Digital tools can save your credit union money—but don’t ignore the economic ramifications

Even not-for-profits need to pay the bills and grow revenues. But what happens when efforts to do so lead to outsourcing, interactive teller machines (ITMs) and digital services that replace in-branch staff? How do you manage the narrative with your members? And how does your credit union share the rewards when your bottom line benefits from digital efforts?

Our four-part series on digital responsibility is taking a closer look at some of the lesser known and unintended consequences of digital tools and services, offering tips on how you can responsibly reap the many rewards.

Our first story in the series, Digital is not always green, highlighted the environmental impacts of digital. Big picture: Digital can be less environmentally friendly than you might assume. Our second article, Are your digital tools socially responsible?, addressed the social impacts of digital, raising questions around personal data, built-in bias, and inclusive design.

This month we’ll take a look at the economic ramifications of your digital decisions.

Like so many other businesses, credit unions had a front row seat to the impact of digital on their financial wellbeing over the past 15 months. Any credit union that hadn’t already taken steps to up its digital game pre-COVID likely suffered a financial hit as the pandemic and stay-at-home orders kept members out of branches. Those whose digital tools were already robust—or who were able to quickly roll out new ones—were more likely to have met member needs and maintained their revenue streams during the worst of COVID.

Although branch lobbies are reopening in most of the country, that doesn’t necessarily mean members will return to a physical credit union anytime soon. They’ve lived a largely digital financial life over the past 15+ months and many have found they prefer it. Research conducted by digital document company Lightico in February 2021, found that 45.4% of respondents said they were likely to visit their branch less often and 30.1% said they would avoid face-to-face banking.

Which means most credit unions will need to continue upping their digital game, both in response to member preferences and to better compete with digital-only financial institutions with minimal brick and mortar expenses. But how will using digital to stay financially solvent affect credit unions’ ability to take care of members, staff and the larger community? Here are some important questions to ask now.

• Can you measure the value of your digital branch?

We can’t truly understand the economic ramifications of digital until we understand how it’s contributing to your bottom line. Yet measuring ROI when it comes to digital is much easier said than done. In a pre-COVID episode of our Remarkable Credit Union podcast, we chatted with John Cournoyer, the VP of marketing at Webster First Credit Union in Massachusetts, which had historically been very focused on the branch experience. The marketing team felt it was critical to take a deeper dive into digital and knew it was important to be able to share apples-to-apples metrics with the C-suite to make that happen. 

Webster First analyzed branch traffic vs. online and found that traffic to the credit union’s website exceeded the combined traffic at all 15 of its branches and that 26% of all real estate loan application volume (the equivalent of five branches’ worth of business) came through the online channel. Being able to share these metrics made it easier for Cournoyer and his team to sell the value of adding more digital functionality, and for the C-suite to truly understand the return on investment.

• How will increasing digital functionality impact your staff?

Even if you’re able to prove a high ROI, staff and members can be understandably concerned when they hear a branch is reducing its hours or that you’re launching helpful new digital tools. Will this take their favorite teller out of the equation? Will they think their favorite credit union has lost its soul and is putting a technology “gate” between members and employees?

According to a study by Boston University, in many situations technology and automation can actually boost employment levels. To make this happen, your credit union will need to analyze roles and skills and, potentially, provide training and assistance to displaced employees—which could be a win-win for all.

Two articles from The Financial Brand suggest looking for ways to “up-skill and re-skill” current employees. The first article cites a PricewaterhouseCoopers (PwC) research study that found 40% of recent survey respondents worked with current staff instead of hiring outside technical talent. The second article cites PwC’s 22nd Annual Global CEO Survey, which found almost 80% of responding banking CEOs believed skills and talent shortages threatened their growth.

The second article pointed out these benefits of up-skilling current employees:

• Lower cost of job placement
• The ability to control the talent pipeline
• Workplace training could be positioned as an employee benefit

One of the most well-known recent examples of up-skilling is happening at Amazon, which is investing $700 million to train 100,000 employees to move into new technical roles.

Many credit unions have found that going digital drives additional hiring and gives staff an opportunity to learn valuable, new skills. For instance, ITMs and video banking are two increasingly common ways for credit unions to go to a smaller branch structure while still providing strong member service. Credit unions we’ve spoken to tell us removing tellers from their branches and having them work as part of a consolidated team at a contact center—or, remotely, especially during COVID—has benefited members and staff. Digital tools have helped ensure that members receive consistently excellent service and staff get a chance to develop rewarding new skills.

• How will you ensure you’re comfortable with the practices of third-party resources?

Outsourcing portions of your digital offerings can make sense for a variety of reasons—for example, lower costs, vendor expertise and access to technology that would be prohibitive to develop in-house. But it’s critical to do your due diligence.

Of course, that can be easier said than done! If you’re outsourcing a product or service you’re currently providing in-house, you’re in a better position to know what you’re looking for in a partner. If it’s something you’re not familiar with, a good consultant can help. Look for one without ties to a particular provider. If a consultant offers solutions before they fully understand your challenges, that’s a sign they might have business connections you weren’t aware of!

If you don’t know where to start, this article from Forbes enlists members of the Forbes Technology Council on the 16 things to consider when outsourcing tech. And when in doubt, you can’t go wrong checking in with the regulator. The NCUA has a number of helpful resources to guide your outsourcing efforts. Here’s one to start with.

• Do enhanced digital tools (and digital-driven revenues) create benefits for all? 

Your investments in digital should ideally improve member service, cut costs, and drive enhanced revenues. Because you’re a not-for-profit, these changes can potentially benefit your staff, your members, and the larger community. It’s also important to incorporate the value of your digital upgrades into the stories you tell about your credit union. For example:

• Show how these new tools benefit both staff and members. We already discussed some of the staff benefits above. Members will benefit from having access to the tools they need 24/7. For instance, if you’re now offering online loan applications, that single mom can apply for a loan at 10 p.m. instead of trying to squeeze in a branch visit during her already-booked lunch break.
• Highlight the material benefits of digital in your marketing and PR efforts. Show how the revenue growth tied to digital investments and/or the savings generated by digital updates, allow you to provide member benefits—lower fees, higher interest rates on savings, better loan rates—and create resources that fund programs, help local nonprofits and support your members and the community in new and better ways.
• Create a company-wide employee bonus that’s linked to the financial growth or savings your digital investments created. If you’re able to measure the ROI of your digital efforts, consider sharing the return with your team. You’ve asked staff to buy into the belief that your digital investments will improve your credit union’s ability to serve members and the community—and hopefully they have. But those digital investments have also likely driven some level of change on employees’ part, potentially shifting the focus of their role or adding new responsibilities. Even if those changes were largely positive, they were likely stressful. A bonus or raise is a good way to send the message you’re all in this together and you appreciate the sacrifices and hard work it’s taken to get to where you are.

Next up: the technological ramifications of digital, including the ethical use of data and artificial intelligence. In the meantime, take a closer look at the economic impact of your digital investments, keeping in mind that digital transformation does not come without costs. But if you ask the right questions as you go, you can potentially turn these challenges into wins for your team, for your members, and for the broader community.