Be An Agile CU: Five Stages

Customers today want the companies they do business with to work with them when, where, and how they choose.

July 30, 2010

With millennials opening bank accounts, saving money, getting student loans, purchasing cars, and getting mortgages, the rules have changed for credit unions.

Customers today want the companies they do business with to work with them when, where, and how they choose. For example, consumers (especially Gen Y) have come to expect basic text messaging services from the companies with whom they do business—and that includes credit unions.

These same consumers do most of their banking online, are ready for mobile banking, and expect protection against identity theft and other forms of fraud.

Historically, credit unions have focused their innovation in the area of operations. However, with tech-savvy members looking for better ways to interact with their money, credit unions are shifting their innovation focus to simplifying the financial lives of members. The problem is that 80% to 90% of a typical credit union’s information technology (IT) budget is allocated to maintaining existing—often outdated, systems.

With only 10% to 20% of their IT budgets available for new innovations, credit unions are hard pressed to quickly bring new products and services to market. Imagine if these credit unions could double their investment in innovation.

They can if they become agile.

Agile credit unions are moving towards easier, cheaper, more efficient, and more effective payment solutions. They’re focused on creating a unified payments platform from disparate silos.

By becoming agile, credit unions can take a significant portion of the IT budget that is currently being allocated to maintaining existing systems and put more money towards new products, services, and technologies.

This approach is well-proven elsewhere in the software industry. Companies used to buy point solutions such as Siebel’s Customer Relationship Management and PeopleSoft’s Human Capital Management.

But Oracle and SAP had the vision of helping companies operate more efficiently while providing more visibility into data across various applications. These software giants turned this vision into reality by creating fully integrated enterprise resource management solutions.

That’s precisely what is happening in the payments industry. Point solutions—whether they are for payment processing, online banking, wire transfer, or fraud prevention and detection—are rolling up into one integrated agile payments solution.

The five stages of agility

Getting to agility is a significant journey that can be defined by five stages. Each stage builds towards the next.

Every organization, even every system within an organization, will start its journey at a different point along the path. However, the first step is to change the way credit unions think about payments solutions so they can stop spending majority of their IT budgets maintaining old, redundant systems and focus on new innovations for members.

Here are the five stages of agility:
1. Reliable. Having a reliable IT infrastructure means credit unions can serve their members with a well-functioning payment service that is available for use during all relevant time periods and capacity requirements.

Most credit unions have already mastered this aspect of the journey. However, it would be remiss to overlook this step in the process because it’s the foundation for success.

2. Compliant. In March, Credit Union Magazine published a compliance top 10 list for 2009. With industry compliance mandates becoming more complex and invasive, being compliant is much easier said than done.

It means having an IT infrastructure that enables the credit union to remain current on regulatory issues and reduce customer-specific modifications while decreasing risk and operating costs.

3. Efficient. Today, there is a lot of duplication in a typical credit union’s IT infrastructure. Becoming efficient means getting rid of this duplication. It means deploying and leveraging a common set of services on a single hardware platform or in an on-demand model—an approach that will reduce unit and operational costs.

4. Responsive. It’s difficult for any organization to be truly responsive if the leaders don’t have visibility into every aspect of the business. Credit unions struggle with this same problem because, with siloed payment systems, data is stored in disparate locations making it difficult to see the entire picture.

Credit unions with responsive infrastructures have the visibility they need to react to new business requirements in a timely manner, create higher levels of customer service, and leverage payments volumes strategically.

5. Agile. A credit union achieves agility when it can orchestrate a set of common services that are automatically activated based upon changing business and technical conditions, such as packaging a new product based on customer circumstances and current risk profiles.

As a result, agile credit unions will benefit from decreased time to market for new innovations, products, and services; reduced IT and other operating costs; and more IT budget dollars available for doubling down on innovation for its members.

Credit union leaders need to change the innovation equation. They need to start investing more money in new products and services for their members and stop spending money maintaining innovations of old. The only way to change this equation is to become agile.

By reading and considering these five stages to reach agility, credit union leaders can begin thinking about becoming agile and start getting their arms around how to move in this direction.

Louis A. Blatt is chief product officer at ACI Worldwide.