Digital Transformation
Woman sitting at desk and drinking juice while looking at her laptop

Almost two years into the pandemic, going digital has become essential to the success and sustainability of Canadian credit unions.

Credit unions have shown up for their members in major ways by prioritizing digital banking and digital experiences. In 2021 we mentioned that the top three areas for credit unions to focus on were digital access, digital engagement and digital operations. While those are still important and essential to serving members, 2022 brings new trends to be aware of.

In 2022, there are some interesting new trends to focus on, including central bank digital currencies (CBDCs), artificial intelligence (AI), payments modernization and digital identity (Digital ID). To learn more about those topics and more, please keep on reading.

Central Bank Digital Currency

The rise of the pandemic and a decrease in cash usage has created a tipping point, creating the need for more digital payments and digital currencies. The effects of the pandemic coupled with the rise of alternative, non-sovereign and borderless digital currencies, such as Bitcoin and Libra (and their underlying distributed ledger technology for exchanging and recording token-based payments) has driven consideration of the Central Bank in Canada.

According to Investopedia, CBDC “is an electronic record or digital token of a country’s official currency. As such, it is issued and regulated by the nation’s monetary authority or central bank. As such, they are backed by the full faith and credit of the issuing government.”

So, what does that mean for the financial sector in Canada? The Bank of Canada, along with a few other banks, are researching and experimenting with the development of CBDCs in Canada. They have found that CBDCs can simplify the implementation of monetary and fiscal policy and promote financial inclusion in an economy by bringing the unbanked (or under banked) into the financial system. However, because this is a centralized form of currency, it may erode the privacy of citizens. Privacy is at jeopardy as personal information is demanded and shared rather than protected. For those without identification documents, these systems are inaccessible. Learn more about how other jurisdictions are running digital currencies here.

A decision to launch a CBDC would require the full support and approval of the Government of Canada and acceptance by the Canadian public. The design choices made in building a CBDC would be crucial to achieving policy goals while minimizing risks.

Artificial Intelligence

Over the past few decades, credit unions have adopted modern technologies and innovations to serve their members.

So, what is the recent technology that is driving the financial services industry? Well, AI of course. The AI-powered digital age has been enabled by falling costs for data storage and processing, increasing access and connectivity for all, and rapid advances in AI technologies. These technologies can lead to higher automation and can often improve upon human decision making in terms of both speed and accuracy.

According to McKinsey & Company, the banking industry can realize one trillion dollars in annual value and see a 15.40% increase in sales with the addition of advanced AI. The annual value is derived from boosted revenues through increased personalization of services to members and employees.

Additionally, lower costs can be realized through efficiencies generated by higher automation, reduced errors rates and better resource utilization.

With AI, Canadian credit unions can harness the power of data that helps them make smarter, faster and more profitable decisions. AI solutions that are designed for credit unions can help you proficiently analyze and utilize data from originations, account management, collections and marketing.

AI gives you the power to understand what’s happening and to predict what will happen next. This is an opportunity to better understand your credit union and your members so you can provide more consistent, personalized experiences.

In 2021, Celero launched two referral programs for Robotics Process Automation (RPA) solutions to allow credit union employees to focus on more important tasks by training software bots to perform tedious, repetitive and manual workflows.

What is the difference between RPA and AI you may ask? AI is a form of technology to replace human labor and automate end-to-end processes. Whereas RPA is used to work in conjunction with people by automating repetitive processes. Combining both RPA and AI can create a fully autonomous process for your credit union by augmenting employees when delivering services to a member. For example, call centre employees can use RPA to learn from customers as most call center queries fall within predictable and repetitive categories. AI-powered solutions that use machine learning will be able to categorize and understand what customers need when they call based on this. Therefore, credit unions can leverage AI and RPA proactively in most call centre queries saving valuable human labour and time.

Payments Modernization

Canadians can expect a vastly different landscape when it comes to digital payments over the coming years. Large scale efforts are being put in place that promise to deliver a safe, modern, fast and innovative experience that emphasizes the importance of data. Leveling up payments technology is an important upgrade from legacy systems to allow data analytics to guide business leaders to make the right payment decisions.

The existing payment systems include convoluted processes and outdated methods, and the modernization of payments in Canada involves changing the fundamental systems that underpin today’s payments. Canada’s new real-time payments system called the Real-Time Rail will provide 24/7/365 payments. At launch, the system will feature account number based routing and ISO 20022 messaging to support data-rich payments meaning there will be more data to vastly improve payments and fuel new and enhanced services.

Curious about the key benefits of payments modernizations? Deloitte outlines five factors below:

  • Rich remittance data with payments that streamline reconciliation
  • Greater payment transparency that clarifies payment status and confirmation of receipt
  • Increased flexibility, security and use of business aliases for the purpose of routing payments, leading to greater simplicity for businesses
  • Higher limits to encourage the adoption of real-time payments
  • Greater certainty and better risk management in consumer-to-business receivables

With the payments modernization in Canada, credit unions will be able to leverage modernized payment systems to provide faster, data-rich payments solutions to their members.

Stay tuned for a blog from Celero’s Vice President of Payments & Cards, Val Geib, on the top things that she wants credit unions to know about payments in Canada.

Digital Identity (ID)

As a method to complete the Know Your Customer (KYC), digital identity (Digital ID) verifies who we are online securely, in a manner that offers data protection and safeguards personal information.

According to Interac, digital ID is an extension of current physical ID documents such as driver’s licenses, passports and bank cards. It offers individuals more privacy and control over how their information is used and shared while simultaneously eliminating threats associated with physical ID documents, such as theft and counterfeiting.

Implementing digital ID can create a wide range of opportunities, including the ability to be used across a range of devices anytime and anywhere, as well as the ability to provide users with greater levels of control over their own information and what specific information should be shared based on verification scenario. Best of all, the universality of these identities will lead to a simple, consistent experience for users. Canadian credit unions should start preparing for the adoption of digital ID as it will become a necessity in the near future to protect member against fraud.

I recently spoke on the Digital Identification and Authentication Council of Canada, Digital ID & Me podcast about how digital ID and open banking can be good for you and for the economy. The podcast covers how “the sharing of data between financial services providers by consumers requires some sort of authentication of the consumers requesting their data to be shared.” Check it out to learn more about digital ID and to hear from others like Kevin Morris, Strategy and Programs Director at Large Credit Union Coalition (LCUC), Senator Colin Deacon and Steve Pannifer, Managing Director at Consult Hyperion.

To learn more about how Celero can help you rethink your operating model, reorient for member-centricity, and align your operations so you can thrive amidst change, talk to your Celero Account Executive or contact us.

Deborah Moore
Deborah Moore, Director of Digital Transformation
As the lead of Celero’s digital transformation consultancy, Deborah helps credit union executives shape their digital transformation strategies and implement them. Deborah holds a masters of management in co-operatives and credit unions, and has over 20 years’ experience leading digital transformation initiatives within the credit union system.
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