Cryptocurrency and the resulting decentralized finance(DeFi) seem to be terms that are appearing everywhere. To prepare for a world with crypto and DeFi, let's take a moment to anchor on understanding what they are.
First, let's start with what we know about a credit union and its functions. Credit unions are simply an intermediary. It is a lovely and supportive but albeit pass-through for members to keep their money in a safe place and get loans for homes, cars, and vacations (i.e., via the credit card). This is essentially the function of modern banking as it we know it.
As crazy as it may seem, the fundamental function of financial intermediaries has been around for centuries. It has only been in the last 30 or so years, with the shift from traditional banking to internet banking, the landscape started to change. Financial Technology (FinTechs) has helped escalate the shift from conventional banking by offering new ways to access funds, make payments, etc. The need to have a "pass-thru" was still there but not as strong. This landscape of traditional and nonbank finance became even more blurry with the recent advent of cryptocurrency.
Cryptocurrency is a digital asset. While you can play with it, it is not issued by a central banking system, so it is categorized as decentralized. This means it is unregulated, resulting in the shifting in volatility.
In January 2021, Anchorage Digital became the first crypto firm to receive a banking charter. In March, they teamed up with a crypto trading platform Prometheum to launch a fully regulated alternative trading system specifically for professional crypto investors.
Why is this a big deal?
Because cryptocurrency has the unique ability to democratize finance and replace a credit union with peer-to-peer relationships, there is no need to have your money stored in a "holding tank" when you can directly pay in crypto. This new way of banking is called DeFi, short for decentralized finance. While it is still in its infancy, the future looks bright.
The biggest question to ask here is how is your credit union preparing for DeFi?
The answer lies in your data strategy. Here are four questions to help assess your organization's data strategy's current condition to provide clarity on the direction in this new world.
#1 Is the enterprise data vision relevant?
Does your organization have a data vision? If so, take a moment to review the organization's data vision. What was the business problem identified that data will solve? Does it seem relevant? How should it be adjusted or altogether scrapped? If your organization does not have a data vision, think about creating one. The enterprise data vision is the overarching data destination that the credit union is aspiring to achieve.
#2 What friction do your members/customers experience doing business with your organization?
Your members/customers engage with your organization in ways they may not have before. It is essential to identify areas of friction that members may have doing business with your organization. If the friction is too much, members will take flight, so the quicker these friction points can be identified, the better. Please note that changes do not need to be massive process overhauls. In most cases, smaller, iterative changes are better. The quicker your organization can reduce member/customer friction, the faster you will experience short and long-term rewards.
#3 How has our current data culture changed?
Identifying the good, the bad, and the ugly of your culture will help bring clarity to positive aspects of your organization's culture and continue to encourage the support it needs to change.
#4 What is the current state of our organizational data maturity?
Take a moment to review the current state of your organizations' data maturity. What does your organizations' data maturity look like? Do you have a formal data governance program? If data maturity feels like a low priority, please take a moment to adjust your thinking. Data maturity is the foundation, the blueprint, the architectural renderings to your dream data home. Most home building experts will never head to an open piece of land and just digging and hope to create a home. Why would you do that with your data?
Now is a perfect time to align the data vision to the friction and create a plan to leverage the new culture and focus on achieving impactful member relationships.
Where can I fill my data knowledge gaps?
With a stop at the
Data Education Center.
We believe that data transformation doesn't have to feel overwhelming or expensive to be impactful. After helping over 600 credit union leaders launch their data journeys, we have identified several consistent knowledge gaps. We have worked hard to fill these gaps with a variety of educational artifacts:
NEW! Read the Data Education White Paper (found at the bottom of the page)
Looking for more insights on data and how you can leverage it to transform your members' lives?
Check out Big Data/Big Climb. Written for credit unions by a credit union expert, this book has been hailed as a "must-have". The book cuts through techno-jargon and translates data transformation concepts into a playbook filled with real-world examples, assessment guides, and other tools needed to reduce member friction, analyze actual competition, and identify disruption to improve the lives of its members and gain competitive advantage.