Technology and Credit Union Growth

Judy Dahl
August 22, 2007 | COMMENTS

With growth stagnant industry-wide, the average member's age creeping upward, and margins slim, credit unions need to take advantage of all tools at their disposal to attract and retain members. Technology is an essential tool for spurring growth, especially for drawing in the next generation of tech-savvy consumers.

And despite national trends, there are credit unions achieving continued rapid growth. They're using innovative technologies to deliver the automated services members expect without losing the personal touch credit unions are known for. In the back office, technology-driven solutions are enabling them to serve more members without adding staff. And security tools are helping them guard members' privacy, protect their assets, and comply with new regulations.

But the key to achieving growth through technology, say the experts and credit unions interviewed for this CUNA Technology Council white paper, is not to make technology your strategic focus.

Technology is a tactic, not an end strategy. “It's a building block for achieving goals,” says George Hofheimer, chief research officer at the Filene Research Institute, Madison , Wisconsin . “Your goal shouldn't be to have Internet banking, but to offer your members a new delivery channel.”

Doug True agrees. He's senior vice president of lending and technology at FORUM Credit Union in Indianapolis and president of FORUM Solutions. “Our belief is that the business plan drives technology,” he says.

This white paper explores how credit unions can deliver growth-boosting solutions that effectively incorporate technology. It discusses important technologies credit unions are using today, along with emerging trends, and profiles eight credit unions' approaches to business and technology strategy. Topics covered include:

• Technology's place in credit union strategy
• Today's technology, who's using it and how it's fostering growth
• Emerging technologies
• Staying current
• Credit union case studies

Credit union growth is dependent on technology today, more so than in the past, according to Carl Faulkner, principal at Cornerstone Advisors, Scottsdale, Arizona. His firm advises financial institutions on strategy and technology, and also operates the Gonzobanker.com financial services news site.

In terms of technology trends, Hofheimer sees the Internet's continuing evolution as one of the most important to growth. He and other experts cite Internet banking, along social media such as blogs, as essential tools for reaching members worldwide, where and when the members choose.

Jim Morrell, CIO and vice president of support services at iQ Credit Union in Vancouver , Washington , indicates the biggest growth-fostering trend he's seen is integration of technology. “In the past we had more separate systems, and now there are better tools available to get them to work together,” he says. “Systems have had to become more open, and there are many open source technologies and programming languages that help.”

Technology continues to change at a blinding pace, generating new tools that can help credit unions stay competitive. Innovations such as peer-to-peer lending, Web. 2.0 applications, and imaging systems that move credit unions toward a paperless environment are among important emerging tools.

Hofheimer recommends a variety of tactics to stay knowledgeable about technology. “Certain people, like those involved in systems implementation, need more detail,” he says. “Board members and others on the business side need less, but they do need to be involved. You'll need a technology expert on staff to interpret the details.”

There are multiple avenues for staying current. “There are resources online, you can subscribe to various publications, or pick up a book on emerging technology,” Hofheimer advises. “Sometimes experts are wrong, so the more resources you consult, the better off you'll be.”

When pondering possible member solutions, “there isn't a set analysis process; it depends on the innovation,” says True. “We do informal ethnographic research by talking to friends and family members about whether it's something they'd use, we look for research papers on the subject, we look from a technical standpoint at how we'd build a solution if we decided to, and we research what's out there that we might be able to buy.”

The eight credit unions profiled here are all actively using technology to accomplish their business strategies, employing many of the tactics outlined in the body of this report. Their prioritization of different technology-enabled solutions may vary, but their overarching strategy is the same: to attract and retain members, and to deepen member relationships, by innovatively employing technology as a tool for growth.

This is the executive summary from Judy Dahl's white paper for the CUNA Technology Council entitled “Technology and Credit Union Growth.” Read the complete paper at http://www.cunatechnologycouncil.org/tools/research.html.