I have witnessed innumerable changes to the financial services world since I began my career some four decades ago. From my first job as a computer operator in 1975 through my 23 years with the CU*Answers credit union service organization, I have seen the primacy of the branch transform into the earliest versions of home banking and then grow to the dazzling technology of mobile banking today.
Now that I am retired, it is not the tech I look back on, but the relationships that defined my career. My fondest memories have to do with projects I worked on with my partners and my teams. I have been surrounded by talented people who worked with me side-by-side, and who always made me look good.
In 1977, I began my first programming job for a savings & loan service bureau that eventually was acquired by Fiserv. I arrived at CU*Answers – then known as WESCO – in 1994 as director of technical resources. At that time, the CUSO was serving approximately 30 credit unions. It since has grown to serve 263 credit unions, with 2 million credit union members served through the CU*BASE platform.
Over the course of my time with CU*Answers, I retained the title of director of technical resources and added chief information officer. As CIO, I directed the technical departments of our CUSO, including software development, network services and solutions, operations, and the production center.
When I started at CU*Answers in 1994, the firm had roughly 30 employees. I remember celebrating 1 million members for the first time in 2008. Now, there are more than 2 million in our network, with multiple data centers across the country. This success was achieved with an extremely talented group of folks who made coming to work every day fun and exciting for me.
I will not miss the 3 a.m. phone calls or the occasional all-night work sessions, but what I will miss is working with our clients and credit union people who sincerely care about the members they serve.
An industry ch- ch- ch- ch- changes
My 40 years in the business correspond to four of the most interesting decades in the financial services industry – and certainly a number of amazing innovations that made new developments possible. Thinking of the three biggest developments I have witnessed, the one that is most amazing to me is the evolution of consumer self-service.
Prior to the advent of online banking, the branch was king and member reach was expanded by building more branches. The branch model was a simple one. Communities had real meaning, and competition was limited to those financial institutions that shared the same geographic space.
However, this model has morphed and members today demand more diverse options to meet their banking needs. Constant access across multiple channels with an ever-expanding list of services and self-managed controls are now the norm. This has meant credit unions have had to shift from their traditional model to a new one that seeks to capture and retain members not just within their geographic area, but including those members who want to manage their accounts from wherever they may be, using whatever device is handy.
The second major change is the expectation that data is everywhere and for everyone. What used to be centralized data processing that was distributed only via reports now is decentralized with distributed computing, creating a situation in which everyone is the operator, the analyst and the consumer of data all by themselves. Data warehouses are popping up everywhere, but we need to be careful as data without intent has more expense than value.
As for the third major change, today’s credit unions are thinking more about being a credit union and leaving the technology to the technology experts. Earlier in my career, credit unions focused on managing the technology necessary to run their day-to-day operations as there were more credit unions operating under the in-house model. But as the online and cloud models took shape, credit unions began to rely on the expertise of data processors more, seeing it as a win-win opportunity.
I see member retention and acquisition as the obvious keys to the future of the credit union industry. Therefore, I think credit unions need to fulfill every member’s needs for money movement and convenient banking in new ways. With this comes a focus on using technology to create more intuitive digital authentication and fraud profiling that puts members at a reduced risk from identity scams. Real-time intuitive behavior identities and automated service denials with a much higher sense of accuracy will be needed across all banking channels.
Consolidation in the credit union space
Fifteen years ago there were nearly 12,000 credit unions. Today there are fewer than 6,000 and every week there are more merger announcements. Credit unions were formed to provide financial services to people with a common bond. Many of them were small credit unions servicing small and large SEGs alike. Yet recently, there was an attempt to not allow credit unions operating out of private spaces. And small, community credit unions keep shutting their doors or merging, unable to offer the kinds of services consumers have begun to expect. Instead of fighting to combat this trend, the powers that be seem content to serve a progressively smaller population of credit unions. We could see the small credit union disappear altogether, replaced by larger institutions more focused on growth and bottom line than the benefit they provide to their community.
CUSOs – and this is not limited to CU*Answers – can provide credit unions the economies of scale needed to compete without bankrupting their operations, and that may be where they need to turn to revitalize the industry.
Much of the consolidation seems to be at the expense of small credit unions, in particular. I believe small credit unions have a future, but the industry needs to find a way for them to succeed in the face of what can be an overwhelming burden of regulatory compliance, capital requirements and other hurdles. These issues can be addressed by creating economies of scale through cooperative partnerships, and by getting the NCUA to work for credit unions, instead of against them.
Small credit unions need energetic boards that see the challenges ahead and want to be relevant. They need to seek out qualified individuals to join their boards and then train them to be more informed, more involved and more outspoken about the benefits of their cooperative.
Given my background, my advice for the credit union industry naturally focuses on the technology side. I encourage young IT folks to really look at our industry and where it is headed, with the opportunities and possibilities of building financial products and services that will create the foundation for the next decade of banking. I heard a great quote recently: “Technology has never moved as fast as it does right now. Nor will it ever move as slowly as it does right now.”