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Dialling into Digital

Credit unions are working hard to meet members' demands for new, digital financial services.

A member of FirstOntario Credit Union (115,000 members, $4.9 billion in assets) steps into a Hamilton shopping mall video booth and begins to negotiate a car loan with a credit union employee – long after the branch has closed.

At a First West Credit Union branch in Penticton, BC (240,000 members, $10 billion in assets) a digital concierge – a human employee with a tablet in hand – approaches a senior waiting in a branch lineup to ask if she would like to see how to do a deposit or a transfer in the comfort of her home.

Welcome to the brave new world of digital, a movement in Canada’s credit union industry that is accelerating to meet members’ demand for new financial services amid increasingly intense competition from banks and other financial institutions.

These scenarios are just two examples of how the global digital transformation is prompting change among Canada’s credit unions. While credit unions share many common values — such as putting members first — how they act on those values is as different as the geography of the communities both small and large that credit unions serve.

There appears to be little research on digital transformation in Canada. However, a 2014 United States study by Bruce Cahan, an adjunct professor at Stanford University and founder of the non-profit Urban Logic Inc., claims that American credit unions do a relatively poor job of assessing the impact that digitization measures have had on members or the communities they live in. Whether Canadian credit unions manage any better remains to be seen, yet there is anecdotal evidence of digital innovation serving their members.

Leading the charge

Jeff Wong is Coast Capital Savings Credit Union’s (543,000 members, $18.4 billion in assets) vice-president of information and chief business transformation officer. Wong is leading a multi-million dollar project to modernize Coast Capital Saving’s technological infrastructure. His discussion of what that means starts with his definition of what digital transformation is not. For one, says Wong, it’s not the sole domain of the IT department, which maintains the computers, software and networks within a credit union.

“If you have a process that is poor, you are just making that poor process faster. So you are going to get the same result.” – Jeff Wong

Many senior executives he’s talked to tend to start on the wrong foot by simplistically focusing on superficial aspects of digitization such as getting rid of paper documents by converting them into electronic ones. “I look at that as just digitizing the mouse trap,” says Wong. “If you have a process that is poor, you are just making that poor process faster. So you are going to get the same result. If that is where it starts and ends up, you are not going to achieve digital transformation.” Wong believes that digital transformation must serve a higher purpose than just gains in messaging efficiency and cutting paper costs. Credit unions have different goals than other financial institutions; namely, they need to improve the quality of their members’ financial lives.

Getting there costs money. Lots of it. Wong is reluctant to disclose what Coast Capital Savings is spending each year on its digital initiative but he does give a sense of scale by noting the expense has grown exponentially to become one of its biggest budget expenses — on par with its expansion plans across Canada. This year’s expenditures, he says, are more than double what they have spent in the past 10 years.

The credit union started its drive to digitize by first examining the efforts of other financial institutions, then reached out to Coast Capital Savings members, asking what they wanted. Their response, among other things, was the desire for a simple, transparent process when opening an account. Right now, this in-branch process can take between 60 to 90 minutes, stretching out to two hours in some cases. If a member only has “half an hour on a lunch break and we don’t get the process done in that time and they have to go home or to work and then call the contact centre, that’s a ridiculous process,” says Wong. So Coast Capital set a goal of digitizing the undertaking so that it can be completed in five minutes. In setting that ambitious mark, Coast Capital Savings learned that the technology has far-reaching ramifications. Most of the real work involved in simplifying the process and reducing the time it takes to open an account involved understanding the concomitant need to manage risks — like money laundering and fraud — that are overseen by third parties such as the provincial and federal regulators of credit unions. Creating better access for members now involved unanticipated complications and layers of complexity, an expensive undertaking.

Reaching out to members

For COO Shelley Besse at First West Credit Union, the digital transformation has largely been driven by consumers and what they want from a financial institution. They see their time as precious, so being able to access services easily and efficiently has high value.

Besse also doesn’t see First West members as homogenous. Some members will prefer to use their mobile devices, some will prefer to pick up the phone or deal with a branch teller face-to-face. “We need to be at the forefront of that so that we are able to service our future members how and when they want to be served,” says Besse.

A challenge in digital transformation is “to discern among the shiny objects to determine which of those will be most interesting and utilized.” – Michelle Belland

While there is strong pressure to automate and digitize the transactional side of credit union services, such as providing e-signatures, which have the legal force of a hand-written signature, or use Skype for member-employee meetings, First West’s ultimate aim is to focus on advising members on the best way to manage their financial lives. For instance, Besse says it doesn’t make sense to digitize everything because there may not be any value to the business, members or employees to go that route. To determine both the goals and the process of improvement, First West uses the Lean Sigma Six system, a process developed by Toyota in the 1980s. That process is one of examining and re-examinin each phase of improvement, or “kaizen,” to determine if there has been enhanced value for a business or member during the shift to digital.

Digitization, however, is not just about numbers, Besse says. “What we don’t want to remove is the human element, if that is what a member’s preference is.”

Chris Catliff has been CEO of BlueShore Financial Credit Union (40,000 members, $4.5 billion in assets), since 2000. Catliff sees digital transformation as a means to an end, which is “passionately improving our members’ overall financial well-being in a digitally interconnected world.

“Our strategy is different from all the other credit unions in that it is a deep strategy and not a wide one,” says Catliff. He points out that while membership has remained stable at 40,000, assets increased by $1 billion to $4.5 billion from 2013-2016. Earnings have grown per member but costs to service these members have also increased. “We decided we are going to be the best in the world at serving the West Coast affluent,” he says. This sense of exclusivity is reinforced by BlueShore Financial calling its branches Financial Spas, branded as “all the elements work in harmony to stimulate the senses, engage in discovery and create a distinctive atmosphere unlike any financial institution you’ve experienced.” The financial spa concept communicates the creation of an environment with stress-free financial transactions. Members are soothed with soft music and images of nature at the BlueShore Financial branch, while affluent members are personally helped with their financial affairs.

Asking members about their preferences, however, led to BlueShore Financial dropping a number of digitalization projects, Catliff says. About 300 members surveyed told the credit union they were happy with the amount of time spent on account opening because “we made everything so pleasurable about it.”

Servus Credit Union’s (380,000 members, $18.4 billion in assets) Michelle Belland, senior vice-president marketing and digital banking, warns other credit unions that there is a lot of distracting theory and practice about digital transformation that should be ignored. A challenge in digital transformation is “to discern among the shiny objects to determine which of those will be most interesting and utilized,” Belland says from Edmonton.

Jay-Ann Gilfoy, senior vice-president of digital solutions and business for Vancouver City Savings Credit Union (523,000 members, $25.6 billion in assets), says there is another aspect of digitization that should be avoided. Banks, which are heavily investing in digital technologies, are also closing branches and laying off staff, Gilfoy says. Credit unions, on the other hand, have not had the same blanket lay-offs — nor should they. “The difference for us as credit unions is we are here to serve our communities,” says Gilfoy. The retention of staff, she adds, is a reflection of Vancity’s values and commitment to their communities, which includes employees.

For Tom Bijvoet, FirstOntario’s chief administration officer, “digital transformation means empowering our members. We really want to get to a situation where we can offer our members the opportunity to do their financial business when, where and how they want. Often people think of digital transformation as something that has the purpose of pushing people towards self-service. That’s not necessarily the case.”

Credit unions that pursue such self-service transformation have “got to allow for failure,” Bijvoet warns. “You undertake a pilot and it sounds like a good idea to bring this technology and service to our members. But it may not live up to the expectations. At that point, you have to be able to draw a line in the sand and say, ‘We’ll evaluate why this didn’t work but we will move on to the next project.’”

Ultimately, the efficiencies gained through going digital meet an important goal for credit unions large and small, says Bijvoet. “We need to make a profit to offer our members the lowest rate. We need to make a profit because we want to give back to the community.” ◊