Industry Leaders Forum: The Biggest Tech Challenge of 2023, Part 3

Finopotamus has assembled a panel of experts in a new recurring series called The Industry Leaders Forum (ILF). Each month, we’ll ask the panel a broad technology question and share their informative responses. Due to unprecedented response, we’ve divided the first ILF installment into three parts. Respondents are presented in alphabetical order by company.

Part 3 includes responses from:

· Scott P. Young, Managing Vice President, Emerging Services, PSCU

· Sabeh Samaha, CEO, Samaha & Associates

· Al Pascual, SVP Enterprise Risk Solutions, Sontiq, a TransUnion Company

· Rahul Kumar, Senior Director, Financial Services Strategy, Talkdesk

· Barry Kirby, CRO/Co-Founder, Union Credit

For January 2023, Finopotamus asked our panel: What is the single biggest technology challenge facing credit unions in 2023?

Scott P. Young, Managing Vice President, Emerging Services, PSCU

We see the biggest technology challenge as two-fold. First, credit unions must prioritize their technology investments and focus areas. It’s no surprise that most credit unions have limited resources – facing both financial and time constraints – which complicates the process of choosing tools and technologies that will yield the biggest impact or return on investment. Not only are credit unions trying to build experiences that are competitive with banks and financial technology (or fintech) companies with larger budgets, but they are also tasked with project prioritization in an ever-evolving financial services market. For example, several credit unions dipped their toes into the cryptocurrency space last year. However, in the current “crypto winter,” many are rethinking their innovation investments and pivoting to solutions or use cases that may be more relevant to their members at this time.

Secondly, as the financial services industry battles recessionary concerns, many credit unions are now reporting a lower investment in innovation and maintenance. During any economic slowdown, one technology principle becomes increasingly important: how to better utilize technology and process improvement to drive productivity and core business priorities. While shifting priorities may tempt organizations to forgo important maintenance and upgrades of technology systems, doing so could ultimately cause greater damage and increased risk down the road. To avoid this, IT risk management should remain top of mind.

If they have not already, credit unions should prioritize a digital-first strategy, then consider the jobs required to achieve it. For some, that might mean upgrading a current system or reviewing offerings to ensure they are safe and secure, while also meeting member expectations and needs. Today’s consumers expect immediacy, choice and variety when making payments and transacting. A digital-first and risk management-focused approach is just the first step toward meeting these needs. From there, credit unions can streamline their digital experience to satisfy members’ ever-evolving needs – while also investing in innovations and maintenance to enable the unparalleled experiences their members have come to know and expect from their trusted financial partner.

Partnering with a credit union service organization (CUSO) can help credit unions meet their members’ expectations, while more easily implementing prioritized and secure technology and tools. CUSOs offer the ability to scale their innovative, cutting-edge technologies, solutions and offerings to fit credit unions’ needs at a reasonable cost. It is also a great way to lower IT expenses during a recessionary period and prepare for slower workforce growth and an increasingly competitive labor market.

Sabeh Samaha, CEO, Samaha & Associates

Barring any economic surprises, I believe that the biggest challenge in 2023 will be member experience. “Moving at the Speed of Member,” as I call it, or “Moving at the Speed of Member Impulse,” is a competitive challenge that we must meet. Credit unions must continue to enrich the special relationship they hold with their members across all “experience” channels. All touchpoints, digital and otherwise, must continue to be enhanced through functionality that is tailored to react and deliver at the “Speed of Impulse” to member needs. This must be done with crisp elegance and beauty (think Apple Computers). We must elevate to that level. Why? Because we can.

Al Pascual, SVP Enterprise Risk Solutions, Sontiq, a TransUnion Company

Credit union members are facing dual pressures. Rising interest rates coupled with a growing number of layoffs are crystalizing in the form of significant drops in mortgage originations, declining savings balances and an increase in overdrafts.

For credit unions, this translates into far less interest income, which is not even close to being offset by non-sufficient fund (NSF) fees. With fewer dollars to lend, invest and otherwise return to the member, credit unions have to make difficult choices, including the postponement or cancellation of planned technology projects.

The result of these delays may complicate other issues, particularly the ability to effectively manage the rising costs of identity fraud and scams that threaten members and their accounts daily.

One of the greatest challenges will be detecting attempts at creating drop accounts with outdated technology. Checking accounts established by criminals using stolen or otherwise false (i.e., synthetic) identities, drop accounts are facilitating rampant check fraud and P2P scams affecting members across the country.

The potential for losses is amplified by an environment that is pressuring credit unions to capture more deposits with cash promotions. Unlike applications for credit-based products, most applications for demand deposit accounts (DDAs) undergo far less scrutiny. The criminals know this. Without sufficient identity proofing controls to manage this risk, many credit unions will be forced to divert increasingly precious resources to fraud prevention.

The fact of the matter is that credit unions have little choice but to put budget behind protecting their members and organization from fraud and identity crime. The liability for remote deposit-based check fraud and P2P scams has shifted to the receiving institution. This has created outsized risks for every credit union, let alone those with weak identity controls in their DDA application process. Prioritizing fraud prevention has always been a struggle, but now more than ever is the time for credit unions to rise to the challenge if they want to protect their bottom line, and ultimately, the financial well-being of their members.

Rahul Kumar, Senior Director, Financial Services Strategy, Talkdesk

One of the biggest challenges facing credit unions is the need to continue to improve the member experience to not only accelerate new member acquisition, but also increase member retention. The pandemic pushed credit unions to open digital touchpoints to support their members. These investments helped credit unions handle the immediate pressures of meeting digital experience needs. However, they also created several long-term problems, such as fragmented member journeys, increased vendor dependency, and stifled innovation.

For example, members today want a connected, cohesive and personalized experience no matter the channel of engagement. With siloed solutions not integrated with each other, the member experience breaks down and leads to a lot of frustration. Siloed chatbots are a perfect example. When a member has to repeat everything and start from scratch, it leads to both member and agent dissatisfaction, on top of making the overall process highly inefficient. A better way is a chatbot smart enough to understand the needs of the member and to escalate the interaction seamlessly – with context – to a live agent when appropriate.

Another example of a problem created by technology silos is that credit unions have become dependent on multiple vendors to help drive innovation. Over time, this dependency becomes cost, time, and resource prohibitive for credit unions that want to embark on any member experience innovation initiatives. Credit unions need to stop investing in capabilities and build their member experience transformation around a platform-led strategy.

Many credit union leaders consider improving the member experience their top priority. Modern member experience platforms offer credit unions an opportunity to rethink their current approaches of investing in point solutions. A “unified automation first” platform purpose-built to support their needs allows credit unions to future-proof their investments in the long term.

Barry Kirby, CRO/Co-Founder, Union Credit

Credit unions are continually battling an onslaught of competitors vying for the attention of members and potential new members. That highly competitive environment, along with decades of technology debt that has been accumulating in this industry for years, has left many credit unions fighting for survival.

Regular technology upgrade projects just add to the perfect storm of what some industry leaders have called “project fatigue,” where once credit union leaders asked, “Should we take on the task of upgrading our technology this year?” they are now asking, “Where and how can we fit this must-do project in?” I think the overarching question is, with teams stretched thin and projects backlogged, how will credit unions begin to prioritize what is a must-have and what is a nice-to-have?

Ultimately, if we as credit unions don’t prioritize attracting up-and-coming consumer segments and acquiring new membership, we won’t succeed. The average member age today in the U.S. is 53, while the average U.S consumer age is 38. With an average member age of 53, how much longer do we expect those members to have lending-driven financial events? If we cannot begin to truly “memberize” the younger population by keeping up with technology and services, the SoFi’s of the world will take over.

As credit union leaders, we need to start getting comfortable with the reality that we have to meet those younger consumers where they are. They aren’t searching for a credit union on Google. They are meeting life events head on and taking advantage of the financial tool sets that help them address the event.

The biggest challenge in 2023, then, is finding ways to be at the forefront of the purchasing and financing cycle. This means more than just having a mobile-first approach. It’s about asking ourselves, “How can we meet a consumer at their exact time of need through their preferred channels?”

Part 1 | Part 2