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Omnichannel and Digital Banking will Not Succeed in America

Omnichannel and digital banking is such a massive initiative, how do credit union and bank executives get their head around it? There are so many parts, where do you start? Have you ever sat down to create a list of solutions today's members/customers expect, or will soon expect from their credit union or bank?

Here is my list in no particular order. What have I missed?

1. Data and ID security
2. Easy but secure authentication
3. Continuity of transactions, applications and services across all channels
4. Online banking
5. Mobile banking
6. Personal financial management (PFM)

  • Spending learning and predictions
  • Expense tracking, tagging and management
  • Retirement
  • Budgeting
  • Investment
  • Education

7. Online forms that adapt to the device accessing the form
8. Process workflow
9. Management defined business rules
10. Automated decisioning - credit and accounts
11. Electronic document management and signature
12. Data aggregation and analytics
13. Voice command recognition
14. Digital assistant - predictive
15. Digital credit origination - instant approval, access and funding
16. Credit servicing (payments, balances, due dates, payoff balances, and remaining term)
17. Digital account opening - instant approval, access and funding
18. Account funding (ACH, debit card, credit card, PayPal)
19. Digital account management

  • Digital account-change records
  • Digital account switching
  • Digital account lockdown service to freeze access that freezes the account until a passcode and/or shared secret is provided
  • Antivirus and spyware protection
  • Onboarding program with quick-start guide

20. Video - Skype, FaceTime, Online (PC, mobile and tablet)
21. Call center
22. Smart ATM
23. 24/7 message chat, email, text support, voice message
24. Social media monitoring and contribution
25. Abandoned application management
26. Web, ATM, phone and branch reloadable pre-paid cards
27. Prepaid ATM/debit cards with web, branch, phone and ATM reloading
28. Real-time core data processing system (no end of day batch)
29. Behavioral predictive analytics
30. Real-time credit manager (regular preapproved credit offers and notification with instant approval and access)
31. Push text notifications and verification
32. Balance and event trigger notification
33. Email and text rate updates/alerts
34. Real-time money movement
35. Send, receive, spend, save, mobile deposit, bill pay, photo bill pay, P2P, PayPal, wire transfer, app
36. Personal banking portal
37. Digital document vault
38. Blogs and custom web content, personal finance microsites with information and tools for key segments such as:

  • College students/new graduates
  • Empty-nesters
  • Families with younger children
  • High school students
  • Middle school students
  • Movers
  • New homeowners
  • Newlyweds
  • Primary/elementary students
  • Retirees
  • Retirement planning
  • Singles

39. Account aggregation
40. P2P lending
41. E-statements
42. E-Receipts
43. Loyalty program and sweepstakes
44. YouTube/Vimeo video - educational and product/service demo
45. Teen/tween banking with parents
46. Mobile app with youth UI
47. Credit score and credit score enhancement
48. Credit and ID theft monitoring and alerts
49. No fee overdraft protection
50. Customer relationship management (CRM) system
51. Just in-time one-off marketing/offer
52. Secure charitable fund raising
53. Exception management system
54. Digital appointment tool for scheduling banker meetings
55. Digital newsletter and newsletter archives
56. iBeacon and digital fence
57. Relationship pricing
58. Relationship product packaging
59. Investment club support
60. A user interface that is shared by the member/customer and staff
61. Online help functions

  • Auto-response to all queries
  • Form-based queries
  • Departmental email addresses/phone numbers
  • A forum where the community can help each other
  • Site-search with filters
  • Executive email addresses
  • Video information/tutorials
  • Context-sensitive HELP
  • Demos (online and mobile)
  • Virtual suggestion box

Head spinning? How can a credit union or non-national or non-super regional bank compete? How can they afford all these solutions? How can they evaluate all these solutions? How can they implement all these solutions while also knowing innovation and the resulting list grows daily? How do you plan for the next solution that you do not know is coming? Credit unions and most banks simply do not have the resources, expertise and capital to continue in what is amounting to the old arms race between the Soviet Union and the United States.

So what can credit unions and banks that do not want to be merger candidates and want to survive do? The technology race to the top is not a winnable solution for most banks and credit unions. Out branching is not a winnable solution. That leaves a couple of choices:

  1. Develop a niche that is not reliant or expecting the latest technology solutions - You may not be their primary financial institution, but your niche is profitable and long-term sustainable enough to remain strong
  2. Partner with other credit unions or banks to develop a technology strategy, roadmap, funding, R&D, hosting, implementation and support plan that serves each of the participating credit unions or banks.

Partnering with your competitors or with credit unions and banks outside your service area may seem like a scary and radical proposition. It is, but what is the alternative? Can your credit union and bank really stay on top of and fund the technology solutions members and customers expect?

I have used this data in several of my blogs because it speaks to exactly what is transpiring today. The data is clear and the members/customers have spoken by their actions. According to the millennial disruption index study, Chase, Citi, BofA and Wells Fargo are among the ten least loved brands by Millennials. According to FICO's Forging Lasting Banking Relationships with Millennials, 68% of Millennials use Chase, Citi, BofA or Wells Fargo as their primary bank. Only 15% use a credit union and only 9% have a regional bank as a primary bank. More Millennials bank at national banks than any other generational group (55% for Gen X and 43% for Boomers). Why, because the big national banks have a digital strategy and are leading the market with the implementation of their strategy.

Credit unions and banks are losing the battle for the next profitable generation of customers, the Millennials. Millennials, 18 to 35 age bracket now make-up the largest age segment of our population, passing the baby boomers. If you don't have a plan to meet their banking needs, then your credit union's or the bank's future looks bleak because there are plenty of traditional and emerging non-traditional financial service providers that will.

Are you ready to partner with other banks or credit unions? In addition to achieving technological economies of scale, another part of the plan can be to achieve economies of scale in back-office processing. Why do you want to own the technology and back-office processing? Because you always have? Instead, why not focus on marketing, front-end operations, brand, and differentiation through the service and support you provide. Just because technology and back-office operations are shared does not mean that the credit unions and banks that are part of the shared technology and back-office support team need to look, operate or execute the same as the other participants.

Lead with creativity, marketing and service and you will have happy members/customers and you will not have the burden of technology and back-office operations.

Is there any doubt credit union and bank consolidation is real? Is there any doubt the NCUA and FDIC are encouraging through regulation consolidation of banks and credit unions. Industry experts forecast that in 15 years the number of remaining banks and credit union could be reduced by as much as 50%.

What is your credit union's or bank's plan to be one of those remaining credit unions or banks?

"United we stand, divided we fall", Aesop. "Innovation is taking two things that already exist and putting them together in a new way", Tom Freston. Wise words or blasphemy?

Agree or disagree with this proposition? Why? Is it workable? What are the problems? What would stop its implementation? Pipe dream or viable solution of the future? 

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Comments: (5)

A Finextra member
A Finextra member 06 October, 2014, 13:421 like 1 like

Not sure how to interpret that article title,  which is in opposition to what our data show. Digital banking and omni channel is growing each year in the  US.  Any smaller FI can use market benchmarking data to truly fast follow by identifying only the missing vital technologies that will lead to the desired performance improvement. 

Mark Mixter
Mark Mixter - Open Text - Chicago 06 October, 2014, 16:31Be the first to give this comment the thumbs up 0 likes

David are you saying Digital/Omnichannel will only work for organizations with the size and scale to effectivily implement and innovate?

David Gibbard
David Gibbard - OmniChannel & Digital Banking - Suwanee 06 October, 2014, 17:18Be the first to give this comment the thumbs up 0 likes

What is occurring is a divide between the "haves" and "have nots". The pace of technological change is growing at a rapid pace. A pace that the vast majority of North American financial institutions (banks and credit unions) cannot absorb. They simply do not have the resources or expertise to learn about, consider, plan, purchase, implement and support customer/member facing solutions that their customer/members will expect. The huge marketing budgets of the national and super regional banks will continue to drive customer/member expectations for US banks and credit unions to match the technology solutions being introduced by the national and super regional banks.

Over the past 5 years the national and super regional banks have demonstrated their ability create a technology gap that the vast majority of banks and credit unions will not be able to make-up.

The national and super regional banks are investing heavily in technology solutions and start-up financial technology (Fintech) companies in order to ensure they maintain and widen their lead on customer facing technology solutions. According to Fortune.com, Fintech venture investment is set to hit $8 billion by 2018 as big banks look for ways to navigate an ever-evolving digital landscape.  The Millennials are evidence the gap is widening.   

 

A Finextra member
A Finextra member 06 October, 2014, 22:02Be the first to give this comment the thumbs up 0 likes

David, I agree with the gist of your reply above, but that's not at all what your headline said. Your headline said that omnichannel and digital banking worn't work in America", and then what you said in the cmoments below is that it works for national and super regional banks but not other banks (or credit unions). those are two very different points, and both of them cannot be correct. 

Best to consult data in these matters, rather than to speculate or generalize. What the data say is in direct conflict with your title, and somewhat consistent with your comments to your original article above. If you look at just our digital consumer segment (run on behavioral and attitudinal analytics) it is only the top four banks--and particularly the top two--that have the biggest advantage over the rest of the US retail FIs. there are a few, USAA and Navy included--who can stand up to BAC and Chase--but not many more at this point in digital banking evolution. 

David Gibbard
David Gibbard - OmniChannel & Digital Banking - Suwanee 06 October, 2014, 22:30Be the first to give this comment the thumbs up 0 likes

James, fair comment, but when 99.???? percent of the banks and credit unions in the US will not be able to match or closely match the digital technology and technology based solutions roll-out of the national and super regional banks then their market viability is in serious doubt.

The article did not say consumer adoption would be a problem, but as long as consumers of all but the largest banks continue to expect their bank and credit union can keep digital pace, those institutions are in trouble. They must find a way to change their business model or paradigm or face irrelevance to most retail financial consumers.   

The article is intended to point out an option or new business model that may solve their problem. When the problem impacts over 99% of US FIs it means it does not work for them.