For Credit Unions: Trust, But Innovate


In some ways, the average credit union customer is very much like the average customer of any financial institution. They want to know their money is secure, they want to have a positive experience whether they are online or talking to a teller, and when things go wrong from time to time, they want to know the path to getting them set back to rights is short and straight.

“It doesn’t matter where you are banking, if you have a problem you want to be able to reach out at any time and get that problem solved,” Jack Lynch, chief risk officer at PSCU, told PYMNTS in a recent discussion.

But credit union customers are also unique — particularly when it comes to how they feel about their relationship to their financial institution. At the end of the day, he noted, trust is the critical element at credit unions, and the main differentiator between credit union customers and other banking customers.

It’s a statement borne out by the new Credit Union Innovation Playbook, a PYMNTS/PSCU collaboration. According to this survey of credit union customers, an overwhelming  81.3 percent indicated that trust in their financial institution (FIs) was the key reason they chose a particular CU as a banking partner. In addition, 80.6 percent identified trust as a reason to remain with a CU.

It’s a powerful starting place and a statistic that gives greater insight into how credit unions in general are crushing loyalty. But, Lynch noted, it is still a starting point. Because while a relationship of trust gives credit unions a powerful infrastructure from which to build a more innovative customer experience, it is also a mandate pushing them forward to live up to the faith their customers have put in them.

“Credit union members want a state-of-the-art banking experience with their institutions,” he said. “Everyone wants things faster and more convenient, but at the same time they also want security.”

Credit unions have done a good job building for and around the security element of these experiences, he said, but the path forward will be in building those more enriching consumer-facing touchpoints.

Tapping Into Trust

Credit union customers, Lynch said, are regular consumers in their day-to-day lives, which means they’ve got plenty of firsthand experience with the upgrades and improvements to financial services that various FinTech players have injected into the market. They very naturally want to see those types of innovations incorporated into their banking relationships. For example, 49.1 percent of CU members pointed to loyalty and rewards as the innovation they wanted their credit union to pursue over the next three years.

And that thirst for innovation, Lynch noted, creates fertile ground for credit unions and FinTechs to work as collaborators going forward, though with caution. Credit unions, particularly smaller ones, aren’t going to build out in-house extensive technical operations or systems; they lack the expertise, manpower and funds to do it.  Collaborating with FinTechs could be a an excellent way to level up their offerings to the consumer.

That is, if they choose the right FinTech. According to the Playbook, 64.3 percent of FinTech firms expressed interest in bypassing CUs to sell directly to members. Collaborating with these firms could very well, from a CU point of view, look like a rooster collaborating with a fox to guard the hen house.

But, the Playbook also noted, as much as FinTechs might very much like to bypass credit unions, that’s a lot easier said than done, because credit unions have something FinTechs don’t.

“Once again, it always comes back to trust for credit union members,” Lynch said.

Members trust their credit union, but the majority don’t trust FIs — according to the Playbook, 55.8 percent of CU members said they would not switch from a CU to a FinTech because they have less trust in these brands.  That means there is space to work and collaborate there — albeit with care and caution.

“It’s really incumbent on the credit unions to work with FinTechs because there are a lot of ideas going out there in the innovative space. And we’re finding that picking the right partner that has some shared values and is interested in working in a real partnership is key to that success. The same trust you establish with your consumers, you establish some of that with your partners as well,” Lynch said.

The Security Core

The root of trust, Lynch noted, is always going to be security for consumers, because that is first and foremost what consumers look to banks to do — keep their funds secure. And those concerns are clearly fairly close to top of mind for a bulk of credit union members today — 42.4 percent cited fraud protection and 33 percent cited data security as their key priorities for the next three years of innovative development at the credit union. And that probably is only to get more strongly felt with time, not less.

“If a credit union is encouraging its members to try new things — mobile banking, lending, faster payments — that trust plays directly into safety and security, those two ideas are entirely intertwined,” he said.

What any individual credit union wants and needs in terms of offerings for its members around digital services can and does vary — different geographies, customer demographics and sizes mean the needs and priorities are going to be diverse.

“But everyone everywhere is concerned about fraud,” he said. “No matter the size of an organization, the question is how can we help to prevent it in a way that doesn’t negatively affect the consumer experience and doesn’t require diverting all of our resources.”

This, he notes, is often where PSCU helps its credit union owners — in customizing those responses and making their systems not just able to repel attacks in progress, but also see them coming and preemptively respond to them. The reality of fraud in the financial services sector is that it is always “a moving target,” he said.

“And even if you are already strong in that area, there is always a next big thing coming along,” Lynch said of the global importance of being proactive instead of reactive to fraud threats.

But the good news, he noted, is that a lot of next big things are coming along as well — and all of them are better than waves of fraud attacks. Machine learning and artificial intelligence (AI) are exploding across credit unions — meaning a lot of processes that used to be done with paper and people are now automated.

“There has been tremendous innovation in digital banking and faster payments — and I think we have a lot more feature functionality coming out of the digital space to come,” Lynch said.

And community banks, he noted, are gearing up to be part of that coming wave — and to continue on as their members’ trusted advisors on how to best surf it.