Disruption, cybersecurity and more in the Magic Kingdom

June 19, 2019 5:48 PM

ORLANDO – Remaining competitive on the technology front emerged as the big credit union priority at the Credit Union National Association’s conference this week in Orlando, Fla.

The America’s Credit Union Conference, or ACUC for short, officially kicked off on Sunday, but kicked into high gear Tuesday with a thick schedule focused on industry trends.

Read on for highlights from the first full day.

T Brian Hamilton, CU Direct - ACUC 2019 - CUJ 061919.jpg

Auto lending trends

Credit unions are well known for their focus on auto lending, but digital transformation is changing how people buy cars, and if credit unions aren’t prepared to meet consumer expectations, they could lose out on business.

“We crush the banks in auto lending – this is our space, we own this,” declared T. Brian Hamilton, VP of innovation and insights at CU Direct. “But we have to collectively understand that at some point, experience maters. There’s price elasticity there where that member will take the path of least resistance to get the car, and the rate won’t make the difference.”

One force driving the space? Consumer demand for personalization.

In fact, consumers who said that they found personalization appealing were ten times more likely to be a brand’s best consumer, according to Hamilton.

But the “Amazon effect” is changing the credit union business model, he noted, and CUs should say goodbye to the days of focusing on personal service and move toward a personalized experience curated for the member.

Citing CU Direct research, Hamilton said 40% of credit union members report they are ‘very satisfied’ with their institution’s digital experience. Forty percent of car buyers also want to complete one or more steps of the purchase process online, rather than visiting a branch. And with 84% of dealerships reporting that they’re willing to adopt digital retailing tools, credit unions ought to pick up the pace in their adoption methods before digitally catching up becomes too overwhelming.

But there’s still time to make a digital impression, however, time is of the essence he noted, predicating a big disruption in 18 months.

“Invest in digital transformation: if you think that’s not just people serving people, you’re missing the boat,” Hamilton said.

"Data is the new sexy."

It’s an old adage in the credit union space that CUs provide superior customer service. The problem is, that may no longer be true.

The most recent American Customer Satisfaction Index found credit unions and banks ranked equally for the first time ever, noted Channie Price, account executive for product and technology at CO-OP Financial Services.

And credit unions that don’t meet members’ expectations are more likely than ever to lose that business – not just to banks, but to new competitors in the fintech space, as well as Amazon, Facebook, Apple and Google.

One way to prevent that, however, is to focus on data and using the information at an institution’s fingertips to better predict a member’s future wants and needs.

“Data is the new sexy,” quipped Price.

Fintech saw record investment last year, noted Price, doubling its 2017 numbers to eceed $52.5 billion in investments for 2018. Banks make up a fair share of that, with Chase Bank throwing in $1.4 billion alone in 2018, while Bank of America spends $3 billion annually in tech innovation, she noted.

“It can be a challenge for credit unions with all the disruptors in the marketplace and everyone wanting a piece of that pie,” she said, continuing that “credit unions should be more than just the primary financial institutions, members want to be advised on their financial wellbeing.”

One way to stay competitive, she urged, is to stay top of wallet. While remaining relevant is an ongoing challenge, Price cautioned that a changing payments landscape is no excuse for getting lazy on that front.

“Square is taking your members. They are making it frictionless, they’re making it easy – so you should be providing the same experience to your members as well."

Big battles ahead as Open Your Eyes expands

Deep in the heart of the Magic Kingdom, CUNA President and CEO Jim Nussle pointed to some magic of his own.

“Our magic only happens because of you,” Nussle said to the credit union crowd, citing that 5 million new members were added to credit union ranks in 2018 – a rate that exceeds U.S. population growth.

He continued that credit union growth was five timers stronger than the population growth in the United States, and then shared some of the top credit union advocacy wins that the industry experienced in 2018.

Despite a host of wins in the last year – including ADA victories, regulatory relief, defeat of state-level bills that would have taxed CUs and more – Nussle said the industry as “big attacks coming” from banks, which saw $30 billion in tax breaks last year even as they paid $321 billion in federal fines.

Nussle claimed that banks are trying to divide the movement, noting how banks “love those little credit unions,” but that the larger credit unions attempting to mimic banks were the problem.

It’s a divide-and-conquer strategy, he said, but it’s mostly coming from the largest institutions. Small town community banks, Nussle said, “are a treasure.”

“They’ve done a fantastic job, shoulder-to-shoulder with credit unions,” be said. “But they’re being destroyed,” he added, pointing to the largest 100 banking institutions as the cause.

Nussle also provided an update on the trade group’s nationwide Open Your Eyes campaign, which he previewed at least year’s ACUC and which launched in early 2019. CUNA has already raised more than one-third of the $100 million it aims to raise over three years to fund the campaign. While ads have already begun in states like Michigan and the Carolinas, the Dakotas and Indiana are set to kick off next month.

Closing the gender gap

Reshma Saujani, founder and CEO of the organization Girls Who Code, led a session focused on the nation’s gender gap imposed by a perception from consumable culture.

“I knew that Silicon Valley was a boys club, but I didn’t realize that club started in high school,” she said, continuing about the gender disparity she noticed in high school computer labs.

Saujani said media culture heavily impacts who matriculates into the computer science industry.

With the premise of Saujani’s address focusing on empowering women and changing culture with the use of technology, many parallels could be drawn to the CU movement. Many women are less likely to enter the financial services industry, and even for women working in finance, studies show that they are less likely to hold an executive position in a financial institution compared to a male. While women hold more CEO spots at credit unions than at banks, they are predominantly leading smaller institutions.

Saujani’s advice for attendees rested on three principles:

1) Practice imperfection: stop being perfect and instead, be brave.
2) Don’t be afraid to make mistakes, in fact – pursue something that you’re not an expert at.
3) Push through excuses and pursue your dream.

“If we want more empathy, compassion and humanity in society, we not only have to teach girls how to code, we have to teach them how to be brave, not perfect,” she concluded.

Cybersecurity

Credit unions that want to protect their institutions should start by attempting to hack themselves.

That was one recommendation from Randy Romes, principal at CLA Information Security, who noted that phishing is the root cause behind a majority of cyberfraud and hacking attempts, with the most common cyber fraud scenarios entailing theft of personally identifiable information, credit card information and credentials, and ransomware.

Attempting a pseudo-phishing attack among staff, he said, not only improves employees’ awareness as to what constitutes an attack, but allows credit unions to test for penetration testing in order to assess when an attack has successfully breached the credit union’s facility.

He also had recommendations for avoiding common cyber misconceptions.

Backups should also be done with a service account, but service locations of back ups should be restrictive – and even read-only access for most administrators.

Users possessing the ability to encrypt backups should also be identified, especially if their accounts were to ever be compromised.

“End-users should not be administrators on their computers, and that includes IT folks,” he warned.

Credit unions should also continuously update their back-office protection. One lead they can follow is Microsoft’s ‘patch Tuesday’, the unofficial term used for when the tech giant releases updates for its software.

Operating systems should also be kept to date.

“If key software is changing, you want to make sure that the backup process can survive multiple cycles of the software changing underneath it,” he said.