How Digital Are Financial Institutions Today: Celent Research

By Robert McGarvey

For CU2.0

Celent recently convened a panel of financial institution honchos – credit union execs included – for its eighth such session in three years to explore a fundamental question: how digital are financial institutions today.

Of course just about every FI now talks a good digital game but talk is still cheap  What are they doing to bring their institution into the digital age that increasing numbers of members demand?

Celent analyst Daniel Latimore starts the report with a cheery note: “Banks and credit unions have reason for cautious optimism. Reponses show a greater C-suite commitment to investing in digital compared to 2015. Customer preferences are increasingly driving decision making, and panelists are eager to learn more about leveraging data and analytics to serve them.”

Latimore then struck a note of realism: “There is still a long way to go, however. Few respondents consider their efforts truly outstanding.”

Indeed: how would you rate your institution’s digital transformation?  Honestly.

If you remember only one thing about this blog, or the Celent study, make it this hard hitting statement of reality:”Digital is unambiguously an imperative. A towering 88% of respondents say
digital is imperative; 12% say it’s optional.”

Getting 88% of financial executives to agree on anything is just about impossible. When 88% agree that digital is “imperative” -a forceful, direct prescription – you know a new day is dawning.

Also intriguing – especially as new data analytics plays enter the credit union marketplace – is hopes aren’t high for big data, said Celent.  “Panellists were overwhelmingly pessimistic about their analytics and automation.”

That’s understandable. Earlier credit union big data plays have been busts and that’s the charitable interpretation. But – increasingly – we see big data analytics improving our lives in many arenas (think only of Amazon which is less a retailer and more a data analytics proving ground) and we also see a well-funded stampede of money center banks into data analytics.  The message for credit unions is hop aboard this fast moving train, now, or get left behind.

And in 2018, per Celent, just 4% of participating FIs claim they see improvement in their use of analytics.

That has to change.

There also is some delusion among financial institution executives. According to Celent, when asked to grade their digital progress, none claimed excellence (and good on that!) but 50% claimed they are very good.

Most aren’t.  Not in my opinion. Most are just starting the digital journey and an increasing number are well intended and energetic, but few rise to “very good.”

That glowing self-assessment is troubling because so much work – hard and sometimes expensive – lies in front of credit unions that aspire to be alive and relevant just 10 years from now. That’s how fast change is coming and how profound the transformation will be.

Celent, by the way, understands the baked-in hesitation when it comes to innovation at financial institutions. But it also understands the cost of hesitation. Latimer wrote: “Public failures are extraordinarily painful, so it’s understandable that financial institutions are cautious about their approach to digital transformation. Nevertheless, banks and credit unions have had to accelerate their pace of innovation. Fintech has exploded, while online conglomerates like Amazon and Google rewrite consumer rules of engagement.”

Self-congratulation about mobile banking is another puzzle in the Celent findings: “2018 satisfaction with the mobile platform is generally higher than with the online platform, whereas they were roughly equivalent in 2015.”

Maybe it’s just the credit unions I use, but the mobile platforms I see are stagnant, unengaging, and feature poor.  The Chase app, in contrast, just keeps getting better and it offers more and more features.

My advice to credit unions that applaud their mobile platform is two-fold. Ask members who don’t use it why they don’t. And ask those who do how satisfied they are. The members’ voices are more telling than what executives say about their wares.

What’s the next step in the digital journey for credit unions? Very simple: double-down on digital because digital is life, it has a future.  Legacy, traditional banking not so much. As the Celent research reveals, that realization is slowly percolating in financial institutions.

But it’s up to each credit union to chart its own course. And the first step is to really make a digital commitment.