DISRUPTERS IN THE CREDIT UNION INDUSTRY
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DISRUPTERS IN THE
CREDIT UNION INDUSTRY
By Sundeep Kapur, Digital Strategist and Eric Webb, COO, ClearChoice
Every industry faces disrupters, those new pro- and other financial institutions in a couple of ways.
cesses, business models or technologies that come
Apple’s Pay brings along over 800 million ITunes
along to disrupt the industry; sometimes in a pos-
subscribers and with those numbers, they carry a
itive way, and other times they can do some dam-
lot of clout. Already aligned with major credit card
age to the financial industry. The financial indus-
companies and top financial institutions, those
try has had many disruptions over the last decade
credit unions unable to connect to their system
with new products, services and regulations. We’ve
could have a harder time attracting millennials,
compiled a list we believe will continue to impact
who value technology and the ease it brings to their
credit unions.
every-day life.
APPLE’S PAY, GOOGLE WALLET According to The Financial Review, they have be-
AND OTHER MOBILE PAY gun looking at the future of mobile pay systems.
SYSTEMS “Apple will begin rolling out Pay within a month,
and it will be accompanied by an iOS 8 update.
Mobile phone payment systems have been difficult American Express, Bank of America, Capital One
to take hold in the U.S. While extraordinarily con- Bank, Chase, Citi and Wells Fargo will be the first
venient, various issues have slowed adoption; from banks to offer Apple Pay with additional banks
retail outlets having difficulty in accepting the sys- coming quickly thereafter including Barclaycard,
tem, to consumers worrying about security. But Navy Federal Credit Union, PNC Bank, USAA and
this disrupter offers challenges for credit unions U.S. Bank.Large and otherwise impressive companies like then social media can be a disrupter in a deliberate
PayPal, Google, Amazon, Square, and Stripe, have manner versus a reactionary one. This would re-
all tried to tackle this problem before with limit- quire connecting with systems such as marketing
ed success. But as is the case in most categories it automation, dynamic content creation on websites,
enters, Apple has a way of delivering ‘mass’. This is data analysis, instant messaging and the like.
why bank and credit union executives should ex-
By combining social media with these other sys-
pect Apple Pay to be accepted and move the needle
tems that can provide more of a one-to-one experi-
rather quickly.
ence, then social media can truly disrupt in a pos-
“While it’s too early to know the business model im- itive way.
plications (as Apple has been very secretive about
the back-end agreements, though issuers and net-
AFFILIATE MARKETING
works seem to be on the winning side), the industry
will finally see whether what it has bet on is true: FINDING & SERVING MEMBERS
that only Apple can change user behaviors signifi-
cantly,” says Yann Ranchere, director at Anthemis Emily and Bill just moved into town. They were
and finance 2.0 blogger.” shopping for a used car and found a great rate
through a local Credit Union. Many direct mails
and phone calls later they even became direct
MOVING FROM SOCIAL members. They got a credit card and even consid-
BROADCASTING TO ONE-TO-
ered the Credit Union for a home loan. Today, they
ONE ENGAGEMENT
make car payments, and use their debit & credit
While credit unions are jumping on social media as cards.
a broadcast engine, they still have not yet mastered
But they are shopping to fill their home – an enter-
social engagement. Twitter, Facebook and the like
tainment center for their living room, a new com-
are channels that allow credit unions and other fi-
puter for Emily’s home office, and all the appliances
nancial institutions to get to a point of engagement,
to help Bill create his dream kitchen.
an introduction, but they really don’t create en-
gagement unless there is a hand-off of some sort to They need to buy products at the best price and
the customer service center. Social media does al- want the lowest possible payments as they intend to
low the consumer to control the brand, giving them finance these products. Couldn’t the Credit Union
a voice they never had before, but the real disrupter help?
for credit unions in regards to social media is how
smoothly they can make the hand-off to a channel Imagine giving Emily and Bill the option to find
that is truly one-to-one or nurtures the person with the best product and a better price and financing
the information they need. this product from your Credit Union. Now imagine
that your member can purchase this product with-
True engagement requires that the consumer con- out having to pay interest on a loan and the credit
nect with the credit union in such a way that it en- union still gets to earn an income. Wouldn’t this
genders trust, likability or some other positive per- be a perfect win-win situation, an opportunity to
ception. While social can get the ball rolling, you serve your members and earn real revenue?
are in effect still in a one to many communication
channel. But if you can create a hand-off, where the We serve consumers with the intent of helping
information garnered from the social media inter- them with their financial journeys; our consumers
actions feed a more relevant and timely discussion, need money to spend on products that they need.
In addition to traditional credit instruments, why
www.goclearchoice.comcan’t we get creative and serve as a direct conduit puts us in a unique position to continue to grow and
between our members and the products that they serve the consumers we seek.
desire?
Consumers across generations, especially the mil-
AFFILIATE MARKETING WORKING lennial are extraordinarily savvy using digital to
search for the best value. If you can provide that
I first worked with Russian Standard Bank in Mos- consumer with the value of choosing products at a
cow, Russia helping them with a creative in-store price lower than retail, and allow the consumer to
financing initiative. The consumer would choose pay with their member account with you – you are
their product, and then walk over to an ATM that retaining the money within, earning revenue, and
would help them with financing. This multi-func- keeping the consumer forever.
tion ATM would dispense cash, accept loan pay-
ments, and even score the consumer for credit CLEARCHOICE – TURNKEY AFFILIATE
MARKETING & MEMBER PURCHASE
worthiness. The bank earned revenue on the mer- PROGRAM
chandise and the financing.
Clear Choice is a new, fee-based revenue stream for
In a three-year initiative with HDFC Bank in India, credit unions. Solving several problems for cred-
we took this to an even higher level. HDFC would it unions, including tapping the less than prime
offer their consumer the opportunity to purchase members’ wallet share by providing them a way
products and services from multiple channels. The to spend their money in a financially responsible
transaction could be initiated at an ATM, online, or way, attracting millennials with its ability to im-
through an employee. prove a members credit score, and providing a way
The consumer did not have to be a customer to for them to create employee purchase programs
transact. Consumers purchased TV’s, vacations, for local employers. This is all achieved through
gold coins, and so much more. The bank earned a a credit union branded shopping experience that
fee income on the product that was sold, and even allows members to shop for products with an in-
used this approach to get people to become bank terest-free loan from the credit union. The amount
customers. provided is determined by the member’s deposito-
ry history; behavior based instead of credit score
HDFC Bank has won multiple awards for excellence based algorithms are considered more accurate by
in service and is considered a top 10 Financial Insti- ClearChoice (goclearchoice.com). Through an au-
tu-tion worldwide for innovation. tomated payment system, members pay off the loan
with each automated debit, and the credit union re-
Electronic commerce has given rise to an estab-
ceives a fee for each product purchased.
lished field of affiliate marketers. In a few clicks an
affiliate can set up a digital store to provide their This revolutionary idea is simple, and benefits both
network with deals on products & services. the member and the credit union, giving credit
unions the ability to gain more of their member’s
AFFILIATE MARKETING CAN DRIVE “wallet share” that had been lost to employee pur-
LOYALTY
chase programs and rent-a-centers.
The bottom line is that consumers need products
It’s a simple, but a game-changer for credit unions
and services, they need financing to help trans-
as it has the capability to attract millennials, un-
act, and financial institutions can serve a key role.
cover revenue value of the less than prime member,
Credit Unions need ways to build affinity, we need
and make credit unions more of a focal point for ev-
to earn revenue, and we need to get creative in how
eryday needs.
we attract new members. Being the trusted affiliate
www.goclearchoice.comMILLENNIALS AND BOOMERS
ADVANTAGES GEN-Y SEES IN
Both millennials and boomers are some of the larg- IN-BRANCH BANKING
est groups throughout the world. Many millennials
view financial institutions as indistinguishable.
Secure 55%
Many millennials state that in five years, the way
that banking is done and how we access our money Personal relationships/service 51%
and make purchases are going to be entirely differ- Easy to resolve issues/disputes 48%
ent - we may not need a bank at all. Receive financial advice
first hand 35%
According to The Millenial Disruption Index, “53% Get product info
32%
first hand
of millenials don’t think their financial institution
More convenient 27%
offers anything different than other institutions
and 73% would rather visit the dentist then hear Faster 24%
what their credit union or bank has to say.” Baby Saves time 21%
boomers are more involved with branches and
Source: TD Bank © March 2014 The Financial Brand
want the face–to-face experience. Many are slow to
adapt to technology and don’t trust it when it comes
to their finances. THE REASON GEN-Y CUSTOMERS
LAST VISITED THEIR BRANCH
For many years, the thought of having all of the
baby boomers retiring has been looming over the Depositing money 72%
heads of been in the minds of many executives. Ac-
Withdrawing money 44%
cording to FiveThirtyEight, Baby boomers are not as
profitable. “Simply put, retirees don’t contribute as 20% Check balance
much to the economy as workers [those with jobs]
19% Transfer money
do. They don’t produce anything, at least directly.
18% Open/close account
They don’t spend as much on average. And they’re
much more likely to depend on others — the gov- 18% Resolve issue or dispute
ernment or their own children, most often — than
16% Seek information
to support themselves.” What does this mean for
the financial industry? It means less money being 16% Pay bills
spent. 15% Seek advice
The obvious impact is that millennials are a focus Source: TD Bank © March 2014 The Financial Brand
for credit unions, but credit unions should not be so
quick to discount retirees. They still have major as- age their connectivity could be just as influential
sets and there are opportunities to create products and marketing to millennials.
and ser-vices that will help credit unions capture
more wallet share of the spending they are doing. PAYPAL AND PAYPAL CREDIT
This could be insurance products, financial pay-
PayPal and PayPal credit are growing in popularity
ment and management tools, as well as shopping
and looking to compete with traditional financial
experiences offered by companies such as Clear-
institutions. If you have a decent credit score, and
Choice Member Purchase program. Baby boomers
would like to purchase something that you do not
are also influencers; to their children, grandchil-
have funds for, you’re able to use their credit feature
dren and others. Developing programs that lever-
to bill you later for that item. This makes not only
www.goclearchoice.comshopping online easier, but you can grab the cash and apply for loans. Credit union executives have
from the account via ATM. seen technology impact the industry, but it will
only continue to grow.
Throughout the many years that PayPal has been
operating, they have a lot to show for it. Accord- According to Sundeep Kapur, Digital Strategist,
ing to their website, “Through our innovations, we many Financial Institutions are facing challeng-
make life better for our over 152 million active reg- es, “Digital—email, mobile, social media—these
istered accounts by helping people and business- words are the buzz of our industry. They offer great
es receive and make payments in more than 100 opportunity but are also fraught with risk. How
currencies in 203 markets. An eBay Inc. (NASDAQ: many of your members are digitally connected
EBAY) company, PayPal is the faster, safer way to to you? Do you have a clear strategy on what each
pay and get paid. Giving people simpler ways to channel is supposed to do? Do you know what
send money without sharing financial information, channels your members prefer? Do you know what
and with the flexibility to pay using their account your members do not like about digital?”
balances, bank accounts or
credit cards, PayPal processes
CHANGES IN GEN-Y’S DAY-TO-DAY BANKING HABITS
9.3 million payments every day OVER THE LAST YEAR
for our customers.” This com-
Mobile Banking
mitment shows that they have
upped their services throughout 57% 35% 8%
the years.
Online Banking
In addition to their payment and 50% 42% 7%
banking services, PayPal Credit
ATMs
has recently grown and expand-
ed into a much more diverse 28% 46% 26%
part of the financial industry.
Telephone Banking
Offering users much more lee-
way than previously. The Bill Me 24% 40% 37%
Later option not only provides
In-branch Banking
users with the ability to pay for
purchases at a later date with
15% 52% 33%
credit, but it also can provide Using more often About the same Using less often
users with cash advances. This
Source: TD Bank © March 2014 The Financial Brand
leaves a lot of financial institu-
tions competing for “wallet share” with new com- These are questions that credit union executives
petitors that are distinctly tuned to millennials. must start to ask themselves in order to turn these
chan-nels into game changers. Online banking op-
ONLINE BANKING OPTIONS tions are able to open up the world around you and
invite a number of clients to your doors, where once
As people grow with technology, they request more
there was nothing. According to Ally Bank, “These
services that can be done over the Internet. This is
days, online banking has become more of a neces-
not only more efficient for them, but it is more ef-
sity than a novelty. While some customers continue
ficient for the credit union as well, if they start of-
to conduct trans-actions at their local branch of-
fering the services. Customers want an easier way
fice, most have gotten used to the flexibility of on-
to access their cash, check their balances, pay bills
www.goclearchoice.comline banking services that allow them to pay bills,
transfer funds and more.” With this being said, so
many more people are searching for banks offer-
ing a simple solution that can be found only in the
digital form - online banking is presumed to be the
place where expansion will occur.
Technology is clearly a disrupter and a negative
one as it clearly creates direct and indirect com-
petitors; but if we learn how to leverage technology,
process and people to align to our core strengths,
credit unions will remain on a sound foundation
for growth. This does require more leadership ver-
sus following. Tip-toeing to the edge is not enough,
as disruption happens to quickly. It’s time to look at
these disruptions and mold them to fit the industry.
ABOUT THE AUTHORS
SUNDEEP KAPUR
Author, www.emailyogi.com
Sundeep Kapur works with financial institutions cre-
ate and execute their OMNI-channel strategy. His
specialty lies in helping brands adopt digital by fo-
cusing on fundamentals - reduced cost, improved
security, and driving revenue - all towards enhancing
lifetime value. He is a frequent speaker at a number
of financial services events.
ERIC WEBB
COO, ClearChoice (www.goclearchoice.com)
Mr. Webb has over 25 years of experience across
various industries, including two start-ups (MyPoints.
com and CultureWorx). From 2002-2014, Mr. Webb
worked for McGladrey as their Senior Director of Go
To Market Services, in which he was responsible for
creating and managing marketing operations, and
providing strategies for this billion dollar assurance,
tax and consulting firm. Experienced in both B2B
and B2C marketing, he is a stalwart for process and
efficiency.
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