Time for a Tech Vendor #ShakeUp?

By Randy Karnes, CEO, CU*Answers

By now you’ve probably read about the announced Fiserv-First Data merger. In an opinion piece, one person suggested that “small banks and credit unions fear big fintech.”

‘Fear’ is the wrong word though. It should have been “CU Thinkers See the Long-Term Challenges in Vendor Consolidation.”

It is not just competitors merging that should concern credit union planners and leaders. It is the consolidation of focus, project resources, and price to ROI expectations that should worry a niche-based industry, like credit unions. When the vendor marketplace or the industries that support a marketplace design, like financial services, become so out of proportion with segments of customer niches, then those niches are mandated to more and more.

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Those niches, in this case credit unions, struggle with each renewing contract and acceptance of norms other than the ones they count on to propel their unique success. What appears to be simply buying tactics at one level of the credit union becomes accepting new conditions that change the very culture and business approaches that once were the defining differentiators for credit union success.

1. Focus – As these super-firms–these glaciers–set their marketplace priorities and execute their plans, they will continue to marginalize credit unions and their drive to be unique in a commoditized, externally defined marketplace. How will CUs set their own unique priorities?
2. Project Resources – With vendor consolidation combined with resource scarcity, we see in the labor markets, these recombining firms have less project management focused on niche marketplaces and the concerns of those marketplaces to project manage credit union adjustments and change priorities.
3. Price – Does a vendor design its prices for its success or to the needs of its clients after absorbing the prices cast upon them? Credit unions are increasingly becoming price takers and massagers through credit union distributors, but less so price innovators through ownership or via their own manufacturing of solutions.

While some segments of the credit union industry believe they can grow and keep pace with the scale that can keep them in the game with these firms, other segments will feel these pressures growing. Credit unions are not just struggling with the need to compete with other financial service segments for consumer connections, they are struggling – or will struggle – to find a vendor focus that does not simply press them into being weaker versions of their competitors via commoditizing of their business models, not just the tools that support their products. And like cancer, one day you wake up and find you’ve been eaten from the inside out, and the body does not respond to the mind’s desire to execute its own plan.

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Credit unions must continue to prioritize their own uniqueness, and that is the ownership model. Cooperative ownership is the key to being the manufacturer of price and culture, even in spaces that seem dominated by commodity tones. Pushing to design prices that allow a client to earn out on the investment, pushing to focus resource and project management based on the timing of the client, and pushing to ensure that models for shared and cooperative execution come to the forefront.

We are an industry of cooperatives, and that required sense of connection is important to our futures. Only ownership can prioritize disruption of the status quo, competitors and the core of innovation. Cooperative ownership of our solutions is the key to:

• Price Disruption – to ensure our cooperative models can earn the ROI on the prices they pay.
• Access Disruption – to ensure the things credit unions need are not walled off from them or do not relegate them to the back of the line.
• Execution Disruption – to ensure that when service engagement options need cooperative alternatives, they are there.

Protecting the decisions and mechanisms for maintaining our differential is the mandate for the future. Whether it be in our dismay about a regulator who seems as resolved as ever to a one-way model for financial service firms or the fact we increasingly rely on vendors to which we are only an afterthought in their strategies, we all, the customer-owners and members of credit union cooperatives, should not fear the future. We should simply mandate the future to the greatest extent we can by mobilizing active ownership in every level of our value stack or vertical capabilities.

Tell me why I’m wrong.