Digital transformation is necessary for credit unions to remain competitive in today’s rapidly evolving financial landscape. Embracing digital technologies can enhance member experiences, improve operational efficiency, and enable credit unions to meet their members’ evolving needs and expectations. All too often, we see credit unions doing much work to become digital or mobile-first, but often these efforts are in silos and fractured. Lending is looking for a mobile-friendly LOS, Marketing is seeking an online account opening application, Operations is looking at ITMs and video ATMs, and the Call Center is looking for AI-driven chat, automated call response, and account verification. However, a successful digital transformation strategy crosses all silos and requires a single organizational effort that has been carefully planned and executed. This article will explore the vital steps credit unions can follow to achieve a seamless and effective digital transformation.

Step 1: Define a Clear Vision and Strategy.

The first step in any successful digital transformation journey is to define a clear vision and strategy. Credit unions need to envision how they want to leverage digital technologies to enhance member experiences, streamline processes, and drive growth. This includes having a bold vision of what the end will look like for the member, the staff, and the operating procedures. This roadmap must consist of setting specific goals, such as expanding digital service offerings, improving operational efficiency, or increasing member engagement, and having measurements and milestones to confirm the execution of the strategic objectives.

Many credit unions start down this journey trying to be all things to everyone. By attempting to combine a robust branching strategy AND a digital transformation strategy, the message to consumers and staff is in conflict. A digital transformation requires some members to change their behaviors and employees to change their processes and tactics. Therefore, a well-defined strategy should include defining the credit union’s unique value proposition, target market, and long-term goals. It should align with the credit union’s mission and values while addressing the changing needs of members in the digital age.

Step 2: Assess the Current State and Identify Gaps.

• Before implementing digital solutions, credit unions must assess their current state of digital readiness. This involves evaluating existing systems, infrastructure, and processes to identify gaps and areas that require improvement. Understanding the strengths and weaknesses of the credit union’s technological capabilities, member experience, and operational efficiency is crucial. Credit unions often find someone outside the organization best suited for this assessment. The reason for an outsider is to avoid cognitive biases. These include:
• Confirmation bias – seeking information confirming our pre-existing beliefs and ignoring evidence contradicting them. This can lead to a distorted view of reality and prevent us from seeing other perspectives.
• Availability bias – The tendency to rely too heavily on readily available information rather than seeking more diverse sources of information. This can lead to an incomplete understanding of a situation or problem.
• Anchoring bias – The tendency to rely too heavily on the first piece of information encountered when deciding and to be overly influenced by that information. This can lead to an over-reliance on one aspect of a situation and prevent us from considering other factors.

In addition, an outsider can create a safe space where the stakeholders can freely speak their truth without fear of retribution or judgment.

By conducting a thorough assessment, credit unions can identify areas where digital transformation will have the most significant impact. This evaluation helps prioritize investments, allocate resources effectively, and set realistic timelines for the transformation process.

Step 3: Invest in Modernizing Core Systems.

This step is probably the most fear-inducing. Converting a legacy core system requires a significant investment of resources and budget. But, a legacy system and outdated infrastructure can hinder the effectiveness of digital transformation efforts. Credit unions should prioritize modernizing their core banking systems to create a solid foundation for digital services. This may involve upgrading hardware and software, adopting cloud-based solutions, and implementing robust cybersecurity measures. When you source a new core, you need to consider three things:

1. Is my current core indeed a limitation? By bringing in your current provider for a conversation and sharing your strategic objective, you may learn of capabilities or enhancements made since implementing the core.
2. Also, bring in other key vendors, applications, and platforms like your online account opening, loan origination systems, credit and debit card, online banking and mobile banking, bill pay, and account aggregation providers to see how they can support your journey. Sometimes system conversions are optional if these vendors become your partner.
3. Ensure any enhancements and replacements to legacy systems provide open and accessible APIs and simplified data access and integration tools.

Modernizing core systems enables credit unions to leverage new technologies, integrate digital channels, and enhance the overall member experience. It also improves operational efficiency, data management, and scalability for future growth.

Step 4: Leverage the Cooperative Nature of Credit Unions

The cooperative business model of credit unions is loaded with superpowers. One of these superpowers is Credit Union Service Organizations (CUSOs). A credit union may find that a CUSO, typically a for-profit entity built by credit unions for credit unions, can help a credit union with the heavy lifting. Before purchasing a software, application, or platform, check with the National Association of Credit Union Service Organizations (NACUSO) to see if a CUSO has already done this work for other credit unions. A credit union may benefit from many lessons learned and economies of scale through this cooperative effort. You don’t have to be in this world as a credit union.

Step 5: Embrace Member-Centric Digital Services.

Often, the technology surrounding digital services is seen as a technology problem. This paradigm must change, and the choices must prioritize the member experience. I have often seen tech decisions made because of the implied perception of “already integrated” or “simple to integrate” when that promise is not a reality. Focusing on which solution serves the member will put the integration discussion into the proper perspective. Often it makes sense to choose a provider that may not be the easiest to integrate but has a better member interface and scalability. A successful digital transformation requires credit unions to develop member-centric digital services that meet the evolving expectations of their members. This includes seamless online and mobile banking experiences, personalized financial advice, and self-service capabilities.

Credit unions should invest in user-friendly interfaces, intuitive mobile apps, and responsive websites offering various services, including account access, fund transfers, loan applications, peer-to-peer payments, and financial education resources. By prioritizing member needs and convenience, credit unions will drive member adoption and loyalty to their digital channels.

Step 6: Foster a Culture of Innovation and Agility.

Digital transformation is not just about technology; it also requires a cultural shift within the credit union. A culture of innovation and agility enables credit unions to adapt quickly to market changes, embrace emerging technologies, and continuously improve member experiences.

To foster this culture, credit unions should encourage collaboration, empower employees to suggest new ideas, and establish mechanisms for testing and implementing innovations. Creating cross-functional teams dedicated to digital initiatives and promoting a learning mindset is essential to driving the transformation process.

The practice of encouraging your entire staff to use digital channels is helpful. It is common to see the member-facing team not using digital channels. When this member-facing staff is practiced experts at the digital channels, they are better positioned to advocate for using the tools and help members with their struggles with remote access points. Also, when everyone in the organization uses these channels, the inconsistencies in process and risk tolerances become apparent and are more likely to correct quickly. Nothing is more upsetting than to have different risk tolerances for an in-branch transaction, an ATM transaction, and a digital transaction. It confuses the member and may unnecessarily force a member to drive to the branch when they would prefer to do the transaction digitally.

Step 7: Develop Strong Data Analytics Capabilities.

All too often, I see the data journey as a separate effort when, in reality, they should be closely connected. Data analytics is crucial in digital transformation, providing credit unions valuable insights into member behavior, preferences, friction points, and needs. By harnessing the power of data, credit unions can make informed decisions, personalize member experiences, and identify growth opportunities. A platform or system addition or change should only happen with requirements for collecting and sharing the data with the credit union. Most credit unions have over 50 third-party data sources, and trying to normalize and align this data from source to source is excruciating and often expensive. Make the sharing and collection of data part of the purchase agreement.

Credit unions should invest in robust data analytics tools and talent to collect, analyze, and interpret data effectively. I’ve seen many credit unions trying to build versus buy these tools and have often found this decision a mistake. Also, credit unions tend to throw money in the form of talent or new software to solve a data problem. If there is one thing I know, strategy comes before software and talent. Know what you need from the data and how you are going to use the data before you add more software and headcount. Credit unions can tailor their services by understanding member data, designing targeted marketing campaigns, and proactively addressing member needs.

Step 8: Continuous Improvement and Adaptation.

Digital transformation is an ongoing process that requires continuous improvement and adaptation. Credit unions should establish mechanisms for monitoring the effectiveness of their digital initiatives and gathering feedback from members. This feedback loop helps identify areas for improvement and ensures that digital services align with member expectations. It will also quickly determine if a software decision was a mistake. If an application isn’t performing the expectations of the member or the credit union, there needs to be a process to identify when to walk away. Too often, I’ve seen credit unions put up with a solution that isn’t working for them or the member because they didn’t have a way to monetize the extra work or frustration it was causing the member and staff. Sometimes it makes sense to take a one-time write-off if it saves your member and staff significant time and frustration.

Regularly reviewing and updating the digital strategy is essential to stay relevant in a rapidly evolving digital and disruption-prone landscape. This involves keeping abreast of emerging technologies, industry trends, and member preferences. Credit unions should be open to incorporating new digital solutions, exploring partnerships with fintech companies, and embracing innovative ideas that can further enhance member experiences. To do this effectively, credit unions need to understand their risk tolerances. Most credit unions say, “I want to be a fast follower.” The problem with this mindset is that fast follower is a continuum. For one credit union, this means being an alpha or beta test for a new technology; for another, it means, “We will adopt it after everyone else already has it.” Have a process to put any innovation or new application through a risk matrix that establishes a score based on the following criteria on a scale of 1-10, 10 is best:

• Cost of the application.
• Cost and resources required to implement.
• Time to market.
• Likelihood of utilization or success.
• Benefit to the member or the organization.

This is a crucial step to understand whether this new product or service is worth the time and money.

Additionally, fostering a culture of continuous learning and professional development is crucial. By providing training and upskilling opportunities for employees, credit unions can ensure that their workforce is equipped with the necessary skills and knowledge to support ongoing digital transformation efforts. Every employee should feel like they are digital natives, true digital experts.

While each credit union’s digital transformation journey may be unique, these steps provide a foundation for embracing digital technologies and enhancing member experiences. By following these seven steps, credit unions will thrive in the digital age while maintaining their commitment to personalized service and community-focused banking – “people helping people” and emerge as leaders in the financial industry.

8 Steps to a Successful Digital Transformation at a Credit Union

Digital transformation is necessary for credit unions to remain competitive in today’s rapidly evolving financial landscape. Embracing digital technologies can enhance member experiences, improve operational efficiency, and enable credit unions to meet their members’ evolving needs and expectations. All too often, we see credit unions doing much work to become digital or mobile-first, but often these efforts are in silos and fractured. Lending is looking for a mobile-friendly LOS, Marketing is seeking an online account opening application, Operations is looking at ITMs and video ATMs, and the Call Center is looking for AI-driven chat, automated call response, and account verification. However, a successful digital transformation strategy crosses all silos and requires a single organizational effort that has been carefully planned and executed. This article will explore the vital steps credit unions can follow to achieve a seamless and effective digital transformation.

Step 1: Define a Clear Vision and Strategy.

The first step in any successful digital transformation journey is to define a clear vision and strategy. Credit unions need to envision how they want to leverage digital technologies to enhance member experiences, streamline processes, and drive growth. This includes having a bold vision of what the end will look like for the member, the staff, and the operating procedures. This roadmap must consist of setting specific goals, such as expanding digital service offerings, improving operational efficiency, or increasing member engagement, and having measurements and milestones to confirm the execution of the strategic objectives.

Many credit unions start down this journey trying to be all things to everyone. By attempting to combine a robust branching strategy AND a digital transformation strategy, the message to consumers and staff is in conflict. A digital transformation requires some members to change their behaviors and employees to change their processes and tactics. Therefore, a well-defined strategy should include defining the credit union’s unique value proposition, target market, and long-term goals. It should align with the credit union’s mission and values while addressing the changing needs of members in the digital age.

Step 2: Assess the Current State and Identify Gaps.

Before implementing digital solutions, credit unions must assess their current state of digital readiness. This involves evaluating existing systems, infrastructure, and processes to identify gaps and areas that require improvement. Understanding the strengths and weaknesses of the credit union’s technological capabilities, member experience, and operational efficiency is crucial. Credit unions often find someone outside the organization best suited for this assessment. The reason for an outsider is to avoid cognitive biases. These include:

• Confirmation bias – seeking information confirming our pre-existing beliefs and ignoring evidence contradicting them. This can lead to a distorted view of reality and prevent us from seeing other perspectives.

• Availability bias – The tendency to rely too heavily on readily available information rather than seeking more diverse sources of information. This can lead to an incomplete understanding of a situation or problem.

• Anchoring bias – The tendency to rely too heavily on the first piece of information encountered when deciding and to be overly influenced by that information. This can lead to an over-reliance on one aspect of a situation and prevent us from considering other factors.

In addition, an outsider can create a safe space where the stakeholders can freely speak their truth without fear of retribution or judgment.

By conducting a thorough assessment, credit unions can identify areas where digital transformation will have the most significant impact. This evaluation helps prioritize investments, allocate resources effectively, and set realistic timelines for the transformation process.

Step 3: Invest in Modernizing Core Systems.

This step is probably the most fear-inducing. Converting a legacy core system requires a significant investment of resources and budget. But, a legacy system and outdated infrastructure can hinder the effectiveness of digital transformation efforts. Credit unions should prioritize modernizing their core banking systems to create a solid foundation for digital services. This may involve upgrading hardware and software, adopting cloud-based solutions, and implementing robust cybersecurity measures. When you source a new core, you need to consider three things:

1. Is my current core indeed a limitation? By bringing in your current provider for a conversation and sharing your strategic objective, you may learn of capabilities or enhancements made since implementing the core.
2. Also, bring in other key vendors, applications, and platforms like your online account opening, loan origination systems, credit and debit card, online banking and mobile banking, bill pay, and account aggregation providers to see how they can support your journey. Sometimes system conversions are optional if these vendors become your partner.
3. Ensure any enhancements and replacements to legacy systems provide open and accessible APIs and simplified data access and integration tools.

Modernizing core systems enables credit unions to leverage new technologies, integrate digital channels, and enhance the overall member experience. It also improves operational efficiency, data management, and scalability for future growth.

Step 4: Leverage the Cooperative Nature of Credit Unions

The cooperative business model of credit unions is loaded with superpowers. One of these superpowers is Credit Union Service Organizations (CUSOs). A credit union may find that a CUSO, typically a for-profit entity built by credit unions for credit unions, can help a credit union with the heavy lifting. Before purchasing a software, application, or platform, check with the National Association of Credit Union Service Organizations (NACUSO) to see if a CUSO has already done this work for other credit unions. A credit union may benefit from many lessons learned and economies of scale through this cooperative effort. You don’t have to be in this world as a credit union.

Step 5: Embrace Member-Centric Digital Services.

Often, the technology surrounding digital services is seen as a technology problem. This paradigm must change, and the choices must prioritize the member experience. I have often seen tech decisions made because of the implied perception of “already integrated” or “simple to integrate” when that promise is not a reality. Focusing on which solution serves the member will put the integration discussion into the proper perspective. Often it makes sense to choose a provider that may not be the easiest to integrate but has a better member interface and scalability. A successful digital transformation requires credit unions to develop member-centric digital services that meet the evolving expectations of their members. This includes seamless online and mobile banking experiences, personalized financial advice, and self-service capabilities.

Credit unions should invest in user-friendly interfaces, intuitive mobile apps, and responsive websites offering various services, including account access, fund transfers, loan applications, peer-to-peer payments, and financial education resources. By prioritizing member needs and convenience, credit unions will drive member adoption and loyalty to their digital channels.

Step 6: Foster a Culture of Innovation and Agility.

Digital transformation is not just about technology; it also requires a cultural shift within the credit union. A culture of innovation and agility enables credit unions to adapt quickly to market changes, embrace emerging technologies, and continuously improve member experiences.

To foster this culture, credit unions should encourage collaboration, empower employees to suggest new ideas, and establish mechanisms for testing and implementing innovations. Creating cross-functional teams dedicated to digital initiatives and promoting a learning mindset is essential to driving the transformation process.

The practice of encouraging your entire staff to use digital channels is helpful. It is common to see the member-facing team not using digital channels. When this member-facing staff is practiced experts at the digital channels, they are better positioned to advocate for using the tools and help members with their struggles with remote access points. Also, when everyone in the organization uses these channels, the inconsistencies in process and risk tolerances become apparent and are more likely to correct quickly. Nothing is more upsetting than to have different risk tolerances for an in-branch transaction, an ATM transaction, and a digital transaction. It confuses the member and may unnecessarily force a member to drive to the branch when they would prefer to do the transaction digitally.

Step 7: Develop Strong Data Analytics Capabilities.

All too often, I see the data journey as a separate effort when, in reality, they should be closely connected. Data analytics is crucial in digital transformation, providing credit unions valuable insights into member behavior, preferences, friction points, and needs. By harnessing the power of data, credit unions can make informed decisions, personalize member experiences, and identify growth opportunities. A platform or system addition or change should only happen with requirements for collecting and sharing the data with the credit union. Most credit unions have over 50 third-party data sources, and trying to normalize and align this data from source to source is excruciating and often expensive. Make the sharing and collection of data part of the purchase agreement.

Credit unions should invest in robust data analytics tools and talent to collect, analyze, and interpret data effectively. I’ve seen many credit unions trying to build versus buy these tools and have often found this decision a mistake. Also, credit unions tend to throw money in the form of talent or new software to solve a data problem. If there is one thing I know, strategy comes before software and talent. Know what you need from the data and how you are going to use the data before you add more software and headcount. Credit unions can tailor their services by understanding member data, designing targeted marketing campaigns, and proactively addressing member needs.

Step 8: Continuous Improvement and Adaptation.

Digital transformation is an ongoing process that requires continuous improvement and adaptation. Credit unions should establish mechanisms for monitoring the effectiveness of their digital initiatives and gathering feedback from members. This feedback loop helps identify areas for improvement and ensures that digital services align with member expectations. It will also quickly determine if a software decision was a mistake. If an application isn’t performing the expectations of the member or the credit union, there needs to be a process to identify when to walk away. Too often, I’ve seen credit unions put up with a solution that isn’t working for them or the member because they didn’t have a way to monetize the extra work or frustration it was causing the member and staff. Sometimes it makes sense to take a one-time write-off if it saves your member and staff significant time and frustration.

Regularly reviewing and updating the digital strategy is essential to stay relevant in a rapidly evolving digital and disruption-prone landscape. This involves keeping abreast of emerging technologies, industry trends, and member preferences. Credit unions should be open to incorporating new digital solutions, exploring partnerships with fintech companies, and embracing innovative ideas that can further enhance member experiences. To do this effectively, credit unions need to understand their risk tolerances. Most credit unions say, “I want to be a fast follower.” The problem with this mindset is that fast follower is a continuum. For one credit union, this means being an alpha or beta test for a new technology; for another, it means, “We will adopt it after everyone else already has it.” Have a process to put any innovation or new application through a risk matrix that establishes a score based on the following criteria on a scale of 1-10, 10 is best:

• Cost of the application.
• Cost and resources required to implement.
• Time to market.
• Likelihood of utilization or success.
• Benefit to the member or the organization.

This is a crucial step to understand whether this new product or service is worth the time and money.

Additionally, fostering a culture of continuous learning and professional development is crucial. By providing training and upskilling opportunities for employees, credit unions can ensure that their workforce is equipped with the necessary skills and knowledge to support ongoing digital transformation efforts. Every employee should feel like they are digital natives, true digital experts.

While each credit union’s digital transformation journey may be unique, these steps provide a foundation for embracing digital technologies and enhancing member experiences. By following these seven steps, credit unions will thrive in the digital age while maintaining their commitment to personalized service and community-focused banking – “people helping people” and emerge as leaders in the financial industry.