Community financial institutions are no longer competing with just each other. In an increasingly all-digital world, they’re competing with every other app and service that facilitates some sort of financial transaction. If these institutions don’t innovate to stay ahead of the curve, they risk losing relevance – especially with younger generations.
In this episode of the The Digital Banking Podcast, host Josh DeTar welcomed Benjamin Maxim, Chief of Digital Strategy & Innovation at Michigan State University Federal Credit Union (MSUFCU). Ben explained why community financial institutions must innovate and what the process of adopting new ideas looks like. The two also discussed how these institutions can use vendors and their offerings; how they decide whether to build, buy, or partner; and how they select partners.
⚡Why do community financial institutions (CFIs) need to innovate? From a technology standpoint, MSUFCU’s primary mission is to seek and develop new products and solutions that make a difference in people’s lives. One thing driving innovation is the maturation of younger generations that may question the need for a traditional banking relationship. “How do you attract this younger generation that doesn’t even believe they need banking accounts? They’re interacting with things on a daily basis, like Venmo, Cash app, PayPal, Square, whatever,” noted Maxim. “They think they can just leave their money in these accounts and transfer it back and forth as they share expenses, do whatever. They don’t even think there’s value in putting that money into any sort of banking account, whether it’s a credit union or a bank. So, some of this innovation is being forced because of the things they’re interacting with.”
⚡Build, buy, or partner? While developing and innovating, a CFI must decide whether to build, buy, or partner. According to Maxim, there’s often no reason to build something yourself when there are enough quality vendors in the market. “Is there a market advantage for us? Is there a reason for us to build it ourselves? And if that’s a no from the beginning, we should buy it,” stated Maxim. “Are there things like heavy compliance, like with a mortgage platform or commercial lending or wealth management, some things like that? It probably doesn’t make sense for us to figure out the laws in all 50 states, if someone’s overseas, and all that. Let’s let someone else handle that compliance, that part of it. We’ll focus on the experience surrounding how a member would use and interact with that.”