Thought Leadership
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The changes of open banking require credit unions to develop a strategic business model in preparation for the impacts it will have on their organization and member experience.

New business models will emerge when open banking becomes a reality in Canada. While there are still a number of unknowns as open banking is defined, we have three key recommendations to prepare your credit union for open banking and our digital future. Credit unions will need to adapt and reimagine their business models; however, there are preparations that can be made to keep your organization’s core values, members and community at the forefront of everything you do.

01./ Differentiation

With the growth of technology in the financial services industry globally, the barrier to entry for new solutions has lowered in recent years. New market entrants, such as digital-first challenger banks and new platform marketplaces have defined themselves in ways that highlight their unique competitive advantages, allowing them to gain a sizable piece of market share.

Open banking will allow these competitors to build relationships with Canadians and offer them easier access to new products and services and simplify how they manage their finances. Platform players will provide one stop cash management and account aggregation services in which to build more innovative offerings.

To keep your credit union competitive, it is important to define what products and services your credit union offers and what makes you the preferred choice for members. Differentiation today means setting yourself apart not just from big banks in Canada, but also from emergent players in the global financial industry.

The opportunities that technology has provided to these competitors is not something to be fearful of for credit unions, but rather, should be thought of as an opportunity for your credit union to expand and explore new models of service delivery. However, an evaluation must be completed at the start of your differentiation journey. This means considering what services you wish to continue providing to your members and where you will focus your efforts going forward.

02./ Trust

When it comes to the foundational strength of credit unions, trust will always be at the center of the relationship between members and their credit union. Credit unions have traditionally garnered higher satisfaction and loyalty scores than their bank counterparts. The credit union business model is based on values and member ownership, and their focus on serving real member needs engenders trust. Across Canada, credit unions have operated in communities of all sizes, working to support Canadians and their financial needs.

Cultivating this deep level of trust is integral to the future success of credit unions as they continue to evolve. Like differentiation, trust helps show your value to your members and why they should continue their financial journey with your organization through these changes.

Trust is a crucial element to the overall experience for members and building member loyalty. As the impacts of open banking become clearer within the Canadian financial services industry, this level of trust is a strategic advantage and can be leveraged to influence members’ banking choices early as they consider new digital services to meet their needs.

By quickly evolving their service offerings to better align to the digital needs of their members, credit unions can further cement their relationships with members, affirming their competitiveness. Members need access to innovative services and need to have trust in the organization delivering them.

The brand of a financial institution can play a key role in establishing a trusting environment.

As is the case with any organization, trust is not instantly developed. The relationship between a member and a financial institution needs to grow over time. However, the development of trust starts even before the onboarding process of new members. The brand of a credit union plays a key role in reinforcing trust as a differentiator – which is particularly relevant in our current economic context.

03./ Agility

Credit unions have an advantage when it comes to agility. Due to their smaller size and organizational structure, credit unions can make decisions quickly and take advantage of new opportunities when they present themselves. Their co-operative model enables them to use their size as an advantage, but also allows credit unions to act collectively to access the infrastructure they need to take action.

The agility of credit unions has helped them attract new members from their communities by solving real member problems and beating out the competition. With new advancements in technology and the advent of purely digital banks and financial service providers, credit unions compete with institutions outside their community. Relationships built on face-to-face interactions need to continue to be nurtured digitally.

Credit unions must create an agility strategy that enables them to adapt their business model and reimagine how they operate. This strategy will answer the question, “what makes us attractive to our members?”.

Defining this strategy now will allow your credit union to properly take advantage of open banking in Canada. By analyzing your members’ needs and developing partnerships to meet those needs, credit unions must act fast to keep their organization strong.

Open Banking in Canada

While the conversation of what open banking will look like in Canada is continuing, we can look at the successes of others around the world for insight.

Standardization and collaboration across stakeholder groups helps to both advance open banking and establish cross-industry networks to tackle complexity and promote innovation. In Canada, we have the benefit of learning from other jurisdictions to create a vision for our digital future and iteratively work towards it to create continued benefits for all Canadians.

New service paradigms have and will continue to emerge that better align with consumers needs and places consumers in the driver’s seat to better manage both their finances and their data.

Open banking introduces new competitive threats and will stimulate innovation. It redefines consumers’ experiences by providing them with greater control, broadening their choices and simplifying how they access and manage their finances. In time, it will redefine how consumers interact and who they will trust to deliver their experience while finances become more embedded into their daily lives – even invisible.

Open banking will enable organizations to partner more quickly, curate a more diverse and innovative set of products and services and optimize their operations once open banking standards and the rules of ecosystem participation are clearly defined.

Even once implemented, the journey of open banking in Canada is far from over. Credit unions, along with their competitors, will continue to develop new strategies to take advantage of the open banking ecosystem – an ecosystem that will likely be more diverse and will be continuously innovating. By keeping differentiation, trust and agility top of mind, credit unions will have the opportunity to both participate and harness opportunities that open banking present. For now, credit unions should continue to evaluate their organization and its path through our digitalized future.

Editors note: this post was originally published in March, 2021 and has been updated for accuracy.

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 with in the credit union system.
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