Human touch versus Digital Banking for Credit Unions?
Oct 03, 2023
Chris Smith
Listen to a conversation with George Hofheimer, the advisor and author of "Banking on the Human Scale." As we navigate the challenges that credit unions face in the digital era, George illuminates the path ahead, offering strategic insight into blending technological investments with the human service that defines credit unions. The traditional face-to-face service is not lost, but rather enhanced as George makes a compelling case for a harmonious merge of the old and the new. This conversation is an essential precursor to the upcoming Manchester Swoboda Credit Union Conference, in November, that aims to unravel the challenge of credit unions and their digital appetite.
At the Swoboda Credit Union Conference, George Hofheimer shares his wisdom, this time focusing on simplifying operations in the digital era. George expounds on how credit unions can prioritise investments and redefine senior recruitment in the digital age. The digital transformation, laden with complexities, becomes less daunting as George guides us through. George gives us a taste on this digital landscape while retaining that unique human touch.
Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, smithowls@gmail.com
Listen to a conversation with George Hofheimer, the advisor and author of "Banking on the Human Scale." As we navigate the challenges that credit unions face in the digital era, George illuminates the path ahead, offering strategic insight into blending technological investments with the human service that defines credit unions. The traditional face-to-face service is not lost, but rather enhanced as George makes a compelling case for a harmonious merge of the old and the new. This conversation is an essential precursor to the upcoming Manchester Swoboda Credit Union Conference, in November, that aims to unravel the challenge of credit unions and their digital appetite.
At the Swoboda Credit Union Conference, George Hofheimer shares his wisdom, this time focusing on simplifying operations in the digital era. George expounds on how credit unions can prioritise investments and redefine senior recruitment in the digital age. The digital transformation, laden with complexities, becomes less daunting as George guides us through. George gives us a taste on this digital landscape while retaining that unique human touch.
Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, smithowls@gmail.com
Speaker 1:
Well, registration is now open for the Swaboda Credit Union Conference on the 24th of November in Manchester. Now it really sounds interesting in this conference because it's starting to get to grips with this real digital future question what do credit unions need to ensure that they can win in this changed world that we're living in? They call the conference disturbance and transformation and the future of your members and your credit union, and I think it will stretch credit union thinking about the extent required and change in a digital era and the business and operational transformation that we thought we'd gone through apparently still needs to be undertaken. The Swaboda team want to make sure we understand that this is not an IT event. Yes, it's a discussion about how we change our business and operations to cope with the onslaught that a digital future requires.
Speaker 1:
Now, the last decade, many of us have lived through the credit union adaption to online banking, smartphone apps and many of us use open banking for loan underwriting. Some are even starting to take advantage of the API based technology. You know APIs are the application program interfaces, if you like.
Speaker 1:
It's the thing that sets the rules and protocols to allow different software programs to talk to each other and share data and functionality. The best example I can give you is when the weather app on your phone is probably using API to get the current weather data from another service to give to you while you're asking for it. But anyway, this is just the beginning of a digital, accelerated form of AI. Members will expect financial and other services to be in real time, in fact all the time everywhere seamless, personalized, predictive. The rapidity and depth of change will be profound. I thought we'd done with all this, but apparently we were only at the beginning. Anyway, this conference good because it's pulled together several people to help us understand the next onslaught of disturbance and transformation in a digital era. We've got Dr Leader Glyptis, professor Karen Elliott, sean Milley, paul Rooney and George Hofheimer from the USA. Now, george founded the Hofheimer strategy advisors back in 2020 to advise credit unions.
Speaker 1:
Previously, george was the head of research and development at USA based Filene Research Institute. He was there 15 years and before that he was the chief learning officer at QS, you know, the Credit Union Industries Education Association. He was there for eight years and George began his career in international business, including members of the first group of Peace Corps volunteers to the former Soviet Republic of Uzbekistan. George is in demand as an advisor and researcher, and devising creative ways to match the needs of business and society has been a constant theme of his career.
Speaker 1:
I managed to get old of George ahead of this conference, especially as he's just recently brought out a book called Banking on the Human Scale and I asked him, george, in a world dominated by scale and technology, smaller community-based financial institutions like credit unions have the chance to serve more people and serve them better by making banking more human. That's one of our sort of USPs, it's what sets us apart. But your book presents the way forward that continues with the human scale idea. But how do credit unions maintain a human touch in this digital era?
Speaker 2:
Yeah, as it relates to technology and credit unions, we find ourselves in a bit of a pickle, regardless of whether you're on this side of the Atlantic or the other, and that, regardless of which credit union you're talking about the largest one in the world, which is Navy Federal, to the smallest one in the world, which you know could be several hundred pounds or several hundred dollars of and collective individuals is that technology's march is not going to stop. And how do we figure out how technology fits into our model? And what I've observed, mostly with larger institutions in the US and Canada, is that we tend to overindex on technology's impact on our business model and what we try to do is emulate the largest institutions, which realistically have budgets that are I don't know how many multiples of what our budget are in terms of technology. We try and meet them at that same level. Realistically, it's not going to happen. I believe a figure that I just saw for JP Morgan Chase, which is the biggest national bank here in the United States and probably one of the largest in the world they spend $12 billion on technology every year. I share that bit of data with perhaps a $2 billion institution here in the States and they become a little meek around this. The key is to be very strategic with our investments.
Speaker 2:
The thesis that I'm trying to put forward with the book that I just wrote and some of the work that I do with credit unions is to figure out what can we realistically do with technology to make it emulate what credit unions are quite good at, which is the face-to-face, person-to-person type of service.
Speaker 2:
The way that we've been talking about it here with credit unions is what are the table stakes, if you want to use a poker analogy, just to be able to sit at the table to say we are a modern institution is usually being able to see what your balances are, being able to transfer money either to people or organizations and to gain an understanding of what are my credit offers and to be able to close a loan.
Speaker 2:
I know that there's a lot of technology involved with that, but where we tend to get off track is by listening to vendors that have really interesting and great ideas, but realistically it's not going to have a huge impact on the members of the credit union. So what I like to do is say let's try and figure out how technology can emulate the good old days of being able to serve people on a face-to-face basis and just being able to satisfy consumers around. Hey, I want to be able to open up an account online without having come into a branch. That, to me, is a table stakes technology. It's not cheap to do, but I think it's something that we should all aspire to. That's not to ignore all of the great technological advancements that we're starting to see, and I always urge caution around those types of investments on a large basis for smaller institutions like Red Union. We just simply don't have the balance sheets to invest in all of those technologies. So it's an active prioritization.
Speaker 1:
George, is another aspect of this change the way in which we recruit and hire people. Do you think there are changes in attitude towards what we can expect from future leaders in credit?
Speaker 2:
unions. Yeah, you know it's really interesting. I think the default for most hiring managers or boards of directors when they're looking for leaders or any positions within credit unions was does this person have a financial services background? Do they have an operations background and do they have a lending background? So I mostly work with CEOs and that used to be the default when there was a vacancy of a CEO, nine times seven out of 10, that person would be from one of those three areas finance, operations or lending. What we're starting to see is that's changing and it's a little bit different today, where more technology professionals are becoming CEOs. Interestingly, more marketing and communications professionals are becoming CEOs.
Speaker 2:
If we can kind of extrapolate out from there, just from the CEO level, how do you bring the right talent into the organization? The first thing that's so important is to be able to have a very clear purpose and understand who you are as an organization and how people fit into that. There's a kind of cliche in hiring. It's like hire for talent, train for skills, and I've seen that manifest itself pretty well within organizations that have a very strong understanding of the purpose of what they're trying to achieve within their organization. So bringing someone in from a sales perspective, for example, that may not have financial services background but has the same ethos and understanding of where the organization is going, can be a really potent combination. That's just one vivid example, but you can think of it from a variety of technical areas, George. What?
Speaker 1:
about measuring success. Credit Union that achieves all of its social goals but returns a loss on the balance sheet might develop some sort of ethical fatigue. Board members may lose social skills hard. Is that double bottom line success achievable where the credit union fulfills its social goals and at the same time delivers a healthy profit?
Speaker 2:
But I think sometimes we do get it a little bit backwards in that we focus too much on the social outcomes rather than the business outcomes. And I am not a hardcore capitalist by any means, but I do prescribe to the notion no margin, no mission. So if you don't have the resources and the capital to invest in social initiatives or any types of initiatives, you're just not going to be a going concern. So one of the things that I'm trying to get through to my clients and work with them on is an allocation of your budgeted net income at the end of the year to allocate for quote unquote, do good initiatives, and that context looks different for every organization, but I think that that's the right way to think about.
Speaker 2:
The ordering is that we have to take care of our business first. We have to ensure, especially in a regulated entity like a credit union or organizations that are in the banking world, we need to have the proper capital and safety and soundness in place in order to do the fun stuff. In fact, I'm here in the state of Virginia and I'm working with a credit union right now named Chartway Credit Union, which used to serve the big naval base here, and last night they had their big foundations, gala, where they help support children that are going through really difficult medical times. Now they and they support this foundation really strongly from a financial perspective. But they wouldn't be able to do that if they didn't have a very, very strong operations and a profitable, profitable model. So that comes after we've figured out quote unquote figured out the margin side of the equation.
Speaker 1:
George, finally, I need to ask you about strategy days, and many people will have the temptation, coming back from their planning days, to take the papers and the ideas and stick them in the top drawer of the desk and turn immediately to the 150 urgent emails, the staff issues and the entry from hell. George, first of all, do you recognize that this happens and also have you any tips for us returning from our planning days as to what we can do?
Speaker 2:
Yeah, that is very recognizable and I think you're speaking of just general human nature around prioritization.
Speaker 2:
But I think the chances of success increase If you take this idea of simplifying really what the problem is that you're in business to solve and then amplifying that really simple thing that you're trying to achieve.
Speaker 2:
So, in the course of the strategy making that I help credit unions with, we really focus in on what is the problem you're trying to solve and fundamentally, that's really what strategy is about and the whole founding of credit unions. Initially we had very tight groups of people that we would serve and it was very clear what we were trying to do, what problem we were trying to solve. Now, as we go out into the community, it gets more complex and we have all of these things coming on us from technology, from society, and the tendency is to try and be things all things to all people or trying to look at all of these broad problems, and my advice would be to really simplify on that floor problem that you're trying to solve and then amplify it back to the staff so you just keep it really really simple. That being said, I don't know if that's going to solve it, but in my experience. Those types of approaches tend to enable people to focus much better than they would before.
Speaker 1:
George, thanks for sharing some of your thoughts regarding the digital future and we look forward to hearing the full story from you at the conference in Manchester in November.
Speaker 2:
Yeah, me too Look forward to seeing old friends and hope to see them soon. Okay, take care, Chris.
Speaker 1:
Well, it's a big thank you to George Hofheimer and looking forward to seeing him at the Swaboda Credit Union Conference on the 24th of November in Manchester. If you go on to the Swaboda Research Centre website easy to find just put in Swaboda into your research engine and up comes their website and you can see under events that there are your registration documents there. So that's Disturbance and Transformation, the future of your members and your credit union, and I guess it'll stretch credit union. Thinking about the extent required to change in what we thought was the digital era that's gone. Apparently it's the digital era that's just about to start. So here we go again and just to remind everybody, it's not an IT event but it definitely is about what IT is going to do to us.