Emanuel Andjelic is chair and co-founder of Squirrel, a fintech that has designed an app to help people create and stick to a budget. He was a keynote speaker at last year’s annual conference of the Association of British Credit Unions. After graduating from Cambridge University in 2002, Mr Andjelic has been involved in several IT projects and has taken on the role of investor, entrepreneur and mentor in several startups.
What are the key digital trends that could cause disruption for credit unions?
Open banking and Payment Service Directive (PSD2) regulations will be a game changer for banking technology. Banks are being forced to open up APIs (Application Programming Interface) which means that customers will be able to allow innovative tech companies access to their data. These companies are already busy building products and services that create enhanced customer experiences in everything from payments to budgeting.
What are UK credit unions already doing digitally and where could they improve?
Open banking regulations don’t currently cover credit union accounts, so the risk is that these accounts will become less attractive if they can’t take advantage of the wave of cool new products and services that regular bank customers will be able to take advantage of.
Can technology help lift a regulatory burden for credit unions?
“RegTech” is fast becoming the latest buzz word in the financial technology seen, with lots of products and services springing up that aim to make everything from Anti Money Laundering (AML) to Know Your Customer (KYC) checks quicker, cheaper and more secure.
Does scale matter when credit unions are considering whether to adopt new tech platforms?
The beauty of most new Fintech innovations is that they don’t tend to discriminate against the size of an organisation. The newest players with the most innovative technologies are keen to gain market share and will welcome the smallest of organisations.
Bobby Gould is client services director for CMutual. He has worked with the company serving credit unions in a number of roles since 2001. He is currently studying at University of Ulster & Boston College, working towards an MSc in executive leadership. He has facilitated strategic planning sessions with a variety of credit union boards across the UK. CMutual is the pre-eminent insurance specialist for credit unions, providing protection products and services, as well as sharing knowledge and insight from across the credit union world.
What are the key digital trends that could cause disruption for credit unions?
Mobile, mobile, mobile! By 2025, it’s estimated that 75% of the workforce will be millennials – that is, people born after around 1980. They have had internet access their whole life. For many, their first mobile phone was a smartphone. The challenge for credit unions (and businesses in general) is that keeping up with the competition isn’t good enough; the real challenge is keeping up with the customer. Credit union members are no longer comparing their experience with RBS, Lloyds or Barclays anymore, they’re comparing it with Amazon, Apple and Google. Amazon accounted for upwards of 50% of all online sales in the US, and over 40% of their sales are made from a mobile device. Therefore, a key digital challenge for credit unions is how to serve members in an “always on and available” mobile-friendly world. Among other things, this means looking at the automation of payments, transactions, applications, recruitment.
What are UK credit unions already doing digitally and where could they improve?
Many credit unions now have websites and allow members to check balances online. Electronic payments and transfers are also the norm for many credit unions in the UK. Some have implemented electronic loan and membership applications.
To embrace technology, it can be helpful to think about its variety of uses, and then prioritise.
- Member interaction – using technology to improve how the member can contact their credit union, and be contacted 24/7/365.
- Marketing – using social media for marketing, awareness and advocacy.
- Educate and excite – using technology to reach out to members and explain the Credit Union Difference, provide information and education.
- Automate – using technology to reduce or eradicate manual processes where possible, to improve convenience and access.
Can technology help lift a regulatory burden for credit unions?
After FinTech comes RegTech! If Fintech focuses technology on the member, Regtech is the application of technology to decrease costs, increase transparency and perhaps renovate the relationship between credit unions and regulators. Where it is different from using existing tools (like online reporting) is that it seeks to use new technologies like cloud computing, APIs and data analytics to solve regulatory and compliance requirements more effectively and efficiently.
Does scale matter when credit unions are considering whether to adopt new tech platforms?
Scale does matter – implementing a “digital mindset” requires changes to the systems and controls that a credit union utilises to deliver effective governance. Cost, of course, is also a big factor; however where credit unions can identify common objectives or requirements then collaboration can enable smaller credit unions to benefit from new technologies.
Can the UK learn something from credit unions abroad?
Absolutely, for example, there are credit unions forming partnerships in the US to explore the benefits and usages for blockchain. In Canada, credit unions are signing up to Apple Pay and in Australia, credit unions are introducing financial management apps to help members track their spending. credit unions can also learn from other industries too, Amazon “one-click” technology is a great example of “ease-of-use” philosophy that has really taken off. Similarly, contactless payments have had huge adoption in a relatively short space of time.
Technology can pose new challenges related to security. How can these be addressed?
The forthcoming introduction of the General Data Protection Regulation in May this year places a new emphasis on how companies protect personal information. Technology is part of the solution to security, as well as part of the problem.
Understanding where data is stored, why we have it, who has access to it, and how we ensure the security around it is suitable, is increasingly important. One step that credit unions can take is to become Cyber-Essentials certified. This is a government-backed initiative that helps businesses measure their cyber-resilience and take steps to improve it.
Tansley Stearns is chief impact officer at the Filene Research Institute in Madison, USA. With more than 19 years of credit union leadership experience across a variety of functional areas, she works to help an organisation move ideas forward to drive business results. Tansley was one of the original credit union professionals chosen to be a participant in Filene’s i3 innovation program. In her three years with i3, she worked with other credit union executives to create innovative projects including SmartScore, Decision Point and Debt in Focus.
What are the key digital trends that could cause disruption for credit unions?
Ease of use is a major issue in this area. Credit unions are no longer competing against the bank down the street or the credit union down the street, but against the simple and easy experience that all of us have with places like Amazon. Consumers expect easy, intuitive and fast. From our report, Member Effort Benchmarking: Measuring Ease of Use by Jardine, Darroch & Anderson, we identified that credit unions still have a long way to go to make the home–loan experience easier and we also struggle with handoffs both between people and between channels.
Artificial intelligence and machine learning will also have disruptive implications for credit unions. From our report, Big Data and Credit Unions: Machine Learning in Member Transactions, by Kallerhoff, we know that if done well, this can amplify credit unions’ efforts at product progression, credit scoring and risk modelling. It can also help us better assess member needs and respond to those needs in a more proactive way.
Does scale matter when credit unions are considering whether to adopt new IT platforms or invest in new technology?
Scale absolutely matters. The great news for credit unions is that we have the competitive advantage of existing in a collaborative environment. We have a host of examples where credit unions have come together to improve performance, reduce costs and enhance member experience through collaboration. In our report, Collaboration in Practice: 11 Credit Union Case Studies, by Hofheimer & Rogers, we share several examples of IT efforts where credit unions came together to advance stronger outcomes.
Credit unions often perceive fintechs as rivals. Can the two work together successfully? What does research suggest?
It’s all about perspective, in Fintech: Developments and Strategic Implications for Credit Unions by Swart & Middleton, there
is a great framework for how credit unions might consider fintech collaboration as outlined:
- Archenemies. These firms intend to disrupt, destroy, compete, and capture your revenue. Their business model is based on competition. They are not your friends, but you can and should learn from their marketing and technology.
- Archangels. These firms intend to be a resource for traditional financial institutions. They see themselves as a technology or service provider and are eager to be integrated into your website, application, or service stack. Their success is your success – at least this is the narrative.
- Archetypes. These firms exemplify co-opetition. They are competing against both banks and credit unions, yet actively seek partnerships. They have realised that they lead in technology, you lead in knowledge of your markets, members, and relationships. By combining forces, the “smart” banks/credit unions can drive revenue or improved customer services in partnership with them. Without them, they believe that those institutions that partner with fintech firms will outcompete and eventually destroy the market share and profitability of “solo” banks and
credit unions.
Each organisation has to assess what their tolerance for such a partnership is and what their strategic goals are. We believe that credit unions have unique gifts as do fintech providers and coming together can be a way to provide even more value for consumers.
With a background in computer science and design, Eugene Danilkis worked on NASA projects as an engineer before founding and building Mambu, from designing and leading the product development and to building and scaling the team and global footprint of the business. He graduated from the University of British Columbia in 2004, which he followed with a degree in human-computer interactions at the Carnegie Mellon University. Mambu provides banking technology built in and delivered via the cloud.
How did the partnership with My Community Bank start?
In 2013 My Community Bank decided to launch a complete online national credit union in the UK. Their goal was to offer competitive and flexible loan and savings products to everyone in the UK. They decided to automate as many processes as possible in order to compete with traditional lenders. Mambu was deployed to manage loan and deposit products, customer data, internal processes and reporting and accounting. It integrates into the website as well as services like CallCredit, EchoSign, FD Online and Rapidata in the UK. The successful implementation of Mambu with the desired products and workflows included third-party services, 20-second automated loan decisions, 100% digital paperwork and the launch of the credit union with zero internal IT staff and full agility to modify and launch new products as they grew.
What sort of services do members using the app get?
Mambu is not an app: it is the lean alternative to cumbersome core banking systems, a cloud-native software, provided as a service, supporting composable API-enabled ecosystems. We empower our clients to operate like a tech company rather than like a bank. We enable banking and lending providers to utilise best-of-breed technologies in order to deliver against their product design brief, offer best in class on-boarding processes, credit decisioning and pricing that uses multiple data sets and metrics or aligning products to specific social groupings or mindsets based on customer behaviour.
Are you working with other credit unions?
Yes, we have been talking to other credit unions since the collapse of the government-backed project and looking at how Mambu and other banking ecosystem providers could work together to support credit unions in moving to a new technology to support more lean, modern and flexible products, processes and customer experiences.
What are the main digital trends that could cause disruption for credit unions?
The growth in niche banking offerings from pure digital providers is likely to increase competition within the market in which credit unions operate. This, together with the geographical limitations placed on credit unions regarding their operations, means they cannot scale to meet the technical capabilities of the new digital banks and lenders, so they could look very old fashioned in comparison.
What are UK credit unions already doing digitally and where could they improve?
The UK banking and lending market is changing rapidly, and those who do not adapt to the new digital methods of customer interaction and servicing will begin to struggle. However, due to scale, many credit unions have only partially digitised their offering as the cost implications have historically not been commercially viable. But, over the past 12-18 months, the UK has seen a vast number of new ‘born-digital’ technology providers enter the market and these are built around a best-of-breed composable Application Programming Interface (API)-driven architectures.
You are based in Germany. Can the UK learn something from credit unions abroad?
Credit unions can learn a lot from overseas credit unions and also from other micro-finance and consumer lenders, especially those in developing areas of the world. We have clients from Africa to the Philippines that have created profitable ventures, successfully launching new offerings providing microloans to the public using a digital core and smartphone technology, as well as
automating processes.
