Categories: Credit Unions

Credit Unions Tech Up For Loyalty

If there’s one thing credit union (CU) members are known for, it’s their loyalty. Since most CUs start life as an economic affinity group of some kind, loyalty is often baked into the business relationship pre-inception. It’s a rare, fair feature in an impersonal business world.

When it comes to loyalty, though, it’s best not to test it too often or bend it too far – because it can break. It’s far better to recognize financial fealty in ways that honor the bond in members’ eyes.

PYMNTS’ June 2020 Credit Union Tracker®, done in collaboration with PSCU, explores the loyalty dynamic at work deep within CUs – and the threats to it should these financial institutions (FIs) fail in their mission to provide members with experiences not typically found at banks.

“A growing share of CUs are … embracing loyalty and rewards offerings as well as other services to retain members,” the Tracker states. “PYMNTS’ research indicates that 33 percent of CUs offered loyalty and rewards innovations in 2019, up from 29.4 percent in 2018. Such offerings could prove crucial to CUs as they face off against challenger banks during the pandemic.”

‘Easy is the New Loyalty’

Whether or not the reputation was ever really justified, CUs were long known as technology laggards in a space where even big, wealthy banks took their time with tech. COVID-19 changed all that, bringing a new urgency to digital innovation and a top-down reimaging of CU loyalty.

“The mantra ‘easy is the new loyalty’ defines what members want from their credit unions right now: user-friendly, convenient tools that are safe and secure,” Scott Young, head of innovation at PSCU, told PYMNTS. “Our current culture is also one of immediacy as consumer preferences, expectations and demands are constantly changing and shifting. In some cases, these expectations are being driven by new innovations and technology companies as well as by the impact of the COVID-19 pandemic.”

The latest Credit Union Tracker® cites “lack of investment in loyalty programs” as a primary reason that more CU members are in play now than ever before. “PYMNTS research revealed that nearly four in 10 members are likely to consider leaving their current CUs,” according to the Tracker, with PYMNTS also finding that 76.3 percent of members support CU innovation, and over 17 percent are “willing to switch institutions if their CUs did not choose to innovate at all.”

Forward-thinking CUs are already on top of the situation and have been digitally transforming operations from back-end automation to mobile apps that delight and satisfy members.

“When asked what type of reward or benefit would encourage them to use their primary card more often, 60 percent wanted something other than cash back — like lower interest rates, [a waived] annual fee or points that can be used for online shopping or travel. However, the pandemic has brought on an oft-referenced ‘new normal,’” Young told PYMNTS.

Dividends of Loyalty Innovation

Close to half of the 2,000 CU members surveyed for PYMNTS’ latest Credit Union Innovation Playbook were unambiguous in their desire for better rewards, in-app coupons and “card-based cash-back programs” to get more value for their vaunted member loyalty.

“Investing in loyalty innovation is a strong sign that credit union decision-makers are also forward-thinking on innovating in other areas, such as payments and security,” the June 2020 Credit Union Tracker®  states.

“Credit union decision-makers who have rolled out new loyalty innovations in the past three years are more likely to say that their FIs invested in mobile payments, anti-fraud efforts, payments technology, data analytics, know your customer (KYC) tools and consumer engagement technology. Thirty percent said their CUs released user experience innovations during this timeframe as well, up from 20.8 percent of CUs with no loyalty innovation track record. Likewise, 33.3 percent of loyalty-centered CUs focused on KYC innovation, compared to 25 percent of their non-loyalty-focused peers.”

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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