Looking Ahead With Optimism As Credit Unions Tackle Digital Banking Opportunity

The year 2020 is no different in this regard, except for the fact that every single person saying it this time around absolutely means it — and is being 100 percent accurate in the description. But as Todd Clark, CEO of CO-OP Financial Services, told Karen Webster, for all the real and genuine difficulties of 2020, he enters 2021 feeling very optimistic.

That’s because normal, or something that feels a lot more like it, is coming back, he predicted. The frozen feeling we’ve all learned to live with, he said, is “absolutely temporary.” It’s not all coming back at once, as the vaccine will need time to get into wide circulation. But by midsummer, Clark said, the data show that consumers will start entering a far less shutdown world. People are going to get back out there, while keeping their recently acquired digital habits.

“I do think people have kind of settled into a new routine, but I also think there’s a lot of pent-up desire to spend on travel and go places,” Clark said. “The world’s going to open up, and how that happens will be an interesting thing.”

That presents a big opportunity for credit unions (CUs) being part of their members’ reopening journeys. To really capitalize on that emerging opportunity, they have two jobs, Clark said. First, they need to keep the momentum moving forward in the places where they’ve gained a lot of ground in terms of digital experience provision in 2020. Moreover, CUs need to close the gaps between themselves and the big banks in terms of the digital services that the pandemic period has revealed.

Following The Roadmap Faster

While there weren’t many bright sides of COVID-19 to speak of, Clark said, there were a few. It created the impetus the CU segment needed to finally get serious about rooting out all the paper and pushing it all to digital.

And on the transition-to-digital front, among the more confidence-building features of COVID-19 for CO-OP was that everything the firm ended up introducing this year was already on the roadmap. The company wasn’t forced to suddenly develop a digitization plan on the fly in response to a crisis.

Some things had to be moved around, and the company spent a month helping build out pandemic-specific functionalities like fee waiver programs, some skip-a-pay programs and the like.

But CO-OP managed to keep its focus on things like developing artificial intelligence (AI) tools for CUs that have been particularly critical during the pandemic period as fraud activity has increased.

“Right now, with our new tools, we have the ability to evaluate and score authorizations in real time and on an individual level,” Clark said. “We’re taking it down to a segment of one, and we’re building models that look at [a person’s spending] behavior for the last two to three years, and then making a decision about whether this next transaction makes sense for [that cardholder]. Based on our knowledge of the members and the other things that they’re doing across our enterprise, I think we’re going to be really successful here.”

AI tools can not only help lock fraudsters out, they can also do the equally critical job of eliminating the false positives that drive away the good customers. Stopping fraud, Clark joked, is as easy as denying every transaction — no fraudster will ever fool you. But striking a balance so that the fraudster is blocked while the legitimate customer passes through without issue is trickier, and AI has been key to achieving that.

Moreover, he said, AI data that authenticates a customer’s identity opens up a potential ability to offer that customer what they want. The member who keeps heading to a car repair shop, for example, might need to see content about taking out an auto loan.

“These are things that machine learning can parse out and feed to models that people doing regression analysis and looking at spreadsheets could never access,” noted Clark. “So, we’re excited about the technology.”

Where Work Remains

While Clark expressed optimism going into 2021, there are areas of concern to be addressed. For example, 2019 was the first year that consumers reported higher overall satisfaction in their experiences with banks than they do in their experiences with CUs. It’s a pattern that repeated in 2020, and a symptom of the fact that banks have upped their game.

“Looking at the big three or four banks, we’ve seen a serious move to digital and self-service,” he said. “The new generation really enjoys that. I think it’s an indication for our credit unions that the member needs to be at the heart of all their decisions. It’s not enough to just provide friendly service. We’ve got to actually meet those digital needs that the new generation — and frankly, even my generation — are asking for.”

The true measure of engagement with members in 2021 and beyond, said Clark, is going to be how much CUs are able to impact their daily lives. That means being able to engage people in payments, money movement, card controls — the things members are clearly communicating that they want.

“The [answer] for 2021 is that you should really be focused on your digital channels,” Clark said.