MADISON, Wis.—Credit unions have largely settled the question of whether they need to invest more heavily in payments, but many are still struggling with where to begin, according to Jessie Gamache, head of research at Filene.
In an analysis examining the evolution of payments strategy that was published by Filene and also shared on LinkedIn, Gamache said credit union leaders have already committed resources, time and attention to payments modernization. The challenge now, she said, is determining how to structure their organizations to compete in a marketplace where payments have become a core product rather than a back-office function.
“For most of the history of banking, payments were back-office processes,” Gamache wrote. Those functions were traditionally designed around accuracy, compliance and operational efficiency, while revenue generation was driven primarily by lending and member interactions were handled through branch and frontline channels.
A Fundamental Change
However, the rise of digital banking has fundamentally changed that model, according to Gamache.
“Today, payments are no longer processes. They are products,” she said.
Gamache wrote that payments can now be enhanced, personalized, bundled and monetized, with leading organizations able to launch new features in weeks rather than years. At the same time, every payment interaction generates consumer behavior data that can be used to improve products and experiences.
What New Competitors Represent
According to Gamache, many newer competitors entered the market without legacy technology constraints and built their businesses around consumer needs from the outset. Unlike traditional financial institutions, she said, these organizations did not develop separate operational and strategic silos and instead organized around delivering seamless money movement experiences.
As credit unions evaluate their next steps, Gamache cautioned that success will require more than purchasing new technology.
“The focus can’t just be on acquiring the latest technology,” she said. “It has to ensure that the structural model supports the transformation.”
Organizational Challenges
Gamache pointed to several common organizational challenges she sees across the credit union industry, including:
- Siloed development of products that treats payments, digital banking, cards and deposits as separate functions.
- Limited or nonexistent formal product development capabilities.
- A separation between teams responsible for payments operations and those responsible for member experience and growth.
While those structures made sense when payments functioned primarily as utilities, Gamache argued they are less effective today, when payments represent some of the most frequent and important interactions members have with their financial institutions.
Key Questions to Ask
To assess their readiness, Gamache said credit union leaders should ask several key questions:
- Who is accountable for the payments experience as a product portfolio rather than simply a collection of payment rails?
- Where does payments strategy reside within the organization—in operations, digital banking, product management or another area?
- Is the institution primarily optimizing for operational efficiency or for member expectations and revenue growth?
- Does the credit union have shared consumer insights and end-to-end member journeys, or fragmented views organized by department?
A Potential Sign
According to Gamache, many credit unions lack clear answers to those questions, which she said is itself a sign that further evaluation may be needed.
“Credit unions have evolved faster than their organizational structures,” Gamache said. “Payments are where that gap is most visible.”
Institutions that address those organizational challenges and develop a more integrated payments strategy will be better positioned to compete in a financial services environment where money movement is increasingly viewed as an experience rather than a transaction, she said.
