Our Approach to Your Growth and Security By Todd Clark President/CEO, CO-OP Financial Services

November 8, 2016

It’s still not December, but it already feels like 2017, doesn’t it? We  know you have been immersed in 2017 planning for months. Still, the fast concluding and rapidly evolving year is leaving our industry seeking a path to the future growth and expansion of our credit unions, while also fortifying our defenses against the current fraud plague.

Though none of us has the ultimate answer to where the future will take us, we feel strongly that we need to press hard toward innovation – technologically and managerially, to enhance member engagement, experience and security. With this focus, CO-OP is doubling down on its commitment to do what we do best: leverage our scale across platforms, partnerships and investments to deliver not only the products you need, but the strategic counsel to both harness new digital technologies and manage the fraud landscape.

Here is how we see the way forward for our movement – and how we can help you on that journey.

Growth and Engagement through Digital Experiences to Acquire Transactions and New Membership

Blend behavior and communications with systems and offerings.

Tom Goodwin, EVP of Innovation for Zenith and contributor to TechCrunch, has suggested that we look at innovation in a deeper way – moving beyond looking at technological advances as simply products. He tells us to blend our behavior and communications with our systems and offerings.

To this end, the Financial Brand recently looked at the demands of our members across demographics and concluded: “Financial institutions’ success in the near future will stem from addressing the changing demands of Baby Boomers and Millennials alike. A mix of investment in technology and customer care will best prepare banks (and credit unions) to offer specialized services, from helping Millennials reduce student loan debt to assisting Baby Boomers in managing rising healthcare costs.”

We are taking all of this into consideration right now – thinking through our traditional payments channels with mobile and digital offerings to ensure we are maximizing member engagement, member value and differentiation for your credit union.

Rethink what you already have: Traditional payment channels need to be layered with digital forms to de-commoditize transactions and boost volumes.

Top-of-phone equals top-of-wallet. Research has found mobile payment transactions will grow 210 percent in 2016, while at the same time 33 percent of mobile users says they use few cards to make payments. Folks still love debit, but they will access their cards in digital ways. We need to make that possible.

Build value, speed and seamlessness based on consumer behavior and payments trends.

Technological elegance isn’t an end in itself. The real solution lies in the integration of digital tools with traditional payment channels. This is why you’ll see us investing, for instance, in use studies on blockchain (see white paper). You will also see us engage in partnerships for our THINK Prize (see 2016 challenge) with MasterCard and OpenIDEO, which aims to understand how we can enhance the lives of many of credit unions members – those over 50. 

User experience and user interface (UX/UI) is the key to deepening member relationships and increasing service usage.

The emphasis needs to be on self-service, digital delivery, customization and simplicity. Diving deep into usage needs and optimizing the way our collective offerings knit into the fabric of members’ lives will increase peoples’ desire for them. 

Faster payments.

Speed is not just cool, it is a necessity both from the standpoint of convenience and making a real difference in our financial lives, be it person-to-business, business-to-person, business-to-business or person-to-person. Late last month, CO-OP took a major step in that direction by partnering with Early Warning to offer credit unions access to the Zelle Network via RealPay by CO-OP. Work is underway now for application next year.

Security Innovation

As payments evolve, so must innovation around fraud and security.

The increase of digitization and convenience in payments has also sadly produced an explosive increase in fraudulent activity.

Here’s just one example of the devastating cost of fraud, from JAVELIN last year: Transactions wrongly declined (“false positives”) can seriously erode consumer loyalty. JAVELIN estimated that 15 percent of all cardholders have had at least one transaction incorrectly declined in the past year, representing an annual decline amount of almost $118 billion. Nearly 4 in 10 (39 percent) declined cardholders report that they abandoned their card after being falsely declined.

We have never had to be more vigilant in our action around fraud containment. CO-OP will continue to develop and expand a strong blend of real-time fraud analytics combined with a variety of tools that address problem areas like identity verification.

But even right now, our Falcon system performs with a False Positive Ratio of approximately 5:1, this means five cases created for each incidence of confirmed fraud which compares to national averages of 9-12:1. Our Real Time Ratio is 1.3:1, this means 1.3 transactions denied in real time to each case of confirmed fraud which compares to national averages of 3:1. Our overall performance is good, but we can always improve, balancing between member service and fraud prevention. 

We are also committed to consumer self-service tools, such as CardNav by CO-OP, to make the member their own personal early warning system.

Safe and Seamless: Balance security and engagement by persistently strengthening the payments chain.

Making things inconvenient for fraudsters cannot mean making things inconvenient for members. Their experience must be both safe and seamless. Fraud consultation and benchmarking, custom reporting, strengthening Falcon member card security and machine learning are all on CO-OP’s ‘17 roadmap and should be part of your risk mitigation strategy.

Place more control in the hands of both the issuer and consumer through innovative risk mitigation tools.

We know that as much as you want customization and control, so do your members. Fraud is becoming more of a team effort between consumers and their financial providers. We want to work with you to mobilize a member army to recognize and fight fraud sooner, through tools. Just a few examples of this are CO-OP Concierge travel notifications, Short Message Service (SMS) alerts and CardNav by CO-OP.

Fraud strategic counsel.

Please do not miss Fraud Buzz with our own John Buzzard, our monthly fraud-fighting webinars. It is the best industry source for strategizing today’s and tomorrow’s fraud battle.

Growth and security. These are our two goals for you. Together we will reach them.

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