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We've said this before; different is not scary. Different is better. If you think that isn’t true, just look at the rise of Neobanks and Fintech firms thriving in a space that was previously thought to be saturated and overserviced. Yet it is in a commoditized and oversaturated market where differentiation becomes critical.

Take, for example, Amazon’s Alexa (I don't even have to tell you that this is a voice assistant). Alexa became a household name and completely caught Apple by surprise. Apple tried to catch up by launching its own voice assistant, but it was too late. Many saw Apple as the dominant innovative player in the technology space, and yet Amazon created a differentiating product. Why did they create Alexa? Each question a person asks Alexa enables Amazon's analytics engine to further refine its ability to recommend personalized products. And personalization is a marketing requirement for successful offers.

If your credit union is not growing and thriving through differentiation, then it is time to re-think your position. What makes your institution unique or stand out among other financial services companies? Fintech firms are profitably processing payments, funding mortgages in 24 hours, and even enabling stock trading outside of the major trading firms. What did the Fintechs identify as a differentiation strategy? The specialization gap.

The first thing Fintech firms did was identify a consumer pain point in the delivery or packaging of a traditional product or service. Mortgages are lucrative products in financial services. However, depending on the bank or credit union, that process can take up to thirty days. Fintech firms quickly moved in and refined the process, eliminating old requirements and keeping only the necessary legal aspects of the mortgage process.

This made it easy to develop a digital platform around the simplified loan application and, therefore, easier to fund. Their mortgages are not radically different from any other mortgages in the industry. Still, their process to submit an application with supporting documentation is more efficient, creating less friction in the application process and a better applicant experience. Just a simple step like embedding a link to log into the IRS website and electronically collect tax returns reduced the amount of time to submit these documents. By specializing in a single product, Fintech firms have created a better experience, resulting in business growth.

Let's talk about Robinhood, and how easy it is to create an account. We can also talk about how easy it is to fund the account. How about how easy the platform is to use? We can go on, but you already know how this small player took a huge bite out of the investment space just by targeting younger, less sophisticated customers willing to learn and invest money. Like the mortgage example mentioned above, the first thing Robinhood did was to eliminate the hoops and hurdles (friction) to create a brokerage-type account.

In many ways, Robinhood is the ideal differentiator. Not only did they create a streamlined experience to open an investment account, but they focused on a segment of younger investors who appeared to be unprofitable due to small account balances. Whereas traditional investment firms viewed sizable portfolio balances as the road to profitability, Robinhood captured the market that those firms ignored. And, that segment is predicted to see an enormous transfer of wealth over the next decade, which positions Robinhood to increase market share not only by the number of clients but also by the expected growth in their portfolios. Robinhood actively curates content, teaching their young investors as they go along. Today, these 22.5 million small value customers have boosted Robinhood's valuation to $32 billion in 2021.

Today, sustained profitable growth cannot be achieved without differentiation. Differentiation is anything that sets a business apart from its competitors - whether that be an improvement in a product, process, or delivery. However, while Fintechs may receive lots of press, there is something to be said for longevity. Let's return to the transfer of wealth point made earlier. A large portion of most credit union membership is the baby boomers, and the baby boomers hold the wealth that will be transferred.

Frictionless digital experiences are going to be table stakes to draw in the younger consumer segments. Using differentiation to attract those segments is imperative now, so when the transfer of wealth occurs, a more significant percentage of those balances stay within your credit union. Members have always trusted the safety and soundness of credit unions, which remains a requirement across all generational segments. But differentiation is the key to getting noticed by your future membership. What makes you different is what sets you apart.