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Digital Investment Imperative As Credit Unions Woo Millennials

Credit unions know that they have to appeal to younger, tech savvy customers in order to survive and thrive but their path to digital transformation is littered with challenges. Digital leaders cite the fragmentation of product types requiring support in payments and wearables, difficulty wooing talent and the threat of disintermediation from fintech startups that are unbundling the relationship credit unions hold with account holders. An American Banker webinar on Nov. 3 highlighted some of the strategies being employed by Ent Federal Credit Union, DuPont Community Credit Union and CFE Federal Credit Union as they court millennials — the first generation of digital natives — and transform the digital banking experience. 

Colorado Springs-based Ent Federal Credit Union recently offered online account opening and a mobile optimized loan application to its members, attracting younger, more profitable account holders in the process. 16 percent of members who opened an account online in September proceeded to open a loan (consumer/mortgage) with the institution versus only 8.9 percent of members who opened their account through a service or call center. Online account openings are also skewing younger - the average age is 35, at least 7 years younger than new accounts being opened in the branch - and these customers are using their debit cards more often than customers who open an account through a physical location.

The need to maintain digital channels efficiently and economically has also led Ent to roll out responsive design, utilizing a single code base to provide an experience that adapts to any screen size or device. "While the experience is not identical at least our members don't have to relearn our site as they interact with us through various channels," said Tanan Miles, Director of Electronic Banking Delivery at Ent Federal Credit Union. "It meets them where they are and allows us to be economical and efficient in our development."

DuPont Community Credit Union (DCCU), which supports 72,000 members in Virginia's Shenandoah Valley, detailed a campaign to increase debit/credit card utilization with rewards dashboards that would make their products top of wallet. "Our user story was a member at home who can see where they are in reaching the next reward tier and can see a tangible value of our products - money refunded, what they've saved," said Michael Tranum, Vice President of Information Technology for DCCU. Upon the launch of these online banking dashboards in March 2015, transactions increased significantly.

Miles noted that "retailers are very interested in loyalty programs, finding ways to gamify something like DuPont did for their debit utilization campaign" and that popular apps drive loyalty through the collection of badges or financial awards. "Not that people think of their FI as a fun place to come but as we try to drive more loyalty there's something to be learned there," said Miles. 

83.7 percent of FIs attending the webinar indicated that they have budgeted to increase IT spend on digital banking transformation in 2016 and 84.3 percent indicated that their organization has embraced the digitization of banking. However, their top digital banking priorities were all over the map. 20 percent favored responsive design, 17.6 percent emphasized UI/UX enhancements, 16.5 percent focused on mobile/tablet/wearable initiatives, 11.8 percent were expanding new payment types and 8.2 percent keyed on analytics integration. But the largest group - 25.9 percent - said they prioritized all of the above:

"We've got so much to do and limited resources," responded Ent's Miles. "Unless you're a megabank your opportunity to do all of the above is unrealistic."

Miles advised small and midsize banks to target new skill sets to meet the demand for UI/UX enhancements, skill sets "not likely to be homegrown in your bank or credit union. That's going to be a challenge but it's very important." Mark Ranta, Head of Digital Solutions for ACI Worldwide, also encouraged FIs to look "outside that normal space we're in and hiring from and (engage with) other industries to bring in best in class thought leadership to drive things like seamless cross channel integration."

Knowing which technologies they should support and when has proven to be a challenge for many credit unions, which have to make tough decisions in allocating scarce resources. "We are very concerned about fragmentation of product types occurring: Apple Pay, Samsung Pay, Google Pay. Do you support all of them?" asked DCCU's Tranum. "We realize with this fragmentation we see in the industry that our problem will be prioritization. Either reading the tea leaves on what will be popular or adopting all and trying to support them."

Tranum said that he expects wearables to be adopted en masse but he believes "they'll be adopted as a notification channel." DCCU plans to "code to that channel when adoption warrants" and they have not seen noticeable demand yet, although their rural area is admittedly a bit slower to adopt new technologies.

Webinar participants discussed some of the changes to their organizational structure as a result of the digital revolution. Tameka Hylick, a marketing manager for Lake Mary, Florida-based CFE Federal Credit Union, noted that her organization had developed an electronic services department on the operational side which handles online account opening experience, loans and helping members navigate the process. "We understood that millennials are tech savvy and use digital channels heavily," said Hylick. "To remain competitive in market we had to move to a more digital strategy overall."