CO-OP Financial Services Blog: Insight Vault

How many times have you wanted the newest and latest technologies for your personal use? Even though we know that technology changes rapidly, we still want the latest cell phone (e.g., iPhone 3GS, Nexus One), LED HDTV or Microsoft operating system (e.g., Windows 7).  We are even willing to pay the high costs to be the first with the latest technology and the ability to flaunt it among our friends. This behavior includes the credit union industry.

In order for credit unions to maintain a competitive edge, attract new members, retain its current members and attract/retain talented personnel, credit unions want the latest technology to deliver quality services (e.g., ATMs that capture electronic images of checks, and the ability for members to access their share account via a mobile phone, allowing members to perform the same level of service remotely and on the go) or streamline its processes to reduce costs.

From a personal perspective, I generally ask myself these questions before making a purchase/investment:

• Is this a want or a need?
• Am I willing to pay this amount and do I have sufficient funds to make this investment?
• Am I willing to settle for some other items that may not have all the bells and whistles, but will meet my current and near term needs (e.g., next three to five years)?
• What is the resale value, if any?

Also, based on my finance background, I will perform a detailed analysis to determine the financial impact to my personal finances. This thought process is no different from what businesses do (e.g., a return on investment, ROI, analysis) before investing in new technologies.

It is important, especially during these difficult economic times, to consistently prepare a ROI to ensure your limited resources are optimally utilized. For those that do not have a finance background, below are some items to consider when you analyze a ROI developed by your finance department.

• Will this help us retain our clients (e.g., members)? If we do not have this technology, would our member leave and take their business to another financial institution? Has the potential loss in revenue been considered if this investment is not undertaken? How about reputational loss?
• Will the new technology provide a new revenue stream or streamline the delivery of a new or existing service? Are the revenue assumptions realistic and is the sales team committed to assumptions and their achievement?
• Will this technology streamline a process and make it scalable? If it does, was the savings in headcount included in the ROI?
• Will the features of the new technology be used immediately? If these features will not be used immediately, should the investment be deferred until such time these features will be used immediately?
• Has the impact to purchase or internally develop the new technology been considered and analyzed? If it will be internally developed, have the costs of internal resources been included in the ROI?
• Have all costs been included, such as:
  • Sales commissions
  • Implementation costs – utilization of internal/external resources
  • Ongoing maintenance costs (e.g., IT department)
  • Vendor management
  • If the new technology will be purchased, has the vendor due diligence been completed?
  • Have business continuity and disaster recovery costs been considered if this technology is deemed to be critical?
  • Were other technologies with similar features and functions considered?  Why were they not chosen?

As shown, the most critical components in analyzing a ROI for new technologies is understanding what’s important to your members, getting the team vested in success and asking questions until you are satisfied that an effective decision can be made.