Credit unions (CUs) have been trying to find the balance between giving customers what they want and improving returns on investment.
The new Credit Union Tracker explores how CUs are finding innovative ways to engage with their members, collect data insights and improve services.
According to the latest Credit Union Innovation Playbook, loyalty-based innovation is a top concern among members. Nearly 40 percent of them would consider leaving their current CUs because of inconvenient services or inability to address problems and data security concerns.
Data-Based Innovation Implementation
In July, midwest-based Cobalt Credit Union introduced video banking services and the ability to transact and open a new account remotely. These innovations were the result of data analytics to determine which solutions might provide the highest returns on investment.
PYMNTS spoke with Cobalt Credit Union President and CEO Gail DeBoer about how interactive communication solutions and data analytics help inform the CU’s innovation plans. “There’s no reason for us to implement something that nobody’s going to want. Asking them what they want is really important, [because] then [we can use] that to set our strategy,” she said.
This has meant offering video banking services, which solves members’ needs for a person-to-person relationship and also extends services to rural customers who might have to travel long distances to get to a nearest branch.
“We want to make sure we target [members] where they’re at in their life stages, where they’re at financially, and present them with things that are beneficial to them,” DeBoer said.
The Future of Bank Branches
Thynk Digital and The Financial Brand recently conducted a survey that found 70 percent of bank and credit union executives think their FI could not survive without physical branches.
This isn’t to say that digital transformation shouldn’t be a top priority, but that mobile apps and other digital banking options should be complementary rather than used as replacements.
A majority (61 percent) said bank branches were still necessary but less important than they once were. Over the past 10 years, with more than a third (37 percent) reporting a decline in foot traffic of between 10 and 25 percent.
When consumers were asked about whether they would consider switching from a traditional bank or credit union to a digital-only bank, a significant number (29 percent) said they would. However, the largest segment (41 percent) said they wanted both options.
When There’s Too Much of a Good Thing
Regional banks and credit unions have become vulnerable to digital competition from larger banks, which is why so much emphasis has been placed on innovation.
But a recent survey from J.D. Power found financial institutions should take a measured approach rather than rush to offer every digital feature available.
It’s true that large national banks have a majority of customers that are digitally centric, meaning customers that don’t visit physical locations. Bank of America now counts 54 percent of its customers as digitally centric.
But bank mobile app satisfaction declines as the features become more complex. According to J.D. Power, the overall customer satisfaction score for retail banking mobile apps is 853 (on a 1,000-point scale), down 15 points from 2018, a decline attributed to customer challenges in understanding features. Complete customer understanding of the mobile app is associated with a 130-point improvement in overall satisfaction for banking apps.
Higher mobile app usage is also tied to increased satisfaction. Overall, 69 percent of bank mobile app users say their banks mobile app is either a “somewhat important” or “very important” channel in keeping them loyal to a particular bank.
This echoes findings from PYMNTS that show 59.9 percent of current CU members consider it “very” or “extremely” important for their CUs to offer a mobile app.
Artificial Intelligence and Machine Learning
Many CUs are exploring new innovations to guard against security threats. The May 2019 PYMNTS Credit Union Innovation Playbook found 79.4 percent of credit union executives identified anti-money laundering improvements as their top innovation priority, 62.7 percent cited data security and 60.8 percent noted anti-fraud initiatives.
Many credit unions are turning to advanced learning technologies like artificial intelligence (AI) to address this broad range of security concerns. AI-based solutions automatically review relevant data to verify users’ identities and accumulate profile information that can help FIs more effectively fight fraud.
AI and machine learning solutions can also improve CUs’ understanding of their members’ behaviors. Developing this understanding is key in identifying potential fraud. These systems can learn about members’ behaviors and gain a more complete picture of the types of transactions they commonly perform to effectively detect fraud and data theft when suspicious patterns emerge.