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I dont’ think I’ve ever gone three weeks without a blog post. After Steve Jobs broke the four minute mile and lapped us, my mind went into simmer mode.  I had some great comments from some very smart people on that last post. It gave me pause.

Tim McAlpine made this comment:

Who knew the sleeper of an iPod / iTunes combo created a decade ago would lead to iWorld – a magical place where you need not go outside (or carry cash or plastic).

People inside the financial world will dismiss this invention just like the extinct record stores and newspapers and the bookstores and the video stories and the…

And then Borders filed for bankruptcy (as expected). Another warning shot across the credit union bow – a shining example of disruptive technology destroying an entire industry.

Why did Borders Books, Music and Movies ignore the trifecta of disruptive technology that was the Kindle, iPod, and Netflix?

Because their target audience (current customers) were not early adopters of technology and would likely never shift over. There are plenty of people that still love to hold a book in their hand and buy CDs in their plastic case and put them on a shelf in their home. Barnes & Noble was allowed to survive and will hang on a bit longer because they also mimicked early in the game by opening an online store.

One could argue that most existing credit union members (age 48 on average) are not likely to use PayPal or move to an electronic wallet. Too late in the game to change. So we’re safe, right? For now.

But it begs the question: “What about future customers?” New customers are born every day. And this Generation named Y is the second largest in US history. When they reach the age of disposable income and independent transportation (16) are they gonna drive to Borders to buy the latest Lady Gaga CD? Hell no.  They are going to download it to their iPhone.  That’s what killed Borders.

Apple’s electronic wallet is not going to destroy the banking model over night – but the model will replace the traditional process of moving money for Generation Y and Z. They won’t have to switch – they will merely be provided with two options. Drive down to your parents credit union (at $4.00 a gallon in gas) and stand in line to deposit a check or sit in line at the drive-up ATM (wasting precious fossil fuel) OR upload money to their phone.

Our world has changed. The iPhone is really a disruptive innovation. Jobs improved our product and service in ways that the market does not expect, and is designed for a different set of customers. The next generation of customers.

The numbers are there to support our eventual Border-like-demise. The average age of a credit union member continues to inch up and for most risk-averse-regulator-devout-near-retirement leaders, the loan-to-share ratio continues to decline. Some of these venerable commanders have even declared that “It’s not going to be my problem, because I won’t be around in five years.”

There is no better form of validation of Jobs innovation than that statement, in my opinion.

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February 2011