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Forging ahead

The future — and present — of banking is digital, with credit unions proving they are competitive players in this ever-growing, crowded field.

In one of the most famous stories in Canadian literature, Stephen Leacock wrote an extremely funny description of how “rattled” he was when he made his first visit to a bank branch. He fled, cash still in hand, the tellers laughing at his back, after he opened an account, got flustered and closed it all in one visit.

The story struck a chord with readers precisely because it captured how many of them felt when dealing with a bank — confused, fearful and intimidated. Flash forward 100 years and you’ll find most people rarely visit a bank branch and, if they do, they may be met at the door by greeters offering a latte, or even a friendly St. Bernard. Most of us now do much of our banking online or with our phones.

Talk to credit union executives about how they respond to members now and you’ll hear how hard they’re working to understand their customers’ journeys and to provide personalized, customized experiences. You’ll also hear a lot about mobile apps, online accounts and a little bit about smaller, boutique branches that may not do transactions, or even have cash.

Their goal is to make members and potential members feel comfortable, welcome and trusting, whether they come in the front door at a branch or via the website. A major reason for the overwhelming change is that members these days have lots of other options for financial services, from Money Mart to Google, Amazon and Facebook.

Everyone aggress that the future of financial services is digital and if credit unions want to grab a bigger share of the pie, they’ll need to prove they can play this field. But it’s a challenging time for credit unions. Many members still want the option of visiting a branch, even if they don’t use them often.

“We know our members better than anyone else and we are using that knowledge as we move into a digital world.” – Bill Maurin

Meridian Credit Union (339,000 members, $20.6 billion assets) is Ontario’s biggest credit union and the third largest in Canada. It is expanding its digital presence, while also boosting its physical footprint, adding 19 branches in the Greater Toronto Area in the past few years. “Our industry is moving into a digital future with smaller branches but our members have told us they still value human interaction,” CEO Bill Maurin says. “In fact, it’s the connecting link that differentiates us,” says Maurin. “We know our members better than anyone else and we are using that knowledge as we move into a digital world,” he adds. “We have a personal relationship with them that carries over, in a different way, online.”

To expand its digital offerings to a wider market, Meridian is launching Motus Bank, a national, online-only bank that will provide the latest high-tech services, while using technology to maintain a close personal connection with its members.

The British are coming

Meridian and others are looking closely at new digital-only competitors such as Monzo and Revolut, both started in Britain and offering quick and easy services. Monzo’s slogan is: “We’re building a new kind of bank. A bank that lives on your smartphone and built for the way you live today.” Monzo offers customers help saving, for example, by identifying that they are buying transit tickets weekly, instead of saving with a monthly pass. So it communicates, “Hey, consider buying a pass.” A generation raised on the sometimes-spooky personal awareness shown by Google and Facebook, or shopping advice from Amazon, expects this kind of service and feels comfortable with the algorithms behind it.

An Accenture study found consumers are willing to share more of their personal data with their financial institutions but they understand the value of that data and expect benefits in return. They want more tailored advice and priority services, such as expedited approvals, or a monetary benefit like competitive pricing, in return for the information they share. “With the wealth of data possessed by banks and credit unions, consumers not surprisingly expect providers to know them, value them and reward them for their relationships,” says Jody Bhagat, president of Americas at Personetics, which provides artificial intelligence solutions to financial institutions.

Arvind Sharma, chief digital and payments officer at Central 1 Credit Union, is leading the overhaul of the digital services it provides to credit unions. Central 1 is replacing MemberDirect, which has been used by about 80 percent of Canadian credit unions, with Forge, a new platform built with Dutch partner Backbase.

In a webinar last August, Central 1 CEO Mark Blucher explained that they needed to charge 20 percent more for MemberDirect services, just in order to cover its costs. There had been no price increase for 10 years and the cost to operate it had outstripped the fees. Blucher also noted that two credit unions had withdrawn from MemberDirect, which meant the remaining credit unions would need to pay more to cover the costs. “No one likes a price increase; I get that,” he stated.

Forge attracting credit unions

His good news was that for about the same price credit unions could sign up for Forge and take advantage of the expected benefits it will offer. Sharma says about 110 credit unions, almost 50 percent of the market, have so far signed on to Forge. A few have delayed while they review other options but he’s convinced that, in the end, most will decide Forge is their best option.

Sharma calls Forge the marrying of two organizations and two capabilities. Backbase is the leading digital platform in Europe and has won top awards from industry experts such as Forrester Research and Ovum. “But it is European, so you have to Canadianize it, explain Interac e-Transfers, how we do bill payments and also build the capabilities for it to integrate with 250 core banking systems across Canada,” Sharma says. “So Backbase built the digital platform, we brought it to Canada, Canadianized it and renamed it Forge.”

Sharma adds that Forge will offer individuals a more customized platform that will only show them services and products they want to see. There are three components to Forge that credit unions can use: a public website, mobile app and online banking. FirstOntario Credit Union (127,000 members, $5.5 billion assets), with its head office in Stoney Creek, was the first to launch a public site using Forge this past March. Alterna Savings Credit Union (140,000 members, $5.1 billion in assets) is expected to be first to launch the mobile app, which should be ready soon.

“We are putting the power of change in the hands of the customer, we’re going to the cloud and we’re moving to Agile.” – Arvind Sharma

Sharma says Forge offers three major advantages: “We are putting the power of change in the hands of the customer, we’re going to the cloud and we’re moving to Agile.” For example, the new platform allows credit unions to drag and drop elements and change the customer experience on the public site, without turning to Central 1 for help as they had to with MemberDirect. The second change is a move to the cloud that includes adopting technologies that will cut costs and allow quicker response. The move to Agile means Central 1 will build and release new products every two months, getting feedback from users and releasing a new version, rather than taking a long time to fine tune a release to get it perfect.

The focus on speed and time strikes a chord with credit unions. “We want to give back more time to the members, to let them live their lives,” says Lloyd Smith, interim CEO at FirstOntario. “The quote we use is, ‘People want to live, they don’t want to bank.’ Our job is to try to find as many solutions as we can that will enrich members’ lives and provide an enhanced retail banking experience,” says Smith.

Curtains for big branches

FirstOntario is also re-evaluating its branch network, says Smith, while keeping in mind that many members, especially those over 55, still value a physical branch. “My personal view is that big branches that you saw 10 or 15 years ago, that’s not what you’re going to see in the future.”

FirstOntario wants to provide a customized experience that provides retail banking the way a member wants it. “You have to define what that retail experience looks like based on the audience you are trying to serve,” says Smith. “It doesn’t do any good to offer a retail branch to a 20-year-old who would see no relevancy and would rather go sit in a coffee shop with their friends and use their phone and do their banking. The customized experience is one that is tailored to that age group.”

Smith notes that 50 years ago a retail branch offered the full suite of products and services that a credit union could provide. “Our goal with our digital strategy is to be able to provide all those services and offerings digitally.” As well, he
adds, FirstOntario can provide the digital service anywhere in the province, so it can attract members who live outside
its branch footprint and also retain any members who happen to move away.

It’s a fair bet that any current humour writer who does a story about credit union members being “rattled” by their service will be writing about phone problems, or computer crashes — not intimidating tellers. ◊