How Credit Unions Can Step Outside Their Comfort Zone in 2021 Without Sacrificing Core Values
According to a recent Forbes article, credit unions were named as one of the losers in fintech and banking for 2020. According to a consumer study conducted in January 2020 by Cornerstone Advisors, 14% of U.S. consumers started the year with a credit union as their primary financial home base. By mid-December, that percentage fell to 10%. Tough blow, but credit unions can win back members by enhancing up their digital banking platform. And it doesn’t need to come at the expense of core credit union values.
Even worse, a CUNA Mutual Group study forecasts that after credit union membership growth plummeted to 1.5% in 2020, that will continue to decrease in 2021 and 2022. While this trend was accelerated by the pandemic, it started prior to the 2020 shutdowns. The time is now for credit unions to team up with strong technology partners to turn the ship around.
The Digital Banking Age: Fast Forward
Many leaders agree that the COVID-19 pandemic has changed the way banking will be done. The pandemic upended much of what traditional banks and credit unions saw as an immovable constant: conventional, in-person banking. The in-person experience has no doubt been a mainstay in core credit union values. But the tectonic shifts felt by the world because of COVID-19 forced radical changes in consumer behavior, moving sizable swaths of the economy online and increasing users’ comfort and demand to interact digitally. Notably, it has also left a widening chasm between the increasingly successful digitally-savvy financial institutions and those organizations that are being left behind because of hesitation.
Less Emotion With More Expectations
More and more end users are likely to view banking services as a commodity. Less than one-third, 29% of consumers significantly trust banks and credit unions to look after their long-term financial well-being — down from 43% just two years ago. According to a 2020 Accenture Global banking study, 50% of consumers now interact with their bank through mobile apps or websites weekly, compared to 32% in 2018.
Despite the surge in online activity, many consumers still believe that when providing advice, their bank or credit union always has their best interest in mind, and 62% believe that the advice is smart, personalized and well-informed. This points to end-users moving certain process-driven transactions to digital channels while keeping more complex matters to in-person, in-branch solutions. Tactical investments in digital banking platforms will be key to meeting post COVID-19 consumer demands.
Value-Driven Digital Banking Investment
Traditional bank and credit union values can seize the advantage when paired with a tactical digital banking platform investment. Banks and credit unions are still widely trusted. However, to remain relevant, financial institutions need to understand and embrace how end users are adopting the digital banking transformation.
For smart financial institutions, the behavioral shift means an opportunity to expand digital services while cutting costs. On top of growing consumer demand, the financial industry is under pressure from a lower interest rate environment, a drop-off in consumer spending and increased loan loss provisions. This, in turn, fuels weakened margins. CUNA Mutual Group forecasts bank and credit union net interest margins to fall to record lows in 2021. The stage is being set for consolidation within the financial industry. The advantage is clear — the financial organizations that survive and thrive will be the ones that adopt customized digital banking solutions.
Credit Union Value Solutions
Credit unions and community banks have a specific appeal to customers. Users expect a more personalized touch compared to the experience megabanks provide. Overwhelmingly, end-users trust credit unions and community banks more than commercial banks. Forbes partnered with market research firm Statista to survey 25,000 people about their banking relationships. Credit unions outscored banks with average satisfaction scores of 4.5 out of 5.
As smaller, regional financial institutions, you are uniquely suited to meet or exceed customer expectations when coupled with the right digital solutions. The pandemic has been an inflection point for fostering online solutions. Banks and credit unions that have invested strategically, financially and culturally have been better prepared to navigate these behavioral shifts. Matching your values with sought-after digital banking solutions will provide you with new and existing end users.
Strong Technology Partners
Fintech and megatech companies are crowding into the financial services space because there is a vacuum within the industry. People, by and large, prefer personalized experiences along with convenience. Working with innovative technology partners that are built to work with regional banks and credit unions can be a serious competitive advantage versus trying to build the solutions from the ground up. If you can create digital banking solutions around your organization’s values, your users will reward you with their loyalty.
Banks and credit unions across the U.S. and the world are realizing that innovation and digital transformation are essential. These adoptions are no longer just value-added moves. Users will continue to depend on banks and credit unions for safety and stability. For the duration of the pandemic as well as post-pandemic life, users will also seek personalized solutions as a staple of their future banking needs. Smart investments by your financial institution can satisfy all of those requirements, ushering in a new era of bank and credit union growth and opportunity.
Marty Aquino has been a passionate writer on venture capital, technology, forecasting, risk mitigation, finance and entrepreneurial topics since 2009. He is the founder of Carbonwolf Energy, a venture-capital firm specializing in world-changing and status-quo-defying technologies and people.
Forbes – The Winners And Losers In Fintech And Banking In 2020 (forbes.com)
CUN Mutual – Economic and Credit Union Updates
Accenture – Rapid Shift to Digital Banking During COVID-19 Accelerating Erosion in Consumer Trust Accenture – 2020 Banking Consumer Study | Accenture
Accenture – 2020 Accenture Global Banking Consumer Study Infographic | Accenture
Forbes – The Best Banks And Credit Unions In Every State 2020