There are three basic kinds of forces that drive change in the world. They are
Demographic/Sociological
Legal/Legislative
Technological
Demographic/Sociological Forces
Demographic/Sociological Forces include generational cycles, population shifts, and changing life patterns of people who are or could be credit union members. The best way to understand these forces is to look at the generational mix for the next ten years.
The concept of a basic generational cycle was first outlined in detail by William Strauss and Neil Howe in their book Generations, published a bit over a decade ago. Since then they’ve also published another book, The Fourth Turning which provides lots of additional detail on the three generations that will be critical for credit unions in the next ten years.
The Baby Boomers are the largest generation ever. They were born between 1946 and 1960 and they’ve transformed their communities and markets at every stage of life. Now they’re entering elderhood. Here are some things to know about the Boomers
- As they begin to retire, about a third of them will move away from the home and community where they’ve most recently lived.
- The nonprofit and cooperative concepts are important to them.
- Technology is bolted on for them.
- Listen to them on ease of use issues.
Generation X is made up of folks born between 1961 and 1981. They are now moving from late youth into midlife and what I call “The Power Alley.” Here are some things to know about the Xers.
- They are the ultimate pragmatists.
- They are the ultimate comparison shoppers.
- They are comfortable with technology.
- Listen to them on competitive issues.
Generation Y represents folks born after 1982. The early Ys have graduated from college and they are entering the workforce, but many are still in school. They are good at and enjoy group things and are great team members. Here are some things you should know about the Ys.
- Plan to meet them at school and the workplace.
- Membership matters to these folks.
- Technology is the water they swim in.
- Listen to Ys on relationship issues.
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Legal/Legislative Forces
Legal/Legislative Forces include all the forces that regulate credit unions and their competition. In the last three decades, the unique characteristics and distinctions of commercial banks, savings and loans and credit unions have blurred and other financial institutions have been let out to play on the financial services landscape.
Today, just about anybody can do just about anything in retail financial services. That open environment is here to stay. The next ten years will be the time when we sort out what this all means. That offers both opportunities and threats to credit unions.
First, the opportunities. As limitations on fields of membership go away, there will be opportunities for growth. Credit unions will be able to offer more and more kinds of services. They will be able to offer services to more people.
What about the threats? The first is the threat from giant competition. Credit unions are the smallest players on the retail financial services field. As such they’re the players most vulnerable to a competitor who is willing to price critical services below breakeven in order to woo members away.
The other big threat is more subtle because it's embedded in the opportunity. The threat is that credit unions will forsake the characteristics that give them competitive advantage to chase the painted lady of growth.
Simply put, there are three core characteristics of credit unions. Credit unions are cooperatives and therefore work by different rules than pure profit organizations. Credit unions have voluntary boards. Credit union members share a common bond. If those characteristics disappear then what's left is not a credit union and some kinds of competitive advantage are lost.
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Technological Forces
Technological Forces include the rise of new technologies and replacement of older ones, along with the adoption of technologies by credit union members and the affect those technologies have on how people live and conduct business. Here are some things that we’re pretty sure of that will affect retail financial services in the coming decade.
Household penetration of PCs will continue to grow. The rate of growth has slowed but growth continues and will continue toward the saturation point. Consumer use of the Internet will increase with the greatest increase in access from home.
The use of financial management software will increase. Intuit with their Quicken and Quickbooks products is the market leader here. One important effect of this is that a significant number of consumers will be doing online banking without ever visiting a financial institution Web site. They will use Quicken (for example) to log on to multiple sites, make electronic payments and more and not be exposed to the carefully crafted marketing messages you’ve put on your sites and without buying bill payment software or services.
Use of devices other than PCs to access the net and to do online banking will increase. Watch the Xers and the Ys who are lead users here as well as places like Finland where tech trends usually arrive before they do in the US.
Wireless phones are becoming far more sophisticated and that trend will continue. Expect convergence of PDAs and phones. The phones will win. It's way easier to make a phone that will handle PDA functions (Kyocera already has one) than it is to make a PDA that's easy to use as a phone.
Wireless everything will be a major driver of change. We are moving toward anywhere computing at a very rapid rate. It's already here for some folks.
Broadband services will continue to increase their penetration into households and businesses. Expect cable modems to win the contest with DSL. The cable folks have proven that they’re good at both service delivery and marketing. The phone companies seem befuddled by all of the changes and are spending way too much effort trying to replace the revenue from local landline phones that is rapidly running down the drain of progress.
The Net has already had three dramatic effects on the marketplace. Transparency, reach and speed have all increased because of the net and they will continue to have an impact on changes in the next decade.
Remember these two things to help understand how technology will change the competitive landscape.
- As people adopt a new technology they always find something to do with it that's different from what they did before. As they adopted ATMs, folks withdrew cash more than ever. With the Internet so far, we’re seeing folks do more balance checking and more transferring of funds between accounts.
- The folks who design the technology and the folks who predict the future (like me) have never been any good at figuring out how folks will use a new technology.
