How Credit Unions Are Putting Digital To Work For Their Members

“Digital first” isn’t a buzzword in financial services any more — it’s reality. Digital accelerated to the forefront amid the COVID-19 pandemic, but it’s become clear as governments lift stay-at-home orders that it’s now many consumers’ preferred way of getting things done. Tom Gandre, chief operating officer at credit union service organization PSCU, told Karen Webster in a recent discussion these trends are showing up in his firm’s data.

For example, PSCU has found contactless payments among credit union members are up 50 percent since the year began. And not only are the transactions growing in frequency, but they’re also getting bigger in dollar amounts. The average ticket size is up 28 percent on contactless credit sales and 26 percent on contactless debit.

The share of consumers provisioning their cards to digital wallets — Apple Pay, Google Pay, etc. — is also rising. PSCU has seen mobile wallet credit purchases rise among members of its credit unions almost 48 percent so far this year, while mobile wallet debit purchases are up 22 percent.

Gandre said all of the figures indicate that the digital era of financial services is here — and credit unions need to start thinking more like challenger banks lest the newcomers steal away CU customers.

“These challenger banks are providing convenience and ease of use, and I think that is a central topic for consumers and credit union members today,” he said. “In the current pandemic environment, credit unions need to have a strategy in place for providing their members with a seamless service experience.”

Mobile and digital banking have become “crucial in servicing credit unions members or prospective members,” he said. “It’s critical for credit unions to get it right on these initial experiences, as these are opportunities for challenger banks to swoop in and capture that credit union member’s relationship by having the right digital strategy.”

And while credit unions don’t need to become full-fledged digital challenger banks, Gandre said, they must start reimagining member experiences while also thinking bigger when it comes to deciding who their target members might be.

Meeting Member Expectations

Since credit unions and their membership groups are unique, there isn’t a single solution for building a correctly balanced omnichannel financial services experience, Gandre said. In the “new normal,” credit unions will have to define their strategies around the specific goals and needs of their member base, he said.

There are a few ways to do that. CUs might look to build an omnichannel experience internally, leverage a partner, or create a hybrid model where the credit union uses a partner’s application programming interfaces (APIs) and also builds its own member experiences. “Innovation is not a one-size-fits-all model,” Gandre said.

CU members in all demographic groups are getting used to frictionless experiences in a digital environment, as well as remote access to self-service tools. Gandre said those tools are going to become a more important requirement for members who increasingly expect seamless experiences even if they can’t get to a CU’s branch.

“New behaviors are being learned,” he said. “Folks are joining financial institutions today remotely through digital technology, and I think they’re getting used to that type of interaction. Going forward, that will be part, or a bigger part, of the ecosystem post-COVID. I do believe credit unions are going to have to look at their new account openings, their lending experiences and all of their other services to make sure that they are as seamless as their competitors or they risk losing market share.”

Expanding The Client Base

Gandre believes the post-pandemic future for credit unions will be about more than merely protecting their current member base from digital challengers. Instead, it will be increasingly defined by the value-added offerings that credit unions build out to draw new members into the fold.

For instance, Gandre said PSCU sees working with small and even micro businesses as “one of the next big opportunities for credit unions” on the horizon. He said credit unions’ intensive focus on their members is a good fit for dealing with small- and medium-sized businesses (SMBs).

Moreover, many small entrepreneurs already have consumer accounts with credit unions, meaning they already have embedded points of access into a CU.

“A number of [credit unions] already have specific programs to serve [SMBs], and I think more and more credit unions are becoming interested in expanding the services they offer to these small businesses because it is a great growth area,” Gandre said.

He added that doing so can attract more than just an SMB owner to a credit union. “Those small businesses have employees, [so] it’s a great opportunity to capture those employees as new members of the credit union — along with peers, family members and the like,” Gandre said.

It’s Not Digital Vs. Physical 

Although the world of financial services will be different and dramatically digital after COVID-19, Gandre nonetheless remains bullish on physical branches. Some market watchers have forecast they’ll disappear, but he doesn’t agree.

Gandre said members will still view branches as relevant places to manage their financial lives. He believes digital and physical aren’t going to be “either/or,” but “both/and” — and CUs will have to rise to the challenge.

“Credit unions are going to have to step up,” Gandre said. “[The] digital experience is going to continue to become more prominent with respect to members and how they interact across the board.”