“You can’t teach an old dog new tricks” — so goes the dim, cynical saying. That would seem to apply to credit unions (CUs), and to Consumers Credit Union of Illinois specifically, one of the largest CUs around, which has been in business since 1930 (before the Great Depression reached its worst depths).
However, we are living in an era when the physical is giving way to the digital, when data is becoming a more valuable commodity than oil — and when an increasing number of consumers, including those who’ve displayed decades of loyalty to their local credit unions, are demanding more mobile banking products. Credits unions stand at that spot where a delicate balance of the physical and digital, the old and new, is vital for their prospects of survival.
In a new PYMNTS interview, Sean Rathjen, president and CEO of Consumers Credit Union of Illinois, discussed with Karen Webster how CUs are embracing digital services without losing sight of their roots — an exciting, but challenging effort that promises to continue in the foreseeable future.
Role Of Tradition
Credit unions are valued largely by what Rathjen called their “traditional products,” which include auto loans and savings accounts. In addition, credit unions have a “commitment to having a physical space,” even as banking gets more digital, mobile and virtual. (He pointed out that even the big, global banks, such as Chase, are investing in smaller, local branches, underscoring the enduring appeal of physical spaces when it comes to financial transactions.)
Yet, even the concept of branches is changing as the digital economy spreads. “The transformation has been significant,” he said, using his own CU as an example. “The branch footprint is vastly smaller,” going from 3,000 to 5,000 square feet down to 500 square feet, he told Webster.
Those changes in branch size have come with the deployment of video remote tellers and sales systems, used not only for drive-up transactions, but account openings and loans. That results in a “much smaller group of employees,” who have much less of a “transactional role than [as an] advisor,” Rathjen said. Not all customers are able to quickly get on board with such change or innovation, but once they see the time efficiencies involved, and are persuaded that such technology is not being used to cut local workforces (those are what tie many credit unions to their communities), they usually come around and get past any disruptions.
Some of that technology, for instance, enables customers to perform banking transactions with another person at the other end of the video feed at 7 p.m. or 8 p.m. — prime time for personal errands, given the long hours worked by many credit union customers.
“It absolutely takes some adjustment,” Rathjen said, but the hard work in digitally focused innovation pays off over time. He added that some 41 percent of new account openings for Consumers Credit Union stem from digital channels.
Reducing Friction
That’s not to say that all credit unions are equipped, or have enough money to burn, to pursue digital disruption and innovation on their own. In Rathjen’s telling and experience, much of the innovation push from credit unions comes from member feedback, including via customer comment cards, which brings a reactive feel to the digital work.
At his credit union, “the member experience group spends a lot of time working with product owners on reducing friction,” he said. “We don’t have the resources [or] the money center banks do” to be more proactive on innovation.
That said, Rathjen advises credit unions to create an internal culture of innovation, and strive to anticipate what members will want and like — thus, reducing friction. In the case of Consumers Credit Union of Illinois, a rewards checking product has proven popular, and has reduced customer attrition. The CU has also come up with what he called an “express transfer” product. It will enable members to use their smartphone cameras to take a picture of a credit card bill from another issuer, then send that balance data to the credit union to receive estimated savings, were the customer to transfer that balance there.
Long story short, many credit unions approach change incrementally, rather than via disruption. That’s often different for credit unions located in highly competitive urban areas, but the reason for the incremental pace is certainly understandable, and goes beyond having enough funding for product development and experimentation.
“Senior credit union leaders tend to be older,” he said, “and have grown up in a regulated business, and think of change incrementally.”
That is changing, of course. The rise of FinTech is putting pressure on all financial institutions to innovate, or risk losing customers. While credit unions target the larger landscape of financial services, FinTech firms “target one aspect of the business, and target it all day long,” he said, which can provide certain advantages.
CU Advantages
Still, Rathjen said that even in this digital age, the most incrementally inclined credit unions retail their own strong advantages. Besides those community ties, credit unions often win points because of what they are not: big banks.
“Being that trusted financial partner has an awful lot of value,” he said. “Decade after decade of banking crises, [and] bad behavior by banks,” has served to protect — and even raise — the profile of credit unions.