A note to bank and credit union CEOs – It’s time to learn about technology

A note to bank and credit union CEOs – It’s time to learn about technologyA note to bank and credit union CEOs – It’s time to learn about technology

Hey Mr. or Ms. Bank or Credit Union CEO, shouldn’t you be thinking as much like a technology provider as a banker? If you aren’t convinced, then consider this. What would you do if Amazon, with all its consumer-pleasing technology prowess, went into banking?

While the retail giant has been issuing small business loans for several years, the company refrained from taking on consumer banking until the release of the Amazon Reload card. This service allows customers to preload gift cards and use them for purchases. It even offers a 2% reward when funds are transferred to the card from a bank account. More importantly for banks and credit unions, it takes the place of credit and debit card transactions, effectively stealing revenue right from the bottom lines of financial institutions.

Unfortunately, that isn’t all. American Banker reports that Amazon is currently in talks with JPMorgan Chase and Capital One about creating a checking account product.

If you still aren’t convinced that it’s time to act like a technology provider, then you might want to know that a third of consumers say they would open a bank account with Amazon if given the opportunity, according to Bain & Company.i

The truth is, big tech companies such as Amazon and Google, have reshaped consumer expectations and preferences. These new attitudes now pervade all areas of business, including banking. In short, your customers and members expect you to deliver products and services like a technology provider, so it’s probably time to start thinking and acting like one.

Digital demands come to banking

To be leaders in account holder acquisition and retention, bank and credit union CEOs first need to realize that their biggest competitor is no longer the bank down the street but every technology-enabled company that is now reshaping the consumer experience.

When asked to name the three technology applications that had the biggest impact on their lives over the last decade, respondents to a recent survey readily agreed: streaming entertainment, online shopping and high-speed home internet had profoundly changed the course of their lives.ii 

Given attitudes like these, banks and credit unions shouldn’t be surprised to learn that consumers also prefer online channels for handling financially related tasks:

  • More than half of consumers log in to their financial account using a computer at least once a week.iii
  • More than 60% of Gen Xers and millennials use SMS/text messaging to obtain account information.iv
  • More than half of millennials and 47% of Gen Xers regularly use online channels to make a deposit.v 
  • 0% of individuals between the ages of 18 to 34 say they use mobile payment services like Apple Pay and Venmo weekly.vi

The use of digital has become so prevalent, and the pace of technological change so rapid, that 85% of business leaders across multiple industries believe they have only a two-year timeline to make progress on digital initiatives before they fall behind quick-moving competitors.vii 

For community banks and credit unions to compete with the Amazons of the world, it is now critical for CEOs to shake off technology agnosticism and become the movers and shakers of the financial services industry.

Digital initiatives fail without CEO support

Walt Disney once said, “If you dream it, you can do it.” He then proved it by assembling the best talent to bring his visions to life. The great success stories of the digital age, be it Amazon, Google, Netflix, Facebook, or any of the other now household names, have done the same.

When it comes to digital transformations, however, businesses don’t always reach the same outcomes. Anywhere from 60% to 80% of transformation initiatives fail,viii and the number one reason is lack of organizational cohesion.

Accenture conducted a survey of 1,350 businesses that globally reported digital reinvention investments totaling more than $100 billion over a two-year time period. The results were staggering, with only twenty-two percent able to scale beyond early pilot work and realize higher than average returns.ix  Lack of leadership agreement on initiative goals was the number one reason.x 

Findings like this underscore why CEOs at community banks and credit unions need to lead digital transformations. When banks and credit unions digitize, the cost saving potential is tremendous. As much as a thirty percent decline in expenses has been realized with an additional twenty percent increase in revenue.xi  However, “success depends on engaged senior leadership that is committed to radically changing the bank,” says Boston Consulting Group.

Becoming the technology leader of tomorrow

Bank and credit union CEOs can lead successful digital transformations and realize stronger return on investments by developing a technology mindset:

  • Be the bank with big ideas: If there is one thing a technology leader does well, it’s to recognize the needs of customers and offer innovative solutions.
  • Be willing to evolve: Big ideas are important, but don’t get so attached to one that you fail to see when it’s time to change direction and think of something new.
  • Target technology investments: According to McKinsey & Company, the top economic performers in a given industry are the companies that digitize the core business and then move beyond to develop new digital businesses, but first, CEOs need to prioritize technology acquisitions and be ready to focus budgets on creating a digitally functional enterprise.
  • Communicate a clear vision: It’s up to the CEO to build the transformation vision, realign ingrained internal behaviors, and define the successful end-state.

McKinsey’s Retail Consumer Banking Survey shows that the number of customers who prefer in-branch services and “old, familiar forms of payment” is declining dramatically.xii  On the other hand, high integration of digital channels and services with core banking products invites greater customer and member engagement.

In the end, the answer is yes, Mr. or Ms. Bank or Credit Union CEO, you should be thinking as much like a technology provider as a banker.

i  Krista Garcia. “Would Consumers Put Their Money in an Amazon Bank?”  eMarketer, Sep. 20, 2020.
ii  “Infographic: 2010’s Tech That Changed Our Lives.” Metova. Metova infographic, Feb. 12, 2020. Web.
iii  “The Rise of Digital First Banking.” Aite, Jun. 2020. Web.
iv  Ibid.
v  Ibid.
vi  “Provident Bank Survey Shows Three-Fourths of U.S. Adults Prefer Digital Banking Services.” Cision. Provident Bank press release, Oct. 30, 2019. Web.
vii  Blake Morgan. “40 Stats on Digital Transformation and Customer Experience. Forbes, May 13, 2019. Web.
viii  James Macaulay. “Most Digital Transformations Fail, Here’s How to Change That.” CEO World Magazine, Mar. 30, 2019. Web.
ix  Mike Sutcliff, et al. “The Two Big Reasons That Digital Transformations Fail.” Harvard Business Review, Oct. 18, 2019. Web.
x  Ibid.
xi  “The Four Pillars of Digital Transformation in Banking.” The Financial Brand, Mar. 27, 2018. Web.
xii  Shital Chheda, et al. “Customer Mindshare: The New Battleground in US Retail Banking.” McKinsey & Company. Retrieved from https://www.mckinsey.com/industries/financial-services/our-insights/customer-mindshare-the-new-battleground-in-us-retail-banking.