The NAFCU Journal: The Future is Now

From omnichannel to open banking, these are the technologies driving credit unions in 2019 and beyond

By Linda Formichelli

Technological innovation is rushing forward at an incredible pace; every time you blink, you’ve just missed a revolutionary new app, another industry that’s being disrupted by tech, or the release of a better, faster device.

Even though the days of physical signatures, stacks of paper documents and clunky banking apps are by no means gone, many credit unions are realizing they’re perfectly positioned to take advantage of all this technological
change — and to pass along the benefits to their communities.

“Credit unions have an opportunity to be more innovative than some of the bigger banks,” says Aaron Junod, vice president of product management at Geezeo, a fintech partner for financial institutions, core processors and complementary digital banking solutions. “So, we actually see some of our more innovative requests coming from credit unions.”

Which technologies are credit unions latching onto right now? This timeline of emerging banking tech explains the biggest developments and how credit unions are using them.

2000: E-Signatures

E-signatures not only free credit unions from the burden of paper documents, but they also extend banking capabilities to people in communities that are underbanked. Since members no longer need to go to a branch to physically sign loan documents or open accounts, they can enjoy the same banking experiences as other communities no matter where they’re located. 

See related story: “How One Credit Union Is Using E-Signatures to Serve Underbanked Communities”

Worried that the particular demographic your credit union serves will reject the idea of e-signing documents? According to research by Software Advice, a software review and selection service for businesses, 77 percent of consumers have e-signed a form three or more times over the past three years, and 77 percent are moderately to very comfortable signing and submitting official documents digitally.

“Our clients — more than 950 credit unions and banks — report high consumer adoption rates,” says Mike Ball, ice president of markets and strategy at IMM, a provider of e-signature and digital transaction solutions for financial institutions. “E-signatures will only continue to gain popularity as more businesses and financial institutions adopt them.”

Read more about E-Sign on NAFCU Compliance blog

2008: Blockchain

We’ve all heard about blockchain, but not many can define it. Essentially, blockchain is a shared registry that any organization can write to and no one can delete anything from. “It becomes an audit trail where the integrity of that ledger or that record is continuously maintained and verified,” says Brian Behlendorf, executive director at Hyperledger, an open-source collaborative created by the Linux Foundation to advance cross-industry blockchain technologies in which NAFCU participates. “So it becomes a great way to build a system of record for transactions, events or information that you’re intending to share among the population or a specific group.”

For credit unions, blockchain is a way to keep track of digital assets. According to the report “Blockchain and the Credit Union: The Asset Transfer Revolution” from PSCU and Glenbrook Partners, some use cases for credit unions include making person-to-person payments faster and more secure; facilitating largescale transactions between financial institutions; and recording ownership and transfer of assets such as stocks, bonds, derivatives, land titles, mortgages and loan documents.

Right now, Behlendorf compares blockchain to the internet in the mid-1990s. “A lot of companies were still not yet online, or maybe they had a brochureware website,” he says of that early internet era. “But there were a few who were starting to pioneer — and arguably, by 1999, if you were a major company and you didn’t have a website, you were not doing so well.”

In other words, blockchain has a lot of potential, and smart businesses are now dreaming up use cases for their own industries.

Behlendorf suggests that credit unions start “getting their hands dirty with the code” to figure out how blockchain can work for them. If you’re still overwhelmed by the very concept of it, though, don’t fret. “I’m sure that eventually there will be independent software vendors to service that particular niche,” he says. “And a lot of the existing [independent software vendors] in the space will probably add blockchain features to their existing products.”

Read more:  “NAFCU gives credit unions a voice in blockchain technology"

2010: Omnichannel Commerce

Businesses used to have multiple channels — such as your branch, your call center, your online member portal — and those channels were separated by an invisible wall. Certain tasks and transactions could be done only in one channel or the other. Even if you could perform a task in different channels, the experience may have been different in each one: For example, a mobile app may not have had the same “feel” as the website, which was in turn completely different from the ATM or branch experience.

Now, members expect a frictionless experience in which they can hop from channel to channel without ever feeling as if they’re leaving your brand. “If you’re looking for a cohesive customer experience, what we’re seeing is that credit unions need to focus on having that experience live within their application,” says Melissa Kopp, senior leader of business development for payment service provider Worldpay. “And when I say application, I’m really talking about their online and mobile platforms.” Every part of the online and mobile experience needs to be quick, secure and cohesive, Kopp says.

Century Federal Credit Union in Cleveland is revamping its online and mobile banking systems with this in mind, with a focus on building out its digital channel. “Whatever you can do in a branch or by calling our call center, you’ll be able to do no matter where you are — whether you’re at a desktop, on a tablet, or on a smartphone,” says Jacqueline Jackson, Century Federal’s director of risk and compliance. “You’ll have the power of actually working with Century right in the palm of your hand. We want to meet our members wherever they are.

Every technological advance has some glitches, so Century Federal will be posting a full user manual for its members online, plus training its brand and call center staff so they can walk members through the new digital tools if needed. “Everyone within the credit union, from the board all the way down, has actually worked through the system, and has tested and trained,” Jackson says. It’s that kind of “all hands on deck” attitude and diligent efforts to create a smooth experience across platforms that help speed adoption of new credit union technology by members.

2015: Open Banking

APIs have been around for years, but now financial institutions are looking at them in a new way — as an opportunity to improve financial services for their customers. Developers can use the shared data to bring products to market that address credit unions’ pain points. “There are a lot of nonbank institutions today that are creating value-added services, and obviously, a lot of those value-added services need to tie into some degree of bank technology infrastructure,” says Paul Walker, general manager of Q2 Open, an API portfolio from digital transformation solutions provider Q2. “This provides a very easy-to-build-from platform, not only for external parties, but also for a credit union’s internal resources.”

For example, it’s not uncommon, Walker says, for a credit union’s technology or business development team to want to test out a new technology but be restricted by cost and the obligation to enter long-term contracts. Open APIs give these teams the opportunity to pilot or build new technology quickly and cost-effectively

Th ere’s been a resurgence of interest in open banking as financial institutions become more comfortable with deploying technology in the cloud. “Just a few years ago, a lot of people didn’t make the investment to go build out these APIs,” Walker says. “We’re now starting to see that there are a number of technologies in production that are readily available to consume. And it’s not just a discussion; it’s a reality.”

Since many credit unions are now comfortable using a technology stack that was designed for the digital-only client, this opens up new banking applications that benefit the mobile member. “One example that has a lot of opportunity is to reinvent free checking,” Walker says. “It’s normally a big cost burden to most financial institutions. But if a credit union were able to reimagine and repackage free checking as a digital-only account, I believe that could help them in not only saving money, but also in creating value-added services that some of their traditional technology may have limitations around.”

Open APIs are also helping credit unions offer a cohesive member experience across all devices, Junod says, because it allows them to make the same data available across platforms. So, one emerging technology feeds into another — letting credit unions improve their offerings, internal management and customer satisfaction.

Linda Formichelli is a North Carolina-based freelance journalist and a frequent contributor to The NAFCU Journal.

This article was published in the July-August 2019 edition of The NAFCU Journal magazine. 
Want to receive The NAFCU Journal in your inbox? Update your email preferences.