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Does Your Credit Union Suffer from Shiny Object Syndrome?

Shiny jewels

If someone asked what drove your credit union’s most recent innovation, how would you respond?

Would you say something along the lines of, “We conducted a careful examination of member needs followed by a gap analysis, then created a strategic plan to address what we learned?”

Or would you say that you (or your marketing director or CEO) succumbed to the siren call of whatever latest fintech tool was making the rounds at this year’s credit union conferences?

We’ve all suffered from “shiny object syndrome” on occasion. And, hey, we get it. Shiny objects have that irresistible “wow” factor, and it’s fun to sit at the cool kids’ table!

But too often, those shiny objects don’t pan out, and we’re left with a “solution” that doesn’t address the problem, blows the budget, and maybe even leaves us worse off than where we started. Ouch!

Before you find yourself in danger of investing in a product or solution that could hurt your credit union in the long run, consider the following.

Sometimes “boring” is better

When it comes to solving problems for your members or your credit union, we’ll borrow an insight that George Hofheimer, founder of Hofheimer Strategy Advisors and author of Banking on a Human Scale, shared on The Remarkable Credit Union podcast: The most impactful innovation is often the most boring innovation. For instance, at the dawn of the Covid pandemic, Hofheimer suggested finding proxies for underwriting—like long-term membership or a history of timely loan payments—to help speed up loan approvals during a time of critical need.

As the CEO of a marketing agency that designs websites for credit unions, I often find myself straddling the delicate line between promising the “wow” factor that clients want and acknowledging that the best user experiences are rarely the flashy ones. In his article, In defence of boring UX, content designer Ryan Bigge extols the virtues of “non-design” and the “simple poetry” of plain language when it comes to user experience. When members come to your credit union to complete a task, they don’t need or want whizbang. They need and want solutions that are fast, simple, and easy to use.

What else is so boring about some of the best innovations? They often happen incrementally over time, not in one big dramatic swoop.

Ben Maxim, vice president of Digital Strategy & Innovation at MSUFCU and a guest on The Remarkable Credit Union podcast, described innovation as “day by day, making things just a little better.” Maxim encourages credit unions to create a culture of innovation—an environment that strives for frequent, incremental improvement rather than splashy Steve Jobs-style unveilings.

MSUFCU created this culture by building an innovation lab, which not only allows employees to explore the value of continuous improvement but invites members to weigh in. At the time of the podcast, the credit union had an innovation panel that was more than 500 members strong.

Innovation doesn’t necessarily mean technology

In today’s highly digital world, it’s easy to assume that innovation = technology and that whichever FI has the deepest technology pockets will win. That’s not necessarily the case.

For instance, think back to the Paycheck Protection Program (PPP) of the early Covid era. FIs of all sizes participated, and it could be logical to guess those with a wealth of technology did the best job getting money into desperate businesses’ hands. The reality? CDFIs, community development financial institutions that prioritize the financial needs of underserved communities, outperformed other lenders.

According to Opportunity Finance Network, JPMorgan Chase made just four times the loans made by CDFIs, even though they had roughly 27 times the total assets of the CDFIs who participated. It’s not going out on too much of a limb to speculate JPMorgan Chase has a lot more technology support to call on than the average CDFI. In research from the 2023 CDFI survey, 21% of CDFIs reported that technology was one of the factors preventing them from fully meeting consumer demand, which makes the CDFIs’ achievement even more noteworthy.

As Opportunity Finance Network points out, the success of CDFIs when it came to PPP lending was intricately linked to their unique capacity to “reach the hardest to reach people and communities.” In the credit union movement, some of the most impactful innovation comes in the form of innovative community partnerships.

For instance, as part of its Transformational Deposit program, Hope Credit Union partners with businesses and individuals to “import” capital from wealthier communities so it can create access for the impoverished communities it serves. Sweet treat manufacturer Rhino Foods partnered with NorthCountry FCU to give employees an affordable alternative to payday loans that also enable recipients to build savings over time. And Allegacy FCU partnered with a hospital, Wake Forest Baptist Health, to create and launch WellQ, a preventative holistic healthcare center that focuses on physical, mental, and financial health.

These initiatives all started with a problem, not a solution. The solutions emerged as these credit unions sought out innovative partnerships to help address member needs that they could not solve on their own.

When asked in a recent episode of The Remarkable Credit Union podcast, how credit unions can best serve their members, Jules Epstein-Hebert, Inclusiv’s Director of Membership, Growth, and Partnership, said:

“There’s no silver bullet for the work of financial inclusion. The most effective approach is not necessarily rocket science. It’s just about having a strong commitment to the communities that you serve, understanding your members’ needs, [and] having leadership on a board that looks like the communities that you’re serving.”

Technology can enable innovation, but only with thought and intention

All that being said, there are plenty of times when innovation will require or at least be enhanced by technology. And that means it’s crucial to make smart technology choices. We recommend these four guiding principles:

  1. Start with the “why” behind your technology search. Is a proven member need driving your desire to innovate? Are you genuinely committed to problem-solving or are you just succumbing to the lure of looking tech savvy?
  2. Don’t let asset size limit your approach to technological innovation. As I highlighted in a prior CUInsight article (What small credit unions can teach the big dogs), thriving small credit unions often benefit from their agility and the lack of red tape when it comes to experimentation. For instance, $52 million Element Federal Credit Union was the country’s first financial institution (yes, financial institution, not just credit union) to offer remote check deposits, and the credit union beat out Chase Bank to win a medical cannabis banking contract—in largely conservative West Virginia.
  3. When the time is right to choose a fintech partner, choose wisely. Look for a fintech company whose values and strategic goals are consistent with yours. At Community Financial Credit Union, that meant finding a fintech partner whose technology offered members a personalized experience and delivered quick benefits to the member while aligning with the credit union’s brand and values. It also meant finding a partner who was willing to navigate not just good times but challenging ones, too. For more on this, see our prior CUInsight article, Can credit unions and vendors be BFFs?
  4. Make sure that technological solutions take into account the needs of your most underserved members. Beneficial State Bank & Radicle Impact recommend working to ensure a fintech’s algorithms don’t enforce biases and confirming that all services can be accessed on mobile devices—the channel lower-income consumers are most likely to use. For more tips and considerations, see our prior CUInsight article, Inclusive design: Why your most vulnerable and stressed out members should come first.

In its second annual Credit Union Innovation Success Study, Filene Research Institute found there was a strong link between innovation and member loyalty, which, in turn, drives retention and share of wallet. Show members you hear and care about their needs and deliver innovative solutions that address them. You’ll trigger excitement and fulfillment—and increase the likelihood they’ll stick around and become better members.

No credit union can afford to stick with the status quo. But just like credit unions themselves, the best innovation doesn’t have to be shiny, expensive, or “big.” It just needs to be easily accessible to your members, address a demonstrated need, and—when applicable—leverage technology to both those ends, not just for show.

This article was originally published on CUInsight.

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