Prepare for the Impact of Big Change

We often talk about personalization and connecting with the customer, especially as digital adoption grows, but there could be emerging opportunities that are not about forging direct relationships.

Consumer behavior continues to shift, and a noteworthy change is consumer adoption of financial services in places where financial services didn’t exist previously. Think of financing a purchase while shopping online with buy now, pay later, opening a checking or debit account through Google, Uber paying drivers immediately in the app, or Tesla offering car insurance as part of the purchase process. People like having their financial needs addressed conveniently, when they need them, without having to seek them out separately.  

The adoption of ultra-convenient financial services is on a rapid growth trajectory as more fintech and other providers embed financial products into their apps. An emerging opportunity for financial institutions stems from the fact that, so far, many fintechs don’t want to become banks. They’d rather focus on their core strengths and leave the banking regulations, infrastructure and details to licensed banks and credit unions. 

Thus, a potential partnership is born in which financial institutions provide the behind-the-scenes nuts and bolts of financial services like loans and accounts, and in most cases, customers assume the services are provided by the company they’re interacting with and are unaware of the identity of the financial institution.

While this could represent threats to the existing business model, imagine introducing entirely new channels that provide an experience today’s consumers are demanding. In addition to existing target markets of customers who interact directly with the institution, new target markets become possible.

People often feel uncertain and maybe a little uncomfortable when presented with such potentially impactful changes in the industry. One way to become more comfortable is to carve out time to think strategically and creatively about what the changes could mean to your organization, without the pressure of having to make any immediate decisions.

Don’t get too distracted yet by how this would work. It might involve software development, engaging third parties to link to the fintech, regulatory and compliance questions, operational changes, and on and on. Before going down that path, start with some strategic thinking about the idea.

There are many potential opportunities from banking and fintech partnerships, but let’s take one scenario as a strategic thinking exercise. Assuming the trend accelerates, could there come a day when the majority of people don’t even have a direct relationship with a bank or credit union? 

It’s 2030. Your credit union is wildly successful, even as consumer preferences and expectations have evolved to the point that people don’t really think of what they’re doing as banking. Many younger consumers have a debit account with Chime, use Fidelity for investments, get their auto loan through the dealer’s app, their mortgage through Zillow, and finance large purchases through buy now, pay later options at time of purchase. Some people do not even realize what a bank or credit union is for.  

Strategic Thinking Questions

• What new opportunities did we take advantage of and why?
  • How did we shift our mindset?
  • When did we start making changes?
  • What were the hardest things to change?
  • What competitive advantages did we create?
• What changes to our business model were necessary to be successful in this scenario? Key questions include: 
  • Why are we in business? What is our purpose? 
  • What target markets are we serving? 
  • What is our value proposition for our target markets? 
  • What core strengths has our organization developed that enable us to deliver the value propositions successfully? 
• What was our strategic approach to third parties?
• How have we changed our organizational roles and structure? 
• How did we change our approach to talent management?
• How have our major revenue sources and expense structure changed? 
• What are our new measures of success?
• What decisions could we make today that would prepare us for this scenario, and not harm us?
• What other questions should we be asking? 

It’s not too early to start thinking through the potential opportunities and threats that widespread growth and adoption of these emerging capabilities presents. Spending time with stakeholders thinking about the possibilities and philosophical questions, while staying out of the weeds initially, is a productive way to begin the conversations that will help determine the institution’s ultimate direction.

c. myers helps financial institutions take control of their future by linking strategy, desired financial performance, and consistent execution with the right talent. Their experience and thought leadership allows them to work as a strategic collaborator and help uncover opportunities that result in continuous business model optimization. They have the experience of working with over 600 financial institutions, including 50% of those over $1 billion in assets and about 25% over $100 million. c. myers helps credit unions think to differentiate and drive better decisions through strategic planning & business model optimization, strategic solutions and implementation, strategic leadership development, real-time ALM and financial planning, education, and thought leadership.