When the Federal Credit Union Act was passed in 1934, America was still in the grip of the Great Depression. Money was scarce, employment was precarious and credit was largely unobtainable for ordinary people. While some things haven’t changed – money is still tight for many and employment is once again precarious (albeit for different reasons) – overall daily life is very different from it was in 1934 or even 2004.
One of the most consequential changes has been the transition to digital banking. Your ability to grow and retain your member base will hinge largely on how well you can compete in the digital space.
The Credit Union of the 21st Century
Credit unions grew up around the idea of serving their community, whether that be a literal community in the geographic sense or a virtual one based on a workplace, union or some similar bond. For a large part of the banking public, especially in the younger demographics, virtual community is now the norm. Even neighbors and co-workers are more likely to interact through IM, text or social media than by chatting over the fence or cubicle wall.
This presents both a challenge and an opportunity for credit unions. The move to online interaction erodes traditional face-to-face personal relationships, which have always been central to the credit union experience. The opportunity lies in building your own virtual community through digital banking and outreach.
In a 2019 paper entitled The Credit Union of the Twenty-First Century, Taylor C. Nelms and Stephen C. Rea of the Filene Research Institute made the observation that “…communities are made and maintained, in part, through participation in credit unions.” That insight is key to maintaining the credit union’s relationship-driven approach even as you begin providing your services digitally.
“We contend that credit unions today do not serve only preexisting communities. Rather, communities are made and maintained, in part, through participation in credit unions.” — The Credit Union of the Twenty-First Century; Taylor C. Nelms and Stephen C. Rea; Filene Research Institute
Who Your Customers Are Today
In its 2019 survey of financial services consumers, research firm Accenture focused on their attitudes toward, and expectations of, digital banking. Respondents fell into four distinct groups, termed “personas” by the report’s authors, each with its own set of wants, needs and biases:
- Traditionalists: This group is tech-averse and prefers face-to-face interaction. They’re mostly Boomers, aged 55 and up, and have little trust in, or engagement with, their financial services providers.
- Skeptics: Accounting for 1/3 of all respondents, this group is wary of tech and jealous of its privacy, and similarly untrusting of the companies they deal with. They’re not an age-defined bloc, with more than a third falling into the under-35 demographic.
- Pragmatists: Roughly a quarter of respondents fell into this group. They care about the end result, not necessarily the technology itself.
- Pioneers: These are the “digital natives,” the consumers who expect to engage primarily through mobile devices and digital channels. They’re early adopters, looking for innovation and convenience.
Your current member base probably includes all four of these broad types, and each has value to the credit union. Traditionalists are older and may have more assets and equity to manage. Skeptics and pragmatists have a “show me” attitude, but may be similarly slow to leave once you’ve brought them into the fold. Pioneers, as the youngest group, have the potential to be your longest-term members.
Lumin Digital’s digital banking platform can help you attract, and keep, all of them.
What Is Lumin Digital?
Lumin Digital provides banking technology that won’t just make you competitive against the big banks’ offerings, but can offer a genuinely superior user experience. Despite the massive resources banks can throw at their digital technology, they’re not nimble. Their digital platforms contain generations of older legacy code which is time-consuming to upgrade, products and services are often “siloed” away from each other, and upgrades and new-feature launches can mean hours of downtime.
In contrast, Lumin Digital offers a thoroughly clean slate, built on state-of-the-art technology. Lumin Digital is:
- a cloud-native application, always lightning fast and always available (we’re an Amazon Web Services Advanced Technology Partner)
- highly secure, with real-time, AI-driven data analytics and threat intelligence/response
- upgraded behind the scenes in real time, so your members never find their banking off-line
- completely consistent across all platforms and devices, so your members only need to learn it once
- fully integrated, so members have access to all of your products and services in one seamless package
- data-driven, so you can provide your members with intensely personalized suggestions, tips and product offers
- customizable, with an Application Programming Interface your in-house IT team can use to add or fine-tune features to fit your needs (and your members’)
- fully supported by Lumin’s own help functions and call center, so you won’t need to spin up a support staff of your own as part of the rollout
On a more fundamental level, the big banks’ digital platforms are built around the banks’ needs, rather than those of their customers. Taylor C. Nelms, Senior Director of Research at the Filene Research Institute and co-author of the paper cited above, sees this as a key differentiator for credit unions. In his words, “There is no trade-off between digital transformation and supporting members’ financial well-being.”
Expanding your digital presence is simply how you’ll help your members reach their goals. In doing so, you’ll meet your goals as well.
How Lumin Digital Can Help Drive Acquisition and Retention
Most digital banking platforms and personal finance apps fall short of ideal performance in some respects. Those areas of friction, or “pain points,” represent opportunity for credit unions with an aggressive digital strategy. Lumin Digital’s superior platform provides you with the tools you need to address those vulnerabilities in rival products, emphasizing appropriate advantages for each customer profile.
- Traditionalists: If it wasn’t before, the recent COVID-19 outbreak made it clear to even the elderly and tech-averse that digital banking has a role to play in their lives. Lumin’s intuitive interface and full-featured support make it easy for reluctant users to get up to speed, and its seamless integration means they’ll only need to learn one way of doing things.
- Skeptics: Lumin’s highly secure product can help allay their suspicion of technology in general, and the high level of control it gives to users fits with their hands-on attitude.
- Pragmatists: What they really want is a product that just works, and doesn’t get in their way. The Filene Institute calls that “ambient banking,” and Lumin does it superlatively well.
- Pioneers: Look for digital services by default, but just having an online presence won’t cut it. Pioneers expect their experience to be fast, and friction-free. A 2019 survey commissioned by Ekata, a digital identity verification company, found that 73 percent of respondents expected transactions to happen instantaneously and that 66 percent would simply abandon the transaction if it took too long. Lumin’s high-speed, cloud-native software meets those expectations.
Lumin Digital’s software platform provides the tools you need to attract and retain members, and to appeal to users across generations and the four “personas.” Two especially crucial parts of that equation merit a closer look.
Personalization Drives Engagement and Drives Retention
Credit unions are built on the intersection between financial services and community involvement. As the Filene Institute observed, a sense of community both drives and results from engagement.
For John Dearing, CFA, personalization is the key to capturing more of your members’ business, which in turn binds them ever closer to the credit union. He’s a partner at Capstone Strategic, a leading CUSO advisory and consulting firm that helps credit unions reinforce their bottom line through acquisitions and non-interest based income.
“To separate themselves from the crowd, credit unions…need to seamlessly incorporate the use of analytics to help retain members with targeted cross-selling to get deeper and become more ‘sticky’ while opening up new growth pathways. When you combine analytics with personalization capabilities, you end up with targeted marketing initiatives that will yield better results because you can get in front of potential new members when they most want your content and…help solve current members’ challenges when the time is right. [This] highly personalized experience will help credit unions be ahead of the game and help create long-term valuable member relationships.”
Lumin’s sophisticated analytics enable you to suggest the right products and resources to your members in a timely fashion. That’s not just good marketing, it’s an extension of the credit union’s member-first ethos. It helps your members feel that they’re known and understood as individuals, not simply as numbers on the balance sheet.
The Special Case of “Digital Natives”
Your younger members and potential members face different financial challenges than their older peers. They’re more likely to be part of what Filene refers to as the “1099 workforce,” juggling multiple jobs or contract positions with side hustles in order to pay their bills and meet their goals.
Their patchwork approach to income is matched by their approach to financial services. They’re more likely to choose service providers on an ad-hoc basis, often by simply Googling or asking a friend or family member. PwC’s 2019 Consumer Digital Banking Survey revealed that 46 percent of Gen Z respondents and 26 percent of millennials planned to open a new deposit account within the next year, but that fully 50 percent of those were unlikely to do so with the bank they currently use.
Bringing Clarity to Younger Members
This a la carte approach, or “disaggregation” in academic terms, is the direct opposite of the increasing engagement you’d like to see from new members. That said, their digital-first preferences open the door for a product like Lumin Digital to make inroads. In PwC’s survey, respondents under 35 were 1.5 times more likely to open an account based on a good user experience, rather than rates or rewards.
For Filene’s Taylor Nelms, younger users’ hit or miss approach to financial services represents an opening in itself. “With the disaggregation of financial services across an increasingly fragmented and confusing landscape of providers, interfaces, and relationships, consumers are increasingly looking for a financial partner that is [both] high-tech and high-touch,” he says.
Lumin Digital’s data-driven, analytic approach to personalization positions your credit union to meet that need for a unified source of reliable, timely information. Members in this demographic are already accustomed to getting personalized recommendations from vendors like Amazon, Netflix and Spotify, so this approach serves both their interests and yours. As Nelms observes, “There is no trade-off between digital transformation and supporting members’ financial well-being.”
A Digital Credit Union is Still a Credit Union
There are a great many fintech products in the marketplace, though few rival Lumin Digital’s speed, security and seamless functionality. A key differentiator for Lumin Digital is that it was created from the ground up as a product specifically for credit unions, built on PSCU’s decades of experience in serving the needs of credit unions and their members. It is, by design, a tool to help credit unions preserve their identity in an increasingly digital-first marketplace.
“Credit unions need tools and platforms that meet the increasing demand of personalized service on…any and all devices just to be ‘in the game,’” advises Dearing. “Lumin Digital is a solid example. They provide solutions based on member habits and behaviors. Highly personalized experiences will help credit unions be ahead of the game, and help create long-term valuable member relationships.”
In his experience, as a longtime industry insider, finding digital partners with a CU background is vital. “Those partners who know the credit union world…that can scale to 1) prove the concept and 2) grow with you, will be the best in breed. Really knowing the space, the needs, the mission, separates great partners from the rest.”
See the Possibilities For Yourself
Theoretical benefits, however well researched, are never as compelling as the evidence of your own eyes, gained through a hands-on demonstration. Contact us today to request a demo, and see for yourself how Lumin Digital can meet the needs of your own credit union, and your own members.