The problem is not that credit unions don't get it. We've seen an endless parade of articles and opinions outlining the importance of online and mobile finance. No one's arguing (in public, at least) that their credit union will be just fine with that fax machine and doesn't really need to appeal to Gen Y and their trendy smart phones. Or that baby boomers won't like online banking. On the contrary, one look at the CUInsight home page on any day of the year will reveal that the industry fully believes that online and mobile banking is essential to the future success of credit unions.
But despite this awareness, credit unions today are way behind big banks. They just aren't as good at providing the online services that consumers care about. A recent CUSoapbox post by Ron Daly highlights a new Javelin study, which found that 40% of big bank customers who otherwise want to leave, won't do so because they don't want to lose their superior online services. 40%. With that number of people indicating that there's a problem with credit union online service, it doesn't really matter whether it's true or not. Perception is reality. Just the fear of losing convenience is enough to keep people from jumping to their local credit union.
So why is it that Credit Unions are so bad at providing good online and mobile services? Those of us in the financial software industry quickly learn that credit unions (as well as small banks) are held back by the software systems they already have. The vast majority of credit unions are locked into long-term agreements with a handful of core processing system vendors. Large software providers like Fiserv and Jack Henry support hundreds of credit unions – all running the same or similar software.
These core systems work well at the back end, but are not designed to provide the user-friendly, seamless and attractive interface now expected by your customers. Now, there are a variety of financial software products available, off-the-shelf, which work with core systems and present services to online customers. But most of these are limited to a certain set of services. Many don't work well with other software products, and even fewer provide the exact set of services your credit union needs to invest in. There may be one or two products which are comprehensive and work well – but these are so cost-prohibitive that adoption is minimal. And no software product fits particular needs without some level of customization.
Core system vendors simply do not play well with other software vendors. If this were not the case, then credit unions could afford to develop custom software which seamlessly integrates with their core and provides similar levels of service as big banks. They would not be limited by off-the-shelf options. They would be able to give their customers what they want – for a fair investment in just the right software.
Yet, credit unions cannot free themselves from their core systems. They are the very backbone of the institution's business processes – and they come with very long-term contracts. Furthermore, the vendors have no real incentive to invest enough in their own products to keep pace with a big bank's continual software development. They have hundreds of contracts and limited competition – and because they serve many different clients, their software must be one size fits all or else be impossible to afford.
The solution here, aside from politely asking Fiserv to be better at online banking, is to look better than you are. Accepting that it may cost more to process behind the scenes, credit unions can focus on developing custom software which looks great and provides your most desirable services – from the customer's perspective. This software acts as a bridge between whatever systems you already have in place and your customer. It doesn't actually do a great deal, but it provides a seamless, customizable and easy to use interface online. Because it's tailored to fit your system, as it is, it's more akin to cosmetic surgery than a triple bypass. And in the current environment, in which big banks are surviving on their looks alone, a little plastic surgery may be all credit unions really need to win that 40%.
This post originally published on CUinsight.com.
But despite this awareness, credit unions today are way behind big banks. They just aren't as good at providing the online services that consumers care about. A recent CUSoapbox post by Ron Daly highlights a new Javelin study, which found that 40% of big bank customers who otherwise want to leave, won't do so because they don't want to lose their superior online services. 40%. With that number of people indicating that there's a problem with credit union online service, it doesn't really matter whether it's true or not. Perception is reality. Just the fear of losing convenience is enough to keep people from jumping to their local credit union.
So why is it that Credit Unions are so bad at providing good online and mobile services? Those of us in the financial software industry quickly learn that credit unions (as well as small banks) are held back by the software systems they already have. The vast majority of credit unions are locked into long-term agreements with a handful of core processing system vendors. Large software providers like Fiserv and Jack Henry support hundreds of credit unions – all running the same or similar software.
These core systems work well at the back end, but are not designed to provide the user-friendly, seamless and attractive interface now expected by your customers. Now, there are a variety of financial software products available, off-the-shelf, which work with core systems and present services to online customers. But most of these are limited to a certain set of services. Many don't work well with other software products, and even fewer provide the exact set of services your credit union needs to invest in. There may be one or two products which are comprehensive and work well – but these are so cost-prohibitive that adoption is minimal. And no software product fits particular needs without some level of customization.
Core system vendors simply do not play well with other software vendors. If this were not the case, then credit unions could afford to develop custom software which seamlessly integrates with their core and provides similar levels of service as big banks. They would not be limited by off-the-shelf options. They would be able to give their customers what they want – for a fair investment in just the right software.
Yet, credit unions cannot free themselves from their core systems. They are the very backbone of the institution's business processes – and they come with very long-term contracts. Furthermore, the vendors have no real incentive to invest enough in their own products to keep pace with a big bank's continual software development. They have hundreds of contracts and limited competition – and because they serve many different clients, their software must be one size fits all or else be impossible to afford.
The solution here, aside from politely asking Fiserv to be better at online banking, is to look better than you are. Accepting that it may cost more to process behind the scenes, credit unions can focus on developing custom software which looks great and provides your most desirable services – from the customer's perspective. This software acts as a bridge between whatever systems you already have in place and your customer. It doesn't actually do a great deal, but it provides a seamless, customizable and easy to use interface online. Because it's tailored to fit your system, as it is, it's more akin to cosmetic surgery than a triple bypass. And in the current environment, in which big banks are surviving on their looks alone, a little plastic surgery may be all credit unions really need to win that 40%.
This post originally published on CUinsight.com.
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