Thinking about tech trends in terms of ‘bottom-line boosters,’ ‘tech to review’ or ‘roadblocks to progress’ can help credit unions be in a better position to negotiate with their providers.
There are always lots of articles and blogs describing the latest top industry trends and how credit unions might consider prioritizing their spend over the next 12 months to address them. But realistically, how many of us actually interpret these trends effectively enough to know the right call to action – especially in a world where technology drives change at increasingly mind-boggling rates?
Perhaps the biggest question to ask is not what to do in the face of these trends, but rather what trends have been missed or left unaddressed? With so many developments vying for our attention, it is understandable that things might go unnoticed. For example, there are contract negotiation and renewal trends that, when taken into account, can reveal significant opportunities for credit unions to save on key cost areas or generate new revenue. These opportunities are a direct result of the proliferation of technology and rapid rate of change already mentioned.
One of the trends is an increase in the number of vendors that credit unions must assess when considering an upgrade or replacement in a variety of areas. In addition, as new players enter the marketplace and competition with established providers becomes more intense, the contracts credit unions must evaluate are becoming more sophisticated and complex.
These realities are driving trends that will have an impact on many credit unions in 2018. Credit unions do not have to compromise securing a favorable position when negotiating their contracts and prioritizing technology investments. They need only know how to approach these decisions for the coming year. It can help for credit unions to think about trends as part of three distinct categories—bottom-line boosters, technologies to review and roadblocks to progress—to anticipate important conversations with their partners and enter into them with greater confidence and knowledge.
- Discussions about core and critical vendor renewals are happening far in advance of contract renewal dates—up to two years earlier. This provides credit unions with an opportunity to lock in current, more favorable pricing and terms ahead of future inflation or other cost influences.
- To achieve this, a credit union must carefully track the critical dates in most contracts—including notice periods and auto renewal dates—and have benchmark data that is current and comprehensive to compare the offers being made.
- The ongoing disruption created by competitive pressure in the card space is impacting portfolios annually. To ensure debit and credit card portfolios are optimized relative to cost and revenue, credit unions should review their portfolios annually, including PAU—penetration, activation and use—opportunities. The dynamic nature of this part of financial services could be creating opportunities to unlock hidden value well before the full term of the contract is realized.
Technologies to Review
- Credit unions know their members are making more purchases and conducting more financial business via smartphones and tablets. In response, they must adopt a “mobile first” strategy that optimizes their card portfolios. Part of this strategy includes shifting traditional PAU campaigns to also be mobile first in their design.
- Many credit unions are spending considerable time and money modernizing systems as old as financial services—core and payments processing, CRM and loan origination. Decisions made to update, replace or migrate these systems should be largely driven by the credit union’s complete review of its member delivery channels, in addition to considering the extensibility and scalability of its digital banking platform.
Roadblocks to Progress
- Merger and acquisition deals can be distracting to credit union’s day-to-day member service. M&As create other challenges as well, such as the integration of systems and operations, including the evaluation of both entities’ contracts to determine the best course for renegotiating them.
- Credit unions face growing data security requirements as breaches remain a material concern for consumers. Cyber resiliency and fraud mitigation are emerging as significant areas of investment. Interestingly, continued advancements in authentication, biometrics and card control stand to make these efforts as dynamic as the world of digital banking.
Technology, the state of this industry and certainly the regulatory environment are certain to change. In 12 months, countering any of these trends and suggestions on how to leverage them could be irrelevant. However, a simple philosophy that transcends any such developments is that contracts should be reviewed early and often to ensure the playing field between credit unions and vendors remains level. This is the single most important step for credit unions that want to optimize the value of these contracts to deliver more value to their members.
Brad Downs is CEO of SRM (Strategic Resource Management), Memphis, Tenn.