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 Feb '18Jan '18
# of CUs5,7575,758
Total Assets
($ billions)
Total Savings
($ billions)
Net Cap.
Loans to Savings82.6%84.1%
Loan Delinq.0.8%0.9%

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Beware ‘Death by 6,000 Cuts'

Nontraditional competitors are chipping away at traditional financial institutions' business.

Competition for credit union members' business is heating up—and the threat no longer comes only from other financial institutions.

In recent years, new and innovative players have entered the financial services realm, and they're looking to grab pieces of your business, John Best, president of Best Innovation Group, told attendees of the CUNA Technology Council and Operations, Sales & Service Council conferences.

Best defines this trend as "death by 6,000 cuts." The term refers to the number of financial technology start-up companies each targeting one small piece of traditional financial institutions' business model.

These companies include such diverse offerings as CoinStar (coin exchange), Acorn (which rounds up customers' purchases and deposits the excess into investment accounts), and Kabbage (an online lender to small businesses).

Traditional lenders risk being left with members' transactional business, Best says, while new, innovative players siphon off the more profitable pieces of the traditional banking business.

This is no small problem, he adds. Currently, financial technology—or "fin tech"—companies have obtained $14 billion in funding. The Lending Club alone has financed $11 billion in new loans to consumers—loans granted outside of banks and credit unions.

What can credit unions do in the face of such competitive pressures?

Best advises credit unions to define what type of company they want to be. Start by deciding whether you're a technology company that delivers financial services, or a financial services company that delivers via technology.

Either approach is valid, but the danger lies in trying to take a middle path, which results in a degradation of user experience and a lack of consistency and continuity in your value proposition, according to Best.

"The technology is changing so fast, you can no longer have a five-year strategic plan; now, it's one to three years," says attendee David Thibodeau, vice president of information technology at $1.2 billion asset Workers' Credit Union in Fitchburg, Mass. "It's not so much focusing on what new technology you are implementing, but rather focusing on understanding what your members need."

(Via news.cuna.org)