The following is a transcript of the podcast episode
Aaron McPherson
Thanks Ryan. This is Aaron McPherson. I’m talking with Ashley and Amanda. It was great working with you on this white paper. I think we both agree that digital transformation is absolutely critical because that’s where the customers are these days, but I’m interested in some of the insights that you have as to why digital transformation is so important in the Modern Age.
Amanda Atcheson
This is Amanda. I can take that one to start. I think what we’ve seen at Co-Op is the trends, the market trends that are out there in any industry are pointing toward this shift toward digital and so consumer expectations are rising. They are expecting that that experience that they have with the Google, Apple, Facebook, Amazon — pretty much every interaction they have digitally — so credit unions and institutions really have to see what those experiences are and see how they can meet those expectations as at the same time technology is advancing faster than ever. There’s this overtaking of digital technology that we do really have an industry need to respond to in order to provide that experience that members really expect.
Ashley McAlpine
Yeah, and I think, if you go off of what the consumer expectation is, we’ve really seen a lot of drive from our members and just customers in the market, that that’s their expectation. A lot of folks right now are talking about having the value of the product or the price being an influencer when it comes to consumers, but the expectation is that by 2020 that the digital experience is going to be that differentiator between when a consumer chooses to go with one product versus the other. That’s going to be important to make sure that businesses out there in the industry maintain and keep those relationships with consumers. There was a really great study: if you look at Bank of America, once they shifted to that digital-first strategy, they moved from being the fourth to the first largest share of consumer deposits in the United States. So as you can see that actual real-life study come out that when we’re making that digital transformation and we change that focus that there’s actually quite a large benefit.
Amanda Atcheson
Right. Something we like to say about digital transformation is “We know it’s really hard, but it’s worth it,” and that study that Ashley just pointed out, that really pays off. It really does pay off when you lead with a digital strategies today.
Aaron McPherson
Yes, I know. When I sign up with a new company nowadays often my first thing is to see if they have an app in the app store, because like a lot of people, I live off my phone and so I expect that they’re going to have that available to me. One of the things we found in our surveys is that digital channels like mobile phones and online are becoming more and more important even as people still value being able to go into the branch or being able to call somebody up and talk to a real person. So we’re not seeing people abandoning the old channels, but what we are seeing is that the new channels, the digital channels, are becoming increasingly important to the experience. I know one of the first strategies that we had in the paper was being member-centric. I wonder if you could go into a little more detail on what that means and what the first steps are to digital transformation.
Amanda Atcheson
Being member-centric in a digital age, the way that we’re approaching that with the seven strategies is I think all credit unions would say, we’ve always been member-centric, and that’s true. That’s what really differentiates credit unions from their competitors. We really put the member first, and that’s part of our core values. But being member-centric in a digital age is a little bit different. We see that as really anticipating expectations of members and anticipating their needs and solving their problems in a new and potentially innovative and digital way based on what their needs are before they even know what those are. What’s important in having a member-centric approach is the customer or the member experience factor of that. Of course that’s super-important when it comes to digital and really any interaction today. That overall idea of customer experience that’s across any industry is really overtaking many other factors when deciding to do business with someone. What we’ve actually found is — there’s one survey that found this, and I find this so compelling — that while 80% of companies believe they delivered a superior customer experience, only 8% of their customers actually agreed. So there’s a huge customer experience gap in general and that’s just something that credit unions need to take a look at and see who’s their audience and understands the member’s journey and really what are those impactful moments in the journey and what to measure and then how to enact those changes to the member experience to stand out and provide that anticipated experience in the digital age.
Ashley McAlpine
I think once you determine or understand what brings your member experience or your customer experience to the next level, that’s when you can really start deep diving and making those adjustments to make it all digital friendly.
Aaron McPherson
It reminds me of this study I saw once about drivers, that most drivers think they’re above average in terms of their ability, but then they rate their fellow drivers as below average. So everyone thinks they’re above average, and obviously that can’t be true. But if you are trying to be superior in terms of member relationships, you obviously need to know a lot about the member and so data is very important. In your view, how does data specifically play a role in understanding and improving the member experience?
Ashley McAlpine
I think data is the number one asset when it comes to understanding that experience. Amanda really talked to what is that superior customer experience. It’s understanding your audience and understanding that member’s journey and to do so data can only help influence and grow upon your understanding of that so that you can formulate how you’re going to move digitally. And what we’re finding is that originally there was a lot of hesitation. There was a feeling of hesitation from consumers in actually sharing that data, but now there’s a lot of studies out there that show that consumers are more than willing to share data as long as they’re getting something back, and getting that more customized experience that’s personal to each consumer allows us to do that. When you look at Netflix and Amazon, they really help drive this and set the standard for how this should be. So when I’m making a purchase on Amazon, I go out and Amazon already knows what I need to buy or I didn’t know I needed that new gadget that’s out in the industry and I wasn’t even aware of it. And so it’s looking at those types of things and taking your data, but I think the problem that we’ve seen in the industry is that there’s so much data out there. How are we consuming it? How do we actually utilizing it? We’ve seen studies out there showing that many executives in the credit union industry recognize that data is important but many of them feel like they’re not doing a good enough job to actually capture the information and to get to the next step. So when we’re looking at how to go about that data strategy, it’s really important that we understand the decisions of the organization and how they want to use the data and what we’re driving toward, but also making sure that we have appropriate collaboration amongst all areas of the organization so that we’re gathering all the necessary data and then actually integrating the data and using the data within our products and services.
Aaron McPherson
Yes, and I think one of the things that we’ve been focusing on this year is the role of open APIs, or application programming interfaces, as a way of integrating additional data sources that you might not have had access to in the past. I think there’s a lot of opportunity, particularly with digital platforms like mobile phones, to capture data on what people are doing, like their location, where they are at any given time, where their nearest branch might be, what they’re shopping behavior might be that helps you get a better handle on what they’re doing. One of the challenges for financial institutions is to be accessible to their members through the digital channels and at the same time maintain a consistent experience across all the channels because, as I said before, we’re not seeing people dropping the old channels. They’re expecting the new ones to work with them. So what in your view does it mean to have an integrated channel experience?
Amanda Atcheson
I would actually also bring it back to some of the other things we’ve already talked about as well. We talked a lot about member experience and how important that is. It really goes to show why having that integrated channel experience says that members actually expect because they’re getting that on Amazon and on these other digital giants that they’re becoming accustomed to, so it’s really becoming the expectation. One example that we like to talk through is, that first interaction with your credit union, which is the account opening process. That journey could today take place in multiple channels. It could start online on your desktop. You might continue that journey on your mobile phone. And then you might decide you have a couple of questions, you need to call and talk to someone. And then you may end up needing to close that account opening in the branch if you have further questions and if you feel more comfortable actually being in person and visiting the branch for that. So that scenario that I just talked to, it’s not too far-fetched that someone would actually interact with all four of those major channels for something, that first touch point of opening an account. If those channels aren’t talking to each other and the data isn’t leveraged so that you’re able to get 50 percent through the process on your desktop and then pick that back up on another channel without losing the time spent and the information that you’ve already submitted through that process, that’s going to create a negative experience from the beginning. So having the channels really integrated and talking to each other is so important today because, again, it’s what members and consumers really expect.
Ashley McAlpine
Well, you don’t want to put in an application for a credit card three times.
Amanda Atcheson
Exactly.
Ashley McAlpine
It’s become an expectation that that’s a waste of time, and you really want to improve that process and that experience.
Aaron McPherson
Right. Absolutely. And I know one of the strategies that we have in there has to do with platform thinking. Can you talk a little bit about that and how you’re executing that at Co-Op?
Amanda Atcheson
I can speak to some of that. From a platform thinking viewpoint, the way that we think about that is seeing all of our offerings as an ecosystem and it’s something that at Co-Op we’re really focused on building that ecosystem. A phrase that we like to say is: “Integration is innovation.” Integrating all of our products and all of our experiences will in turn create innovation and create that experience in the entire ecosystem that will in turn really benefit credit unions. So that’s the way that we’re thinking about it, and then we’re, from a digital transformation standpoint, really encouraging credit unions to do the same thing.
Aaron McPherson
Okay, very good. So I’ve got my digital channels, I’ve got my omnichannel integration. I’ve got my data sources, but now the risk is I get drowned in all this data. I think this is a challenge that we’re seeing across many of our clients: What do you do with all this data? How do you make it actionable? That’s where artificial intelligence and machine learning come in. How in your view should credit unions approach AI and machine learning in their digital transformation?
Ashley McAlpine
Well, I think you made a good point. Once you get all that data, you have to start using it. And machine learning and artificial intelligence really allows us to react and adjust to emerging trends and usage coming from our consumers in real time. We take our cue from others out in the market. Look at Netflix. Netflix seems to know that if I like House of Cards, it can now make a recommendation that maybe I’ll like Ozark. And so it can look at what my history is, where I’ve been, what I done, and pursue it from there. So when we look at it from a financial services standpoint, we’re seeing many within the industry start to move toward using artificial intelligence and becoming a leading adopter within AI. And so it’s putting a lot of pressure on us specifically when it comes to credit unions so that we need to start entering that space and come together and collaborate for that effort. One of the things that we’ve done at Co-Op and we unveiled at Think 2018 is how we’re driving that space with our product COOPER. And so this platform what we’re using it for initially is to start driving machine learning initially and artificial intelligence in our fraud space and so now I can start looking and see how trends are evolving at a consumer level, at a portfolio level, and not only improve when it comes to fraud but also that member experience. So when I’m going, through LAX and land in China, when I go and make my transaction in China, my transaction gets approved and I have no hesitation when having to carry my card around. So really trying to focus on taking in and digesting that information so that we can learn real time and not rely on any of that human interaction to try and make these decisions
Amanda Atcheson
I think too it’s also that perfect balance of the human and the machine, so that’s what we’ve been working about it. It’s not that scary part of machine learning and AI — that it’s going to take over everything. We believe that it’s that perfect mix of the human and the machine that makes an impact here.
Aaron McPherson
Very good. Of course the other aspect of having all this data is securing it. We’ve seen a lot of big news stories this year such as Cambridge Analytical and Facebook, where people are now beginning to wonder if they’ve given away too much data and how is that data being used and how is it being protected? As we move toward a world of open access, machine learning, and data sharing, how do you recommend credit unions keep their members’ data safe?
Ashley McAlpine
It’s a Catch-22 because we want to get this data and consumers are willing to give it, but then as soon as there’s some sort of security concern, consumers are quick to turn away. And so it’s really important to have a strong security mindset and make sure that you’re protecting your members. Seventy-five percent of consumers have said that they would actually stop utilizing a company if they don’t really put that cybersecurity in the forefront of their thinking and concern. So it’s important that we continue to make this an important priority. But it’s interesting because on the flip side, we’re also seeing that consumers are not always the ones that are going out and trying to protect themselves. They really rely on the financial institutions to do that for them. And so we see this in normal practice that Americans that actually use PIN code on their phone or any sort of protection on their mobile devices, only about 45% of Americans are actually using it, which is pretty low when you consider that. And so consumers want it to be secure and then all factors to be protecting them, but they’re not always willing to take that extra step for themselves. So they’re really choosing that ease of the solution more than security and that they expect you to protect them. So it’s important that we continue to keep that mindset and ensure that we’re going above and beyond to protect cyber security.
Aaron McPherson
I think fortunately the move to digital channels is to a certain extent making it easier to authenticate that people are who they say they are. We have fingerprint readers on phones. We have the ability to digitally fingerprint mobile devices and computers. So you can have a little bit more assurance now that you’re dealing with the person you expect to be dealing with even if they’re not using full security. I think one of the goals that we see in the security community in general is getting away from passwords. Just recognizing that people are not going to change them. Every year we have the same articles about how the most common password is “password.” And so I think part of the challenge is, how do you protect people from themselves? Well, I’d love to keep going on this, but we’re running out of time. I wanted to ask for some closing thoughts: What in your view are the most vital parts of a winning digital transformation strategy?
Amanda Atcheson
I would say continuing to that mindset of being member-centric. I think that that should always be paramount in any strategy. I think all credit unions would agree with that, but it’s about exceeding those expectations and finding new ways to really serve them and meet those expectations through new technologies.
Ashley McAlpine
I think that any time that you do that you also have to focus on embracing that change at the financial because there’s going to be resistance to making digital transformation a priority, and you’re always going to have some sort of challenges that come with it. You’re going to have growing pains and you’re going to have those that are looking to have more information and question it. You just have to be prepared and really embrace what it’s going to come because we do see a lot of great value with it. It does make a change to your to your organization.
Amanda Atcheson
I would agree with that. And I don’t think we’ve said this, but Co-Op is going through this right along beside our credit unions. We’re seeing the need to embrace change at Co-Op as well and seeing how important that culture shift is. And at Co-Op having that leadership buy-in that we have has made digital transformation a reality for us. So it’s exciting to be a part of that, but at the same time we know that it’s a lot of change for the organization whether it’s here at Co-Op or at the credit union.
Ashley McAlpine
I think with that it’s continuing to maintain and monitor and improve on what you put in. It’s not a set it and forget it. And when it comes to digital transformation, every day we’re seeing new technologies come out. So it’s means maintaining your innovation and ensuring that you’re continuing to keep up to speed.
Amanda Atcheson
I would add to that, it’s important to remember that digital transformation is a marathon not a sprint. It’s not going to happen overnight. It takes time, and so it takes patience and having that long-term view. In our view at Co-Op, we don’t think that there’s an end to digital transformation. It’s really as Ashley said, it’s continuous and you have to be prepared for being agile and being able to adapt to whatever new technology is going to come tomorrow.
Aaron McPherson
All right, great. Well, this has been really interesting. Thank you very much, Ashley, Amanda, for sharing your insights. I’ll let Ryan close it out.
Amanda Atcheson
All right, it was great talking to you.
Ashley McAlpine
Thanks.
Aaron McPherson
Thank you.
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