How can DAO (Digital Account Opening) Technology benefit CUs? Five steps to simplify the digital transformation

How can DAO (Digital Account Opening) Technology benefit CUs?

Five steps to simplify your digital transformation

According to a recent issue of the “Digital Banking Report”, mentioned in the blog “The Financial Brand”, “abandonment rates increased significantly as the time to open an account or complete an application increased. If the process took over ten minutes for an online/website process, or five minutes for a mobile process, the abandonment rate impacted the account openings by as much as 40%”.

Having the ability to open an account digitally can help the Credit Unions not only keep their membership base, but to increase it.

The overall organization of the Credit Union can benefit from such an opportunity. Even if staying personal is still key, members are asking for digital, seamless experiences that are accessible from one single point. Credit Unions can gain more trust and loyalty by embracing this change, and implement a strong growth strategy that can ensure a brighter future for the movement.

Cooperative Financial Institutions are having a hard time balancing their need to shift towards digital, with the consequences of the pandemic. A recent report by Callahan highlights that in the first quarter of 2021 “dividends per member registered -37.2% (the lowest since 2017), as members continued to favor liquidity rather than interest rates on deposit accounts.” Budgeting for new digital services can be tough in this scenario.

On the other hand, digital services are crucial for the future of the Credit Union industry: CO-OP white paper “CU Payments Outlook: How active member relationships drive long-term growth”, shows the importance of mixing actual services – such as ID theft protection or education on financial wellbeing – with high-valued services – such as instant funding. Combining these two elements can help Credit Unions maintain their personal touch, while triggering a new way of enhancing their members’ satisfaction.

People are still valuing the personal elements offered by their financial institutions, especially when these are non-profit organizations that reinvest their efforts in improving rates and services for the members. Sometimes this relationship can be a bizarre combination of digital and physical, a story recently told by Blanche Jackson, CEO at Stepping Stones FCU, to Credit Unions’ Time.

How can you gain all the benefits of digital account opening technology without losing sight of the overall technology strategy of the organization?

Ensure consistent and accurate data flows
Overcome security threats
Innovate around members’ (security and financial well-being) needs
Bridge core with digital, for a more powerful approach
Connect personal and digital at your fullest branding capacity

1. Ensure consistent and accurate data flows

Usually, more data means more systems to be orchestrated together. Working in unison is an important element to ensure the overall accuracy of information, from the back-end to the front-end.

Fintech players that entered the non-profit’s financial institutions market deliver new technologies for new members’ needs, focusing on single front-end tools instead of on all the processes and data of an organization. Yet, the knowledge of the vertical processes of the Credit Union – from accounting to member services – is important to effectively ensure a consistent and accurate data flow.

API’s can perform connections and streamline the travel of the information across the organization. But what happens when multiple API layers are at work on different applications? Can the organization keep information under control even within a hyper-fragmented ecosystem?

If this is even possible, the multiplication of players handling data and processes can complicate the overall management, especially when it’s crucial to deliver the same exact set of services in a branch or through a mobile app.

Digital Account Opening is just another tool to expand the way the Credit Unions interact with their members: the real focus should be on having a true seamless connection between what lies beneath the front-end: the vertical processes – and the core technology platforms – that keep the Credit Union up and running day after day.

2. Overcome security threats

Brick-and-mortar branches are built around physical security. Tellers provide in-person services, and the technology supports these relationships by ensuring data is always secured. On the other hand, what happens if these kinds of interactions between the CU and the members happens in a digital ecosystem? How do advanced security options and protocols safeguard the members’ online experience?

From accessing the account, to managing data within it, to moving money, to protecting the entire experience from external attacks: security of digital banking platforms should embrace all these elements, thus ensuring members feel safe about each stage of their online interaction with the Credit Union.

To do so, a holistic approach to security is crucial. Let’s see how this can play a role in helping the Credit Union to avoid threats and reassure members, at the same time.

Establish access security through multiple layers of protection, such as methods for new user registration and login along with features to ensure systems are locked out after a defined period of time and protection against “bot” attempts to create new accounts.
Ensure environment security through end-to-end protection that mixes a wide and recognized variety of methods to deliver the ultimate protection for customers and their data.
Deliver complete transaction security that spans from Account to Account Transfers, to Person to Person Payments, just to name a few.
Monitor security by building in resources to keep the organization informed and compliant. This approach ensures member’s expectations are met even when the CUs embrace the digital banking evolution, a shift that can create some new challenges and exposure for security. Adding multiple layers of security can protect CUs, their organization, and their members’ data, thus ensuring the organization is always in compliance as regulations change.
Embrace defense security through hyper-secure penetration defense. There are many different players that can provide this kind of protection, with important benefits for the organization. In particular, proactive systems that can monitor any perceived threats and identify active penetration events and other malicious activity in real-time, 24 hours a day, are powerful ways to ensure that the organization and the members’ data are managed through the leading edge of threat prevention.

3. Innovate around members’ (security and financial well-being) needs

To gain members’ loyalty and to expand in the digital banking ecosystem, CUs need to look at new needs, continuing to adapt and to employ the latest equipment, software and management protocols to assure reliable services within a secure and recoverable eco-system.

As more consumers do their banking online, and credit unions mix and match third-party solutions, creating a complete secure and reliable system is more challenging than ever. And Digital Account Opening is a customer facing application that can benefit the CUs if it takes these elements into consideration.

CUSOs role in this scenario is important because:

Co-operation with innovative organizations, such as universities, can also play a huge role in the shift towards digital, helping the CUs to really exploit the digital account opening potentiality. For example, since CUSOs can ensure that more resources are allocated to achieve these goals, CUs partnering with them have access to research and data that can help them to design new digital experiences that are behaviorally-informed, for example by using AI. A deeper understanding of members’ security needs and behavioral changes can really help to make digital a true tool to fulfill their mission: increasing the ﬁnancial well-being of the entire community.

4. Bridge core with digital, for a more powerful approach

Today the Credit Union movement needs to compete with aggressive players, such as the fintechs. These organizations have invested money and resources in designing front-end interfaces to be delivered quickly to younger generations. But what happens when going beyond the front-end? Fragmented data and processes, not connected with your overall organizations’ systems, generating a “Frankenstein effect” that creates inefficiencies, while increasing costs and generating security issues. The back-end, when it’s built by someone who knows the Credit Union industry from within, is a resource to exploit and to leverage.

This is how digital banking can be seen as a whole new approach to workflows and processes: adding a Digital Account Opening functionality can really ensure high-services to members when each piece of this new environment accompanies the financial supply chain of the organization all along the journey: from the traditional accounting to the digital one.

5. Connect personal and digital at your fullest branding capacity

Embracing Digital Account Opening is important to elevate members’ services. This tool is just another touchpoint to interact with people and CUs should be aware of this bivalency. It’s important not to forget that the way they interact with their actual or future members should be considered like a diverse ecosystem made of physical and digital pieces.

To ensure these multiple elements all act and look as part of the same organization, CUs should design digital touchpoints that embed not only their brand image, but that also elevate it by turning their branded digital experience into a seamless experience that goes beyond physical but is still as personal as possible.

A good way to do so is to choose flexible tools and approaches that enable CUs to mix and match designs and features, thus allowing the ability to present an online environment that really mirrors the in-branch experience.

In the end, having more control over the brand and the image of the Credit Union is key to gaining consistency of the overall member and staff experience. From physical to digital, with one approach and one look and feel.

See change as an iterative approach

The five steps described can help CUs to simplify their digital transformation. By approaching the shift through different, specific topics, CUs can lessen the impact on management and help the organization focus on change one step at a time, with an iterative approach.

This way of interpreting technology changes can be helpful in focusing on the project with the right mindset.

CUs can then think about their digital and technology model as a strategic choice to be pursued with a solid partner, that relies on technology but mixes this with the deep knowledge of the industry’s peculiarities and challenges.

Flexibility and forward-looking gaze

Implementing Digital Account Opening applications can help CUs to fulfill new members’ needs, and to better compete with fintechs and banks.

According to the CO-OP’s white paper mentioned above, 94% of fintech users consider “seamless integration” very important. So digital really keeps on growing.

On the other side, the same white paper highlights that personal is still important: 96% of members and prospects find importance in accessing a branch in the future to obtain financial advice.

Having this in mind, CUs can embrace the shift towards digital by balancing these two elements and in a more efficient way.