Credit Unions: When Innovation Timelines Are Measured In Days Not Months

Of all the lessons the world will take away from the first half of the year 2020, the most powerful will likely be to never underestimate the power of a black swan event to dramatically upend, well, everything.

No matter how smart the artificial intelligence gets, how clever the model or advanced the machine learning tools we build to predict the future become, the future will likely carry on with its annoying habit of throwing novel events into the mix that confound the models — and require a lot of roadmap rewriting.

Such is the world credit unions (CUs) nationwide face today. As essential service providers, their doors are still open amid the coronavirus pandemic, but the landscape they’re looking at is very different from one they’ve ever seen before, and one where the unknowns in many ways still outnumber the knowns.

While that has been challenging for CUs, it has also proven to be an opportunity to accelerate innovative efforts that have been percolating in the background across the industry for some time, Pentagon Federal Credit Union (PenFed) Executive Vice President Jamie Gayton noted in a recent On The Agenda conversation on the future of CUs in a post COVID-19 world with Karen Webster, PSCU CEO Chuck Fagan and Boeing Employee Credit Union (BECU) Executive Vice President and Chief Digital Product Officer Doug Marshall.

COVID-19, the panel universally agreed, for all the havoc it has wrought, may end up being the catalyst for innovation that the CU entire industry needed to really begin its next evolution in delivering on its members expectations.

“What we’re hearing from credit unions now is that they are ready to start thinking about growth again, how to plan for consumers’ reentry to the market, and mostly how to build opportunities for growth out of the trust and confidence they have developed and managed with their members during this difficult time,” Fagan said.

Innovating On A Dime

Unlike some verticals, where owners and executive teams have had to essentially scrap every plan they had made at the start of the year in favor of radically pivoting in an attempt to survive a black swan event, CU leadership faced a somewhat different challenge, Gayton and Marshall noted. Their priorities were around taking ideas and innovations they had been developing, testing, and, in some cases, even piloting them in limited run — and bringing them online for mass consumption with basically the flip of a switch.

For PenFed, Gayton noted, that meant taking its early work in developing the capability for its workforce to go remote and doing a full live run in the field with nearly the entirety of its call center workforce.

“We’ve been working for the last 18 months to make sure our team members could work remotely, but we’ve had to expedite some of those processes because we hadn’t planned to execute on such a short timeline,” Gayton said. “But the groundwork was there. We had provided them laptops already, we provided them software, we had soft tokens, and we’ve done small pockets of testing. And then when it was time, we immediately were able to be split 50-50 with our remote workforce. As of today, we’ve gone to 85 percent at home. It’s been an amazing journey for us. We’ve learned quite a bit.”

BECU’s Marshall concurred, noting the CU had been on a similarly accelerated innovative journey with its own products in a whole host of areas, including relocating its workforce, creating tools and resources for members who may be facing financial uncertainty, upgrading its digital and mobile banking portals, and even launching new products.

“We’d been pondering a payday loan alternative for months that we have now rolled out into the market as basically a bridge loan for consumers waiting on stimulus funds,” Marshall said. “We managed to roll that out in three days after setting an initial deadline of four days for ourselves.”

He joked that it was much easier to get a new underwriting product out since BECU’s regulators were too distracted to really care.

More seriously, he noted, the real secret was getting all the necessary players into the room and “saying, ‘This needs to exist right now. How do we get it out to meet that member need?’”

And that focus on finding a way to meet the members’ needs and being able to meet them across any and every channel, PSCU’s Fagan noted, has been the trend across the industry. Innovation-focused CUs have actually been faster to market than some of their big bank counterparts in rolling out necessary services to their members.

“At PSCU, we’ve so far enabled hundreds of credit unions moving toward extending payments, skip payments and interest rate adjustments,” he said. “They are building in automation to make a very fast and efficient processes because their first question is how to turn innovation to the benefits of their members.”

It is the right thing to do, the panel agreed, but it’s also the smart thing — particularly as CUs nationwide are starting to expand their thinking beyond managing the immediate crisis and more toward building a better financial services landscape in the world that follows it.

The Road To Recovery

As has become a recurring refrain across industry, panelist agreed that the COVID-19 recovery won’t happen in the same overnight fashion the response to the crisis did. Consumers will slowly move back into their day-to-day routines as they feel safer doing so. And some of those routines, they noted, may not look the same in the six months to a year it could take for things to really begin to level out.

As of today, both Marshall and Gayton agreed, there hasn’t been a massive shift to digital among their members. Online transactions have increased, they noted, but by less than 10 percent thus far. But, they noted, they are seeing movement that is gradually starting to pick up, which begs the obvious question.

“Will customers, once they see how easy it is, efficient as well to go digital — will they want to migrate back to what they were very comfortable with before, or are they going to stay where they are?” Marshall noted.

That is the question, the panel said, that no one can be sure of today. The financial services industry as a whole will have to watch and wait to see how that develops. But, the panel agreed, whether there is a big shift or a more moderate one, it doesn’t change what CUs will have to do to not merely survive in the new normal — but thrive in it.

And that, they agreed, is to be ready to meet the customer in whatever channel they want to be in, when they want to be in it and to provide the same trusted and personalized services that customers tend to expect from their CU.