Tech Check

Whether credit unions know it or not, says Tim McAlpine, they’re in the tech business.

McAlpine, president and creative director at the Currency, a CUES Supplier member based in Chilliwack, British Columbia, and board chair of $45 million Mount Lehman Credit Union, Mt. Lehman, British Columbia, says he’s come to realize over time that credit unions are fundamentally technology companies.

“So much of what we do is wrapped in technology,” he explains. “And yet so much of that is outsourced, whether it’s to our core providers or our other system providers. [I believe we] should have a fundamental understanding of how this stuff works from an opportunity point of view, from a risk point of view, and from a just good governance point of view.”

It helps when directors are avid users of current tech, but what’s really valuable is a sense of the big picture: How do credit union members use technology? How will they use it in the future? How will the adoption of a technology, or the lack thereof, affect the future prospects of the financial institution?

“We’re talking about the business risk to the credit union around the implementation or use of computers,” explains James Benlein, owner, KGS Consulting, Silverdale, Wash. “As an example, if the credit union chooses to wait and not implement mobile banking, there is a business risk that potential members will decide not to join the credit union because they don’t have mobile banking. At that point, the credit union has to say, OK, what is the risk of losing these potential members?”

Steve Williams, principal and co-founder of CUES Supplier member and strategic provider Cornerstone Advisors, Scottsdale, Ariz., says there’s never any downside to directors engaging in the product and channel offerings of the credit union. But what’s more important is that they have the discipline to look beyond their personal preferences and behaviors and think about the market as a whole.

“They need to have the discipline to get the right kind of data and the right kind of perspective from both members and general consumer research to say, ‘This is where we need to allocate resources,’” he says. “I think it’s more important to have that objective discipline than it is to be a power user. Because frankly, a power user could commit the sin of saying, ‘My preferences and what I like represents what we need to be focusing on as a credit union.’”

Delving Deeper

Of course, directors aren’t involved in the day-to-day operations of the credit union. But they also shouldn’t be too hands-off when it comes to big technology decisions. One or two of the most computer-savvy directors may, for example, serve on the CU’s IT steering or IT strategy committee.

“They can spend some time becoming more knowledgeable about the IT projects and initiatives that the credit union is working on, and then can go back to the board and all of the members and say, ‘This is what we’re working on, this is what we’re doing,’” says Benlein.

Williams says he often sees board technology committees that work alongside management, especially at larger credit unions. In the best case, the committee delves a little deeper into the organization’s technology plan, understands the major vendors, and is involved in major investments. It shouldn’t meet all the time, he says, or there’s a risk of them getting too involved in operations.

“I think a quarterly type meeting is reasonable—one that’s involved in reviewing progress of the technology plan execution and of major partnering and investment decisions,” Benlein says. “Then, when it gets to the board, they say ‘Charlie, you’ve looked at this BCP server out in Nevada. What do you think?’

“And Charlie says, ‘We got two bids. I’ve asked the questions. I sat on the conference call with the final vendor. I feel good about this. Thumbs up.’ I think that can be an efficient way to do governance.”

McAlpine says the board should be involved in big decisions, such as core banking system conversions, and not just be rubber-stamping management’s selections. An IT committee is a way for them to weigh in without overstepping.

“It’s a fine line, right?” he says. “It’s an advisory role. But an advisor needs to be up to speed on things. From my experience, in many cases if a credit union gets in trouble, it’s been the case that the board hasn’t known enough.”

For the Members

But how much knowledge is enough? For example, do board members need to be users of the credit union’s mobile banking app to be able to make sound recommendations about it? Yes and no, says Benlein. The board’s primary interest should be the big-picture questions of how implementing (or not implementing) a technology will affect the membership. But it can be extremely helpful for them to have a little hands-on experience.

Many CUs test new technologies on their employees before launching them for the membership. These testing runs could include the board, Benlein says. And no worries if some of the directors are not very tech-savvy; in this case, it might actually be an advantage.

“If you have credit union employees who might be younger and more comfortable with technology, then [when something doesn’t work smoothly] they just go, ‘Oh, it always does that.’ Board members who don’t have that comfort level may be able to ask other questions: ‘Why does it do this? How does it do it? How come?’”

That’s important because some of the members are bound to be less tech-savvy as well. The board can serve as a surrogate for those members during the testing process.

“They (the members) can see the convenience of mobile banking,” he says. “They’re interested, they want to do it, but they may be kind of hesitant. Your board may have the same sort of feelings and may be able to ask the questions that your members are going to have.”

So while it’s crucial that at least a couple of board members are technologically proficient, what’s even more important is that most or all of the CU’s directors show a keen interest in IT and tech—that they are curious, engaged, persistent in asking questions, and willing to try new things.

While they’re at it, they might want to try out the competition’s technology for ideas on how to serve the members better, says McAlpine.

“Credit unions, in particular, have a tendency to do one version of their mobile app and then say, ‘All right, we’re done!’” he says. “And yet with popular apps, you’re constantly getting alerts that there are new improvements or bug fixes. So to be active users of a credit union’s technology is important, but to also have an understanding of what’s going on in the market, I think is important as well.”

Upping Their Game

At some credit unions, directors simply aren’t very computer-literate. Yet they still need to be able to offer sound guidance in IT matters. That’s why they should never be shy about enlisting help when they need it.

“Depending on the size of the credit union, there might be a VP of information technology or a manager of information technology [who could] come and give a report to the board on what’s up, what’s new,” suggests McAlpine. “Also, the board can invite special guests to board meetings. We do that quite often. It may be somebody with an emerging payments technology, or some other technology, just to give a perspective on what is out there.”

The credit union may have staff with knowledge and experience who can help educate board members, says Benlein. When they’re discussing IT projects, those employees can offer more background on the technology and offer a business case for why the credit union should or shouldn’t get involved in it.

“Something you would like to see at a credit union is a relationship between the board and management where, if a board member says, ‘We’re hearing a lot about Bitcoin and we’re not sure we understand what it is,’ someone at the credit union is willing to help,” Benlein says. “Maybe the IT person can point them in the direction of some useful resources—a paper, a magazine article, something that can help them better understand.”

Williams says often, when the board spends time with the IT department, they come away with a new respect for the developers and data managers. They gain a new understanding of what the key managers in the IT group do.

“Sometimes I’ve heard them say, ‘I’m surprised at how much we do with so little down there,’” Williams says. “So it’s a very good way to build that bridge between the board and management.”

And there’s nothing stopping the board from bringing in outside experts, either, he points out. A gut check from a third-party consultant can often help directors understand how their credit union compares to others, and how it’s measuring up against best practices.

“Boards are just very hungry to know where they stand, given what the large players are doing and where consumer behavior is moving,” Williams says. “I often hear them say, ‘I understand we’re not perfect. I just want an objective assessment of where we are strong, where we are weak, and what we should do first, second, and third.’”

Jamie Swedberg is a freelance writer based in Georgia.