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How Credit Unions Can Help People



Credit Union-Credit Unions | How Credit Unions Can Help People Thrive In The Post-Pandemic Economy | featured

Banks shuttered more than 3,300 branches in 2020. That’s a concerning number of closures. Yet as the chief experience officer of a company that offers payment and financial technology solutions for credit unions, I believe the pandemic has accelerated the adoption and brought home the value of digital banking for millions.

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How Credit Unions Can Help People Thrive In The Post-Pandemic Economy

Thanks to the availability of online and mobile banking, digital payments, virtual tellers, and other banking-by-screen solutions, a sizable percentage of people usually don’t require their primary financial institution to have a physical presence although they may continue to appreciate the branch for more complex engagements.

Essentially, financial providers should anticipate consumers’ needs and be ready to serve them right where they are.

Fintech firms are getting very good at delivering on that expectation. In a study commissioned by CO-OP Financial Services and conducted by EY in January and February of 2021, 30% of the 3,000 credit union members surveyed said their primary financial relationship (PFR) is with a fintech firm.

Nearly one-quarter chose PayPal as their most trusted financial brand.

It’s clear — a big part of the desire for human interaction is about trust, and financial institutions should earn it by understanding the needs of those they serve.

Interestingly, trust in financial institutions has dropped as digital engagement has increased. Accenture research reported by The Financial Brand found that in 2018, 43% of consumers said they trusted their bank to look after their long-term financial well-being. In 2020, just 29% said the same.

The State Of Financial Cooperatives

I believe our need to connect human-to-human with the institutions handling our money is one of several reasons credit union membership has continued to grow steadily, as Statista data illustrates.

As financial cooperatives owned by their members, many credit unions have strategically maintained this connection even as they have digitally transformed the member experience.

When credit unions are excellent at both human and digital interactions, they can position themselves well to provide meaningful alternatives to those living and working in bank deserts.

Many people are already members of credit unions in the U.S. — 126.6 million in 2020, according to Statista. Yet in my experience, even those who already have that relationship don’t often think of their credit union as a resource for new, high-tech, digital payments and other banking experiences. In many cases, this is simply a problem of awareness.

Especially if bank deserts become more of a concern, I think we can expect to see credit unions step up their games in terms of driving awareness of their digital solutions.

That’s because doing so could not only stimulate the growth of the credit union movement but could also help more communities struggling with a lack of people-centric financial providers to access the services they need.

How Credit Unions Can Help More People Thrive

The question of how to earn a deeper relationship with more consumers is the subject of several strategic conversations happening right now within the credit union movement. Here are two ways credit unions can do so.

1. The first of these is needs-based segmentation. This strategy calls for credit unions to consider the complete lifestyle of a member or prospective member.

This differs from strategies of the past in which financial institutions focused on key milestones in a person's life — life-stage moments like buying a house.

In a world changed by Covid-19, lifestyle moments often happen at a distance. Consumer needs now often hover around things like touchless, remote, and digital transactions.

Credit unions can examine their data about existing member deposit accounts to spotlight gaps in lifestyle-oriented services that they can fill. For instance, person-to-person (P2P) transactions might indicate comfort with fintech providers and digital payments.

The credit union can then consider better promoting or incentivizing the use of its own P2P service for those members with heavy P2P activity.

Changes to ACH activity can indicate a recent job loss or deferment of a credit card, auto loan, or mortgage payment. Navigating everyday financial decisions can become especially difficult when unexpected crises hit an individual or family.

Credit unions can proactively reach out to vulnerable members with programs that may help alleviate their current financial struggle.

2. The second strategy centers on transitioning passive member relationships to active ones. Whereas credit unions are typically strong in terms of passive relationships (ranked No. 1 for loans, savings, and checking in the EY survey), I believe fintech has achieved primacy inactive relationships.

Credit unions can focus on developing payment products like contactless tools, P2P payments, and mobile wallets to create greater numbers of active relationships.

Again, it’s about being there for the everyday lifestyle moments, not just the occasional life-stage ones. (Full disclosure: My company offers technologies like the ones mentioned in this article.)

It will be important to ensure any payment products they develop offer the level of digital sophistication and personalization consumers have come to expect from fintech providers.

Enhancing credit and debit card loyalty programs by incorporating features like real-time cashback reward redemption, for instance, could provide just enough incentive to move a ho-hum card into top-of-mind positioning.

Beyond digital payment products, credit unions can also create financial wellness ecosystems that provide relevant wealth-building opportunities for the distinctive needs of different member segments.

In fact, 2019 Gallup research found that among consumers who agreed with four or more of eight statements that signify their banks support them, 77% of them are engaged with their financial institutions.

I believe the credit union of tomorrow will have personal relationships at its center and will offer a compelling mix of human and digital services designed to help members achieve their financial ambitions.

As cooperatives, these distinctive financial institutions typically already hold strong incumbent advantages, such as their ability to offer outstanding service, trusted advice, and secure banking solutions.

By pushing forward on the initiatives above, credit unions could become the partner that all people — not just those living in banking deserts — need to thrive financially.

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