The notion that credit unions (CUs) play country mouse to their more worldly banking cousins is beyond flawed, as a recent poll by the Gallup organization showed. Delving into customer sentiments across measures – including “helps me reach my financial goals” and “puts my financial well-being ahead of the interests of the bank” – Gallup found that credit unions are crushing it. Banks, not nearly as much.
Banks did not surpass credit unions in any criterion used by Gallup. In fact, it wasn’t even close. Though respondents had generally positive feelings about banks – for example, about financial institutions (FIs) being helpful during difficult life events – the focus on relationship-building and more personalized forms of finance have given credit unions the edge. For those who capitalize on it, the advantage will come in handy as FIs shapeshift their way to greater customer-centricity.
How CUs sustain their unique brand of customer loyalty is among the core insights from the latest PYMNTS Credit Union Tracker, done in collaboration with PSCU. Because, while they do get more love than banks, CUs fear rejection should they fail to deliver on customers’ digital banking expectations.
“Co-opetition” in the CU Space
Gallup’s findings are not news to CUs or their faithful members. According to at least one recent survey,
CU approval rates for small business loans were well ahead of banks in 2019, and were even high by CU standards. Are credit unions simply taking risks that bigger lenders won’t? Nope. The decade that just ended was one of well-managed growth and change for CUs, which have declined in number but entered 2020 with a 7.4 percent year-over-year increase in assets and healthy membership increases.
St. Louis, Missouri-based Together Credit Union, profiled in the latest Credit Union Tracker, is a good example of the quiet confidence that undergirds the CU space. Formed by the consolidation of three CUs established by iconic brands (American Eagle, Anheuser Busch and Purina), Together Credit Union is, as its name implies, “together” with other CUs in a cooperative network that serves as an anathema to Big Banking.
“[We] bounce ideas off of other credit unions and folks that work in this space on a regular basis,” said Tom Kraus, Together’s COO. “The one thing that's really powerful about the credit union industry is that we share a lot of best practices with each other. We can learn from our partners in this space, and partner up to not only share information, but also share [the] development of new products.”
New product introductions are not what CUs are historically known for, especially not in the tech arena. That makes advanced digital initiatives mission-critical in the sector. As CUs tinker with more advanced mobile features and FinTech offerings, for example, they’re not sitting still. Together Credit Union has a full suite of online banking products, and has been testing interactive teller machines (ITMs), which promise to revamp the ATM experience with human and AI interfaces.
A peek at their balance sheets and customer insights should convince anyone that credit unions are not only staying relevant business-wise, but are also outperforming major bank brands with their comforting style of customer service, increasingly offered as part of the digital convenience customers demand.
Fraud, digital transformation, FinTech competition – CUs face all of these challenges, as do their competitors in the banking sector. We’re seeing CUs play to their central strength (customer loyalty), sharing best practices and embracing technology in ways that will resonate with members.