Because of perpetual advancements in technology, the way people conduct their day-to-day activities is always changing. What once required a visit to the bank can now be done by taking a picture of a check or a swiftly transferring funds from a savings to a checking account through a mobile app. While fintechs have been able to keep up and thrive in this digital environment, some credit unions (CUs) and traditional banks have found themselves falling behind.
To further discuss the digitization of Credit Unions (CUs) and how banks can use new technology to better serve their customer base, PaymentsJournal sat down with Samantha Paxson, Chief Experience Officer for CO-OP Financial Services.
CUs go digital
CO-OP Financial Services is a payments provider to 3,000 CUs and 60 million consumers, processing about 8 billion transactions per year. To better understand what CUs need to do to be competitive and where they should be investing their time and money, CO-OP commissioned research focused on member-centricity.
In this study conducted by EY, consisting of 2,000 current members and 1,000 prospective members of CUs, CO-OP sought to understand what drives the primary financial relationship, which choices within the CUs helped to increase growth, and what the market share engagement was among that set of consumers.
The results were quite interesting. Results from a similar study conducted two years ago showed that those consumers who were members of CUs and receiving financial services from banks, fintechs, and wealth management providers were more engaged with CUs than traditional FIs. In fact, only 6% viewed fintechs as their primary financial provider. Now, 30% of existing CU members see their CU as a primary financial relationship, while 30% see a fintech in that role.
“The key takeaway from this is that we first, as credit unions, really need to understand our members and do needs-based segmentation to design for the member, just like fintechs are doing. The second thing is to migrate numbers from just having a passive [relationship]—a savings account and a checking account—to an active relationship where they’re using the card every day for things like credit and debit card payments, or P2P [and] contactless [payments],” said Paxson.
Do consumers still trust their banks?
It is no surprise that younger consumers gravitate toward newer, tech-savvy payments solutions and the providers that offer them. However, the research previously discussed was conducted across all demographics, from Gen-Z to the Silent Generation.
“We have to shift our mindset [so] that it is not just [about] educating our existing members,” explained Paxson. “It is simply having the ability to offer [solutions to] them and engage those members and meet them where they are. We need to be active as credit unions and aggressively putting this at the center of our strategy.” This will give CUs the opportunity to collect data and assess how members are behaving so that they can provide bundled solutions that suit the needs of their customers.
In order to gain the trust of their members, CUs must prove that they are not only going to do what’s in the best interest of the customer, but also have the capability to act on those interests. This entails 24/7 access to services including contactless payments, fraud alerts, money movement, and real-time understanding and personalization of solution sets that are being delivered digitally. The more that CUs accelerate the intersection of human-based delivery with digital delivery, the more aptly they can demonstrate their ability to deliver.
CUs should take a proactive approach
Paxson believes that data is crucial to enhanced communication. For example, a CU cannot know if a customer is looking for a home loan without having access to their data. Only with knowledge of a customer’s behavior can the lending team then know that they should be engaging with this individual. This allows the team to extend personalized offers to the member, based on the understanding extracted from the data and behavioral activities.
“Being proactive is so critical because member expectations have just plain changed,” offered Paxson. “They expect us to deliver like Amazon [and] PayPal, and PayPal is the provider that is seen as the top competitor to credit unions.” CUs have an enormous opportunity to demonstrate that they have a deep understanding of their customers and can meet them where they are with solution bundles that they need.
Life stage moments
CUs and traditional financial institutions often struggle with needs-based segmentation. There are a lot of root causes that explain why CUs and banks have siloed data sets in individual departments. “Many credit unions have 500 vendors; they have processes that are not quite linked or architected in a way that is integrated,” explained Paxson.
If a CU focuses on the daily lifestyle of a member, it will generate more activity and usage to help inform customer life stage activation, or the beginning of a customer’s lifecycle. “One informs the other: the daily lifestyle engagement informs the life stage engagement,” elaborated Paxson. For example, if the CU can get the customer’s business for payments, it can also get it for loans; one is a sales engine for the other.
However, CUs have many vendors and different departments that are focused on individualized activities for members, and it can be challenging to cut across all of those avenues and then link them together. CO-OP has been in the business of access and convenience for 40 years and has acquired an extensive data pool that spans across many solution sets. This has allowed it to collaborate with CUs and put that data and information into action.