Credit Unions

Deep Dive: Why Credit Unions' Struggles To Go Digital Represent A Major Industry Challenge

Some financial players may think that digital transformations are nothing more than a past trend. Many banks, businesses and service providers implemented their first digital platforms decades ago and have since steadily built out their solutions with newer technologies like artificial intelligence (AI)-supported customer service channels. Overlooking digital transformations in the present could be problematic, however, especially for companies or FIs that did not adopt these innovations as soon as competing entities.

Credit unions have generally been slower to adopt digital services, as less than 5 percent of those in the U.S. currently have mobile banking apps, according to one study. App-powered offerings are becoming the banking method of choice for many consumers — a study found that 97 percent of millennials currently use mobile banking apps. Mobile banking’s personalization capabilities allow consumers to set alerts and receive notifications tailored to their individual financial situations, an attractive alternative to branch-based encounters that reduces processes’ reliance on paper.

Younger consumers have expressed interest in innovative options, but budgetary restrictions and increasing digital fraud concerns may have limited CUs’ ability or willingness to modernize. Outdated technologies are likely to redirect potential or existing customers to competing services, especially given the rise of online-only competitors and any security lapse’s lasting impact. Twenty-five percent of consumers who switched FIs in 2018 did so because they were victims of fraud at their prior institutions, for example. Baby boomers, members of Generation X and millennials all cite trust as the most important factor when choosing their financial partners, and institutions that cannot protect against modern, sophisticated fraud will surely lose that trust.

Consumers who want seamless, personalized connections with FIs are unlikely to accept any excuses for failing to implement solutions that meet their needs. The following Deep Dive explores why credit unions must adapt and act to protect customers that increasingly prefer digital channels.

Confronting Digital Lag 

Eighty-six percent of FIs note that digital transformations will fundamentally change the financial industry and how they interact with customers. Only 43 percent have implemented digital strategies, however, with the rest — including some CUs — still playing catch-up. CUs must firsttruthfully evaluate their current innovation status and their customers' precise expectations before allocating resources towards a digital transformation.

In doing so, these credit unions must identify the channels and technologies that deserve their time and money as well as strategize how best to roll out such features once they are fully developed. Mobile banking applications are especially important, but simply introducing one is not enough to close a technological gap or stand out. CUs must instead tailor their efforts to how customers want to bank and optimize how their offerings interconnect. In-app banking features can complement a CU with strong physical locations by helping users find convenient branches — a priority among millennials and members of Gen X.

Developing this integrated support is critical to seamless customer experiences, as technologies that do not meet consumers’ evolving standards can frustrate more than help. Approximately one-third of consumers reported reacting negatively to their FI after being forced to abandon actions on mobile banking apps, for example. Millennials, who almost all use mobile banking apps, abandoned such activities on mobile most often: 43 percent did so, while only 25 percent of Gen X customers did the same. Easing mobile frictions could enable credit unions to better compete against banks and FIs with strengthened digital financial services.

CUs that currently do not offer banking apps must work toward designing, launching and supporting such solutions quickly to adequately compete with both existing and emerging players within the financial services space. CUs are not only working to attract members from fellow credit unions but also from established banks, up-and-coming FinTechs and online-only banks that promise speed and convenience to consumers that clamor for mobile options.

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