An executive came back from a conference convinced that interactive teller machines would soon replace the ATM and that the institution had to move first. The team traveled to another bank to see the machines in use, spent time and money on the project, and never put a machine in a branch.
When Chris Rigoni, EVP and Head of Partner Banking and Payments at Axiom Bank, joined us on Next Best Action, our podcast on how banks and credit unions adapt, he described how projects like that begin: “Seeing something at a conference, talking to someone for thirty or forty-five minutes, seeing their product and going, wow, that’s really something we should put in place. Is it, really? Does it align with your strategy? Does it align with the direction of the bank?” A strategy answers those questions before anyone begins evaluating the idea.
The goals behind projects like that are usually sound. Chris calls those goals outcomes. The strategy is how an institution decides to reach them. What he hears is “we need deposits, or we need fee income. Well, that’s not a strategy. That’s banking generally.” The trouble starts when someone jumps from the outcome straight to a technology and lets the purchase substitute for the strategy. “A lot of organizations get really enamored with a technology,” Chris says. “Nowadays, when you look at a lot of organizations, they want to do AI, but they don’t know why. They don’t know how it’s tied to a strategy.”
Why the strategy gets skipped
Evaluating a tool feels like acting on the goal. A platform decision can take months of demos, due diligence, contract review, and board approval. Most of that work examines the tool: its features, its vendor, and its price. Far less of it examines the institution that will use the tool. Those questions belong to strategy, and they are harder to answer. A team that sets a strategy has to say what the institution does well, what it does poorly, and what it will not attempt. Chris says a community bank has to take an honest look and “ask what we don’t know.” He wants leaders who will say, “I don’t think we’re ready for this.” Neville Billimoria, CMO of Mission Fed Credit Union in San Diego, asks for “maybe more reflection than analysis.”
Admissions like those are hard to make in front of a board or a peer. During a long evaluation, everyone can skip them. By the time someone signs the contract, the diligence looks like rigor, and the implementation looks like progress. That is how the strategy goes missing at institutions that know they need one.
Where the technology substitutes for the strategy
Leaders who have joined us on the podcast describe the same jump from their own seats, in partner banking, in digital, and in analytics.
In partner banking, a bank wants deposits and turns to fintech partners and their technology to get them. Without a strategy, Chris says, the deposits may arrive fast and carry little fee revenue. Some fintech partners grow and then fade, and the bank pays “to onboard, maintain, and then offboard” each one. One large partner can end up holding most of the deposits, which Chris compares to a single commercial client carrying seventy percent of a bank’s revenue. “It sounds great to a salesperson,” he says, “but on the risk, compliance, and finance side, it’s not.”
In digital, leaders make the jump with AI and new platforms. Jay Tkachuk, who led digital banking at Security Service Federal Credit Union and then Golden 1, sees leaders “looking for some AI magic pill that will solve all the problems.” He describes the same problem when institutions hire a digital leader to deliver a transformation. “They know they want digital, they know they want transformation, they know they want to be competitive. But how to get there, they haven’t decided.”
CarrieAnne Cormier, founder of BankSmart Studio and former COO of IC Credit Union, heard the language before a platform upgrade: “We’re going to be just like Chime.” When the institution launches and staff find it is “just the same as the bank or credit union down the street with different colors,” they feel let down. Deciding what will set the institution apart on the new platform is strategy work, and that decision belongs before the launch.
In analytics, institutions make the same jump with data platforms. Lauren Kessler, director of marketing, analytics, and sales at BankFund Credit Union, says data silos begin when an institution introduces a new platform. The institution has “just spent all this money on it” and wants to prove the ROI. The platform can go live before anyone answers the strategy question: what will the institution do with the data? A team produces “the pretty graph you made and shared with leadership,” and nobody turns it into an email, a website placement, or a prompt in digital banking. “There’s no report or graph that’s going to tell you how to generate revenue,” Lauren says.
A board that wants AI now will see waiting for a strategy as losing time to competitors. Jay offers a way to answer that board. He tells leaders, “Learn how to build an AI agent. Just build one. It doesn’t matter what it does.” A leader who builds an agent learns what the technology can do and where it stops and can bring that knowledge back to the board. That learning costs little. The purchase can wait until the strategy says what the AI is for. An institution that buys AI with no strategy behind it spends budget and staff time on a tool with no problem to solve. Jay’s challenge is about learning. His warning is about spending.
“There’s no report or graph that’s going to tell you how to generate revenue.” – Lauren Kessler, Director of Marketing Analytics, and Sales at BankFund Credit Union
A strategy that decides
Leaders should be able to use a strategy to decide what the institution will pursue and what it will pass up. It can take very different forms.
Chris has worked at banks with robust sponsor-bank programs. His approach starts from expertise: “start with your comfortableness and expand from there.” A bank with deep experience in healthcare goes after healthcare deposits, where it already has relationships and faces little competition. A bank that has never done cross-border payments does not enter that business until it builds the expertise. The strategy also sets a size and a pace. “If you want a billion in the next thirty-six months, that’s probably doable,” Chris says. “A billion in the next six? Probably not.”
Mission Fed chose member intimacy when its board asked Neville for a new value proposition. The choice came with a rule. Mission Fed advocates for its members “even if that means redirecting them to a different enterprise if that’s what’s in their best interest.” It also created an advocacy officer role that sat in the asset-liability committee meetings to speak for the member.
The two strategies share almost nothing, and each one settles real decisions. A slogan like “member-focused” or “we need deposits” leaves those decisions open.
A credit union we work with shows the same kind of strategy settling a technology decision. It was losing market share to competitors, and its leaders worried that a shrinking share would leave the credit union unable to serve members when they needed it. It needed to grow. It tried higher CD rates and lower loan rates, and both brought in new business. The new members wanted a better rate and had no interest in growing with the credit union. Its leaders chose a different strategy. The credit union would grow with members who wanted a lasting relationship, and it would reach them through its digital channel, which it had not yet used to grow. It saw our clients growing through their digital channels, and it chose to work with us because the platform served that strategy. The technology itself, and the AI in it, mattered less.
Go back to the executive returning from the conference. At an institution with a strategy that decides, leaders can answer Chris’s questions in the first meeting. Does the product serve what the institution chose to pursue? Does the institution have the expertise to run it? If the answers are no, the idea stops there, however good the demo was. If the answers are yes, the long evaluation that follows examines the right things.
Leaders can run the same test on their own strategic plan. Take the last technology the institution bought and find the line in the plan that decided it. A plan built on phrases like “grow deposits” or “improve the experience” has no such line. That is the moment to ask Chris’s closing question of the plan itself: “is it really a strategy, or is it an outcome?” The tool still matters. The strategy decides whether anyone should consider it at all.
If there is a technology on your list you want to test against these questions, we are glad to talk it through.
This article is part of a series that draws on the first episodes of Next Best Action, our podcast on how banks and credit unions adapt. The guests have had different roles at different institutions, and on a few questions they keep reaching the same answer. Each issue takes one of those questions.