The architecture of transformation: Ecosystem enablers

It is essential to include ecosystem enablers in your credit union’s transformation journey. Your vendors enable your credit union to provide valuable products and services. However, you must also consider how they support the communities you serve and how they can support your transformation efforts to ensure your credit union reaches its goals.

Strategic partnerships will also play an important role in the future financial services landscape. Partnering with fintechs or combining resources with other credit unions can help you reduce costs or provide cutting-edge services to your members. Each of these factors must be considered on your path toward transformation to help future proof your credit union.

Drew Wilczynski, Executive Director of CUCC, shares his perspective:

“It’s important to take a step back and consider what the credit union system really means. It has changed so much that the purpose, drive, and vision of the system as a collective needs to be examined and realigned around a shared purpose. I think if we can realign with the objectives of our members, it will create a renewed focus and energy for credit unions and their service providers to really deliver value. What was needed 20 years ago isn’t the same as what is needed today.”

“A lot of institutional organizations that are outside of the credit union system have evolved, whether it's the Bank of Canada looking at digital currencies or even some of our partners like Interac and their mandate. It is important to have a shared sense of understanding of key drivers within the environment as well as the needs of our members when we make key decisions. Our credit union system is complex and challenging with the diverse scale and needs of credit unions, both large and small.”

Vendors

Many credit unions are evolving procurement processes to ensure vendor selection is done strategically — with the maximum value achieved for funds expended. It is essential to ensure your strategic sourcing model is an enabler of transformation that considers factors beyond price and basic compliance.

Adopting a strategic sourcing model provides the perfect opportunity for your credit union to consider the downstream implications of its vendors, including ESG and third-party risk implications. Additionally, it enables your credit union to evaluate what value the vendor can provide for you in achieving your own strategic objectives beyond the product or service itself.

Incorporating some of the following questions as part of your sourcing strategy is critical:

• What success has the vendor achieved regarding its own growth and transformation? Assess the potential vendor’s stance on growth and transformation and the achievements they have made in each area. This can help your credit union gain insights that may support its own growth and transformation goals.
• How active is the vendor in the Canadian credit union system? Evaluate whether the vendor has been in the system long-term, whether they will be here five or 10 years from now, and how they have grown and adapted within the ecosystem.
• Does the vendor have significant operations within your local communities? Consider whether the prospective vendor supports the same charities, employs many of your members, and understands the needs for transformation from a community-driven perspective.
• What relationships does the vendor have with other relevant organizations? Assess the relationships that the vendor has with both credit unions and non-credit unions provincially or nationally. These relationships may give you access to best practices through relevant insight on transformation successes or failures.
• How aligned is the vendor with our own membership base whose needs drive our transformation? Consider whether strengthening your relationship with the vendor will give your credit union more prominence within a target member group such as agriculture or small businesses. Additionally, assess whether the vendor is as invested in the financial success of your members as you are.

Additionally, front, middle, and/or back-office considerations also come into play in relation to vendors. Several of the above questions will become more important depending on what area of focus your credit union is looking for expertise and partnership in during the transformation process.

Strategic partnerships

Several factors are exerting significant pressures in the ever-evolving landscape of credit unions — with cost emerging as a foremost concern. The mounting cost pressure in various areas has become a constant challenge, particularly in the realm of updating core banking systems and digital application platforms.

The tools and technologies that support the operations of your credit union are subject to frequent changes, and the process of keeping them up to date has become increasingly expensive. Additionally Canadian credit unions have limited options for certain critical systems such as core banking and loan management. These limitations often result in a lack of competition within the market — potentially leading to a perceived imbalance in pricing.

Some credit unions choose to patch existing systems due to these challenges to save costs and reduce disruptions. While this approach may yield short-term benefits, it can be detrimental in the long run — impeding your credit union’s ability to embrace transformational change and adapt to changing market dynamics and member demands.

For example, a group of five or six credit unions can pool resources to operate a shared human resources (HR) back office. This arrangement offers the opportunity to leverage economies of scale, access more advanced technologies, and employ a highly qualified workforce. This may not be feasible if each credit union chose to hire individually. However, this approach assumes that there is capacity within existing structures to identify and implement efficiencies effectively.

“While our best option is often partnerships, this comes with the addition of reputation risk,” says Jodi Chambers, Chief Strategy & Innovation Officer for Cornerstone Credit Union. “We have limited control over the performance of our partners and for many of our outsourced activities like credit cards, wealth, and digital banking — it is extremely difficult and disruptive to our members and employees if we want to change partners.”

Additionally, your credit union may consider exploring partnerships with fintech companies — which may bring advanced technologies to the table. Collaborating with fintechs can help credit unions address current technology challenges and provide access to additional capabilities.

Embracing these partnerships offer the opportunity to accelerate your credit union’s transformation journey. However, it is essential to recognize that both the shared services model and fintech partnerships come with unique competencies and inherent risks. To make informed strategic decisions, it is crucial to understand these risks a well as the requisite expertise that your credit union needs for the successful implementation of these partnerships.

Below are some additional factors that your credit union may take into account when considering partnership opportunities:

Models for augmenting strategic initiatives

Your credit union can explore various models to augment its strategic initiatives effectively. One approach is outsourcing or partnering with external experts and service providers. This can help accelerate the pace of transformation by leveraging the specialized skills and resources of these partners. For example, your credit union may consider collaborating with technology companies that specialize in digital banking solutions to rapidly enhance its digital offerings and member experiences.

Additionally, your credit union can consider augmenting its workforce through temporary or contract hires to bring in specific expertise for strategic projects. This approach will allow your credit union to access skills that may not be readily available in its current staff — fostering innovation and efficiency in the execution of strategic plans. It also allows credit unions to scale up resources that may be required for high-priority projects with compressed timelines without needing to use a lengthy recruiting process and worry about redeployment or termination at the end of a project.

Learning from other industries

It is essential for your credit union to look beyond its traditional boundaries and draw inspiration from other industries. Learning from the success stories of strategic partners in different sectors can offer valuable insights into enhancing customer experiences and undertaking large-scale transformations.

Examining the customer-centric strategies employed by leading retailers or digital innovations adopted by tech companies can provide your credit union with fresh perspectives on improving member engagement and digital service delivery.

By studying these external models, your credit union can identify best practices, innovative approaches, and emerging trends. These can be adapted to its unique context to achieve a successful transformation.

Connection to communities

When considering potential partners, your credit union should assess the partner’s reputation and engagement within their communities. It is essential to understand what is being said about the partner locally — and the level of trust and credibility they have established. Community engagement is a two-way street, and your credit union should prioritize partners who share your commitment to community development and social responsibility.

Partners with a positive track record of supporting local initiatives and fostering meaningful relationships with community members align well with credit unions’ values and mission. This alignment not only enhances the credit union’s reputation, but also strengthens its bond with the community it serves.

Exploring innovative models for strategic augmentation, drawing inspiration from diverse industries, and prioritizing partners who align with community-focused values can help your credit union navigate the evolving financial landscape. Shared services models and fintech collaborations can offer solutions to the challenges your credit union is facing. However, it is imperative to assess and mitigate risks while capitalizing on the unique advantages that these partnerships can bring to the credit union sector.

These approaches can empower your credit union to adapt, grow, and provide excellent services to its members while remaining deeply rooted in its commitment to community engagement and service excellence on the path toward transformation.

Where to go from here

It is essential to consider the sustainability of your credit union as you make the necessary changes to achieve a successful transformation. However, the term transformation is broad — and it can be difficult for leaders and boards to identify the changes required to achieve your credit union’s goals.

A transformation advisor or a dedicated team that has managed the large-scale changes that you are facing can support your credit union during its transformation journey. It may be beneficial to seek out advisors or collaborators who have the same passion for transformation as your credit union — and who have a vested interest in your communities.

A successful transformation will require your credit union to enhance the member experience and transform its supporting infrastructure. Your credit union must also remodel its governance and organizational structure, leverage data to make informed decisions, and explore connections with ecosystem enablers to ensure its sustainability both now and in the future. Each of these factors plays an essential role to help your credit union secure its position in a rapidly changing industry.

Our advisors at MNP have planned a series of publications to provide useful insights from our experiences to prepare your credit union for its journey toward the future. If you need help transforming the architecture of your credit union, contact a member of our Credit Unions team today and keep an eye out for our next publication about the future of the credit union industry.