Innovation in Financial Services

Financial Services Innovation: How business leaders use innovative approaches to shape their strategies.


An interview with Ms. Christine Zalzal, AVP, Sales and Marketing, FirstOntario Credit Union.

Ms. Zalzal argues that the grassroots strategy of a Credit Union is about being part of the community and staying for the long run in those communities.

Read the Arcus Innovation Leaders Report.


If innovation is one of the biggest challenges companies face, how do senior executives build the innovation engines they need to generate the products and overall business environment to keep new things coming? How do they know where to focus their resources and management efforts? Arcus’ multi-industry survey of senior executives found that of all the challenges companies face in this area, the biggest challenge is finding ways to create a “culture of innovation”. Most executives agree that innovation should be a shared responsibility—something everyone should participate in. They also say employees can’t innovate unless managers empower them to do so.


As Arcus research indicates, executives around the world increasingly recognize that the creation of long-term shareholder value depends on a corporation’s ability to understand and respond to consumer demands for innovation. No surprise, then, that the topic of innovation has been gaining ground as CEOs seek to incorporate the innovation imperative into their assessment of a company’s long-term value.


An interview with Ms. Christine Zalzal, AVP, Sales and Marketing, FirstOntario Credit Union.

Ms. Zalzal argues that the grassroots strategy of a Credit Union is about being part of the community and staying for the long run in those communities.  She says people who choose to deal with Credit Unions have a different set of expectations because Credit Unions are owned by members. The innovative approach is to change the context of banking. It is highly personalized, going beyond a transactional approach to banking. The nature of the conversation with their members fundamentally defines the Credit Union world and sets it apart from other organizations, says Ms. Zalzal.


Innovation in Financial Services


Arcus: Please describe the business model of Credit Unions.


Ms. Zalzal: The Credit Union Model has been in existence in this century for quite some time. It was born out of a cooperative movement. Unlike banks that are owned by shareholders, Credit Unions are owned by members. The concept fundamentally defines the Credit Union world and sets it apart from other organizations. It is thereby not driven by a focus on satisfying shareholders but to satisfy the needs of members.


We believe the Credit Union model is based on a 360 degree approach. Members join because they want to have a say in the service model and a vote in the delivery structure. It starts with a model of a cohesive membership base. The membership base has a say in how the Credit Union is operated. Each member has voting privileges. The bylaws are voted by the membership. These bylaws dictate how the Credit Union is managed and how broad policies are developed and implemented.

“Credit Unions are for consumers who want a different experience in banking.”


Arcus: What are the drivers of innovation and growth?


Ms. Zalzal: Credit Unions are largely misunderstood and its one of those best kept secrets. Customers who bank with us know that it is a very different model and that there is a viable choice other than the big banks. There is a significant gap in awareness, understanding and relevancy. These are the three barriers to accelerating growth. These challenges are unrelated to our financial structure and capitalization. We needed to have a clearer articulation of our current and desired state.


Arcus: Do Credit Unions function like non-profit organizations?


Ms. Zalzal: We are careful not to use the word non-profit in the sense where we have special privileges. But unlike the banks, we are not just profit-driven. Fundamentally, that is the difference between the banks and their shareholders expectations. The reason we expect to run a profitable operation is to reinvest in the Credit Union and provide a superior level of service that members would expect from the organization. It goes beyond dividends. We invest retained earnings in technologies, branches and services.


Arcus: Do Credit Unions offer a unique banking experience?


Ms. Zalzal: Credit Unions are for consumers who want a different experience in banking. Credit Unions are largely known for having a much more hands-on approach to their membership and related needs. We really do care about members and we listen and respond to their feedback – these are not hollow words. A membership base tends to have a stronger voice. It’s all about feeling a sense of belonging and being part of the community.


The grassroots strategy of a Credit Union is about being part of the community and staying for the long run in those communities. We invest in these communities. When we lend to companies and other members, it’s always in our community so we have a vested interest in the success of our members and our communities We listen a lot harder and respond quicker. The decisions are made with a different lens. We do make a profit but we balance out things to ensure the membership’s needs are addressed. We would ask ourselves what would be the benefit for members and collaborate on an approach that would succeed for both membership and Credit Unions.


Arcus: What makes the Credit Union offering innovative?


Ms. Zalzal: We are driven by a different business imperative. We put humanity and values back into banking. We reinforce the value system that customers expect from us. That is why we focus on a value proposition that is unique and resonates with our members. The innovative approach is to change the context of banking. It goes beyond a transactional approach to banking. It is highly personalized. What makes us different is the nature of the conversation with our members. We ask ourselves what would be the impact of each business decision on our members before we proceed with initiatives.


“People who choose to deal with Credit Unions have a different set of expectations.”


Arcus: How does this innovative approach translate into products and services?


Ms. Zalzal: People who choose to deal with Credit Unions have a different set of expectations. We focus on services that enhance our value system. Our approach translates into superior end-products for our members. The approach requires the end-customer experience to be vastly superior to their past banking experiences. The approach also translates into tangible results. Also misunderstood is that we not only offer all financial product suites. But our price can be more attractive than our main bank competitors.  The idea is to give back to our membership in many aspects of the service and product delivery. A recent study indicated that the loyalty of the client base of Credit Unions is significantly higher compared to loyalty rates of other financial institutions. On average, our clients have been with us for over a decade. Our clients tend to stay with us because the value proposition resonates with their expectations.


Arcus: What are the key drivers of customer loyalty?


Ms. Zalzal: What makes people join is a sense of community and belonging – realizing that their banking experience will be different compared to what is experienced elsewhere. Their loyalty is strengthened by a superior standard of service and product offering. Members know they count and the customer experience is elevated beyond a transaction. For example, customers who interact with our Credit Union for the first time realize that they need to recalibrate their expectations from financial institutions. They see a genuine interest and an eagerness to please customers. Our credit and investment products are priced competitively within our service offering.


Arcus: Could you please share an example of superior product innovation?


Ms. Zalzal: In the past few months, our communities have suffered the impact of the financial crisis not unlike many areas in the world.  As we all know very well, there have been significant lay-offs, and people’s lives have been greatly affected by the turbulence of our times.  As a credit union, we took this very seriously and asked ourselves how we can tangibly and emotionally lend our support to help our members get through this challenging period.


We knew that we wanted to offer a service that can ease the transition both on a financial basis as well to help members get back on their feet and into the job market.  We also knew that losing a job after many years at a company can be devastating to the individual and to the family unit.  We therefore felt we needed to go beyond what would normally be expected and offer a holistic and comprehensive program that would assist on all fronts:  financially, emotionally and practically in preparing to go back into the job market.


We want to be partners in their success. As a result, we created the Community Assistance Program.  The program offers to re-evaluate their finances to allow them to weather their circumstance. Each member’s situation is reviewed carefully and our “normal” rules are reconsidered in the spirit of protecting and assisting the member to ensure that we can minimize the impact of change as much as possible.  We review their cash flow and create a financial plan that works for them by offering special considerations. On the job front, we will provide them with a comprehensive list of all resources available to them in their communities. We also offer in-classroom seminars on how to write a resume, interviewing techniques, and much more.  On the emotional front, we also offer counseling services through a company that is an expert in dealing with such situations. All of this is of course without cost to the member.  It is a service that we feel is integral to our company’s philosophy and in turn to our members. This type of service speaks to innovation since our approach to developing products and services are aligned to our brand values that are inherently different than traditional financial institutions.


Arcus: How is innovation encouraged in your organization?


Ms. Zalzal: Innovation originates in the most unexpected places. It comes through conversations, having a curious open mind and surrounding yourself with people of a similar nature. Innovation certainly happens through conversations, having an environment to be open and curious and a sense of ownership in the company.


There tends to be an entrepreneurial spirit in smaller organizations. Innovation can come from the most unlikely places. Everyone feels they have a greater impact and as a result, it infuses these conversations and sometimes excellent ideas come out of the process. The Credit Union innovation model is driven by ownership and a sense of belonging. The model ensures a client-centric service delivery and client experience model that stems from a genuine interest in serving members because after all, our members are owners of the organization. It translates into a persuasive value proposition of banking with a human face. The approach puts humanity and a value system back into banking.


Arcus: Has the strategy delivered tangible results?


Ms. Zalzal: There are many examples throughout Canada that have proven that the Credit Union model is alive and thriving.  It offers consumers a different alternative than traditional banking. In Quebec, for example, Caisses Populaires is a dominant player with the largest market share. They have succeeded because they are focused on the grass roots level and are embedded in the culture of the province. In BC, Credit Unions own 40% of the market. The example of BC is one that we hope can take hold in Ontario.
Credit Unions in BC faced similar challenges like the ones we face in Ontario. For example, Vancity, Canada’s largest credit union, and its subsidiary companies are guided by a commitment to corporate social responsibility, and to improve the quality of life in the communities where they live and work. They are innovative in BC because they decided that they would carve out a niche by being involved in the community and the environment. Their products line up to a unique value proposition. In that example, Credit Unions grew their share of wallet. Saskatchewan is another example of a success story. Ontario has been lagging behind because of gaps in infrastructure. But I think we are in the process of coming up with a cohesive strategy to replicate the success stories of BC, Saskatchewan and Quebec.



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