The Seven Steps to Becoming an Innovative Credit Union

 

By rich@leading2leadership.com | December 1, 2023

As the financial landscape evolves and becomes disrupted, credit unions face the challenge of staying relevant. To maintain relevancy, innovation becomes a must-have if the organization is to meet the changing needs of its members. Embracing innovation is vital for credit unions to thrive. But innovation, for innovation’s sake, is not helpful. All innovation must focus on offering members a memorable and personalized experience. This article will explore the seven steps for credit unions to become innovative.

1. Member-Centric Approach, Understanding the Member’s Needs:

Everything a credit union does must begin with the member in mind. Understanding the member’s life journey needs, with an eye on their preferences and pain points, is critical. This deep understanding of members should be the driving impetus for all innovation. This member-centric approach ensures that innovations directly address the challenges credit union members face. A significant part of innovation is understanding how to leverage technology to personalize services. Consider using AI-driven chatbots and machine learning for customer support and loan approvals while creating a seamless, user-friendly experience across all channels.

2. Foster a Culture of Innovation:

Fostering a culture that encourages creativity and innovation is paramount. This involves empowering employees at all levels to share ideas, experiment with new approaches, promote creativity and risk-taking, and embrace a mindset that values continuous improvement. Create a work environment where collaboration and communication are valued and employees feel safe sharing innovative thoughts. Cross-functional teams and innovation labs can provide dedicated spaces for brainstorming and testing new concepts.

A vital element of innovation is a culture that embraces diversity of thoughts, ideas, and experiences. Educate staff about the importance of diversity in thinking and how diversity positively impacts innovation and well-being.

3. Embrace Technology:

Innovation in the digital age is synonymous with technological advancement. Credit unions should invest in cutting-edge technologies to enhance member experience, streamline operations, and stay competitive. A credit union may have to consider a transition from legacy systems to more agile and scalable platforms. This includes adopting cloud computing, upgrading cybersecurity measures, and integrating APIs for smoother data exchange with third-party services. This includes improving mobile apps, online banking services, and tools used in call centers and branches. Today, credit unions must explore emerging technologies like distributed ledgers (blockchain) for secure and efficient transactions, money movement, and authentications.

Credit unions should focus on streamlining operations, enhancing member services, and improving efficiency by staying abreast and investing in the latest technologies and tools.  A digital-first/mobile-first strategy is essential to meeting the expectations of today’s tech-savvy members.

4. Collaborate with Vendors, Other Credit Unions, and FinTech:

A core principle of credit unions is collaboration. Collaborating with other credit unions, vendors, and fintech companies can open up new potential for innovation. Fintech firms are often at the forefront of advancements, and partnerships can provide credit unions with access to innovative solutions without significant in-house development. When credit unions and vendors collaborate, finTech collaboration can be magnified with fresh perspectives and expertise. This climate of cooperation can result in mutually beneficial relationships that enhance the financial ecosystem. Building this collaborative ecosystem can accelerate the credit union’s ability to adapt to changing market dynamics.

5. Invest in Data Analytics:

Data is a crucial driver of innovation. Credit unions need to know, through data, what members are doing, what they aren’t doing, what they are missing, and what they need. This data-centric approach to innovation will also help the credit union know when an innovation is working and, if not, why. But the ecosystem around data is very complicated. Most credit unions have over 30 third-party data sources that use proprietary reporting systems, nomenclature, queries, report timing, and APIs. Credit unions should invest in robust data systems to normalize and govern the critical data before it will yield insights into member behavior, preferences, and trends the organization needs. Insufficient data will only yield wrong insights and decisions. By leveraging a governed and analytic discipline, credit unions can personalize offerings, detect patterns, make informed decisions, and safely deploy AI decisions and machine learning, effectively contributing to their overall innovation strategy.

6. Personalization and Niche Building is Vital:

One size does not fit all when it comes to financial services. All credit unions should focus on using innovation to tailor their offerings to meet the unique needs of individual members. This need for personalization may be more significant for smaller credit unions. Small credit unions cannot compete in the open financial services market with the big players’ tools, applications, and access choices. Therefore, innovation becomes their lifeline to sustainability. Using Design Thinking and Innovation, small credit unions can identify market niches not served by the “big guys.” By innovating product solutions and access methodologies, these small credit unions can learn to serve this niche and build a franchise that is very difficult to replicate. This can include personalized savings plans, targeted lending products, focused marketing, product bundling, and applications and tools for access and money management. This personalized approach builds member loyalty and sets credit unions apart from larger, more impersonal financial institutions.

7. Make your Innovation Sustainable:

Ensure innovation aligns with the credit union’s core values and long-term goals. Seek solutions that meet immediate needs and contribute to sustainable growth and positive social impact. Sustainable innovation considers environmental, social, and governance (ESG) factors.

Becoming an innovative credit union requires a holistic, strategic, and proactive approach encompassing technology, culture, collaboration, and a deep understanding of member needs. Credit unions can position themselves as dynamic and forward-thinking financial institutions by fostering a culture of innovation and staying adaptable to changes that serve the members and the organization. Ultimately, the goal is to create an environment where members feel supported and excited about the financial opportunities their credit union provides.