than once a year or on a biannual basis.
Perhaps surprisingly, the second largest percentage of respondents — at 21.5% — said their technology planning cycles stretch three to five years in length. Only 3.1% go without revisiting their strategy for more than five years at a time.
In this era of constant innovation and change, long planning cycles can leave a credit union in a perpetual state of catch up. That being said, many high-tech credit unions do find value in a conservative approach, particularly when it comes to identifying market-validated options that will stand the test of time.
"[Our] three to five year planning isn't just for technology," said one California respondent. "Our board wants the entire organization to perform at the same level of planning."
7. Credit Unions Opt For Substance Over Flash
Nearly 71% of respondents rely on a blend of in-house developers and outside partners to deliver on their technology vision while another 24.6% depend exclusively on third parties. So what makes a vendor stand out from competition?
Surprisingly, only about one in four respondents cited new features or cost as the most important criteria in their selection of a vendor partner. The majority reported either compatibility with current technologies or responsiveness to issues/requests as most important. Another top ranking factor was having first-hand experience with that provider.
Taken together, these responses indicate that many credit unions prioritize seamless member experiences over potentially superior technology or reduced expenses.
8. External Influences Are Growing In Importance
Roughly 10.5% of survey respondents self-identified as being innovators in technology while 17.9% and 40.3% reported being early adopters and fast followers, respectively. Only 11.9% reported being late adopters.
Considering that credit unions are member-owned, it should come as no surprise that "what members are asking for" was the biggest influencer of technology and channel decisions. The actions of large credit unions and other national financial institutions also played a role, followed by Silicon Valley players and national payment firms.
Credit unions are innovative but also largely self-driven as an industry, with most technology investments coming from what members request and what has already proved successful among other industry players. With this approach, credit unions must take care to avoid innovation isolation. They must also be able to cultivate best practices from a range of sources, as failure to do so could result in a disconnect between what members experience at the credit union and the technology they experience elsewhere.
This section of CUSP demonstrates how a credit union can tap into the knowledge and insights of its financial institution brethren as well as those technology pioneers and nontraditional competitors who are shaping financial services.