Categories: Credit Unions

Report: Credit Unions Look Past FICO Scores To Unlock Member Credit

Credit product innovation was on many credit unions’ (CUs’) agendas in the months before the pandemic struck.

Some 47 percent of CU executives were expecting credit card processing revenues to surpass debit cards, according to PYMNTS’ July Credit Union Innovation Playbook: Card Trends Edition. Some 72 percent of executives said they were interested in developing solutions that provided digital management capabilities, while 48 percent expressed the same about developing products with notifications and alerts, and 42 percent said the same about instant funds issuance to digital wallets. While the reasons for rolling out these solutions varied, more than 70 percent said they were responding to the demands of potential members.

The need to offer innovative credit solutions has now gone into overdrive in response to the pandemic by assisting those most severely impacted by the crisis and working to understand the quickly evolving needs of consumers today. In the September Credit Union Tracker®, PYMNTS examines how CUs are stepping up to support the consumers and businesses hit hardest by the pandemic with innovative digital banking solutions and more leniency on extending loans.

Around The Credit Union World

CUs often struggle to compete with the robust credit card loyalty programs that giant national banks can provide, but they could have an edge in one key area: annual percentage rates (APRs). CUs have historically offered lower APRs than many other financial institutions (FIs). Many CUs’ cards feature rates between 7 percent and 13 percent, for example, while the rates for banks’ offerings rarely fall below 13 percent. Some CUs have dropped their rates even further to reach younger consumers and those hit hard by the pandemic.

Smaller CUs do not always have access to the financial resources of their larger counterparts. This concern is prompting many small CUs to carefully select technology partners that can help roll out innovations. Maine-based Connected Credit Union, for example, recently signed a 10-year deal with managed services provider Synergent to host the latter’s Symitar Episys core platform. The CU also tapped the provider to deliver remote deposit services, check processing and digital banking solutions.

Some CUs are launching services that can better support small businesses and simplify their access to financial services. Ontario-based WFCU Credit Union, for example, recently adopted the Commercial Account Opening platform from onboarding solutions provider thirdstream to help it improve member sign-up for sole proprietorships, partnerships and corporations.

For more on these and other CU news items, download this month’s Tracker.

Alternatives Federal Credit Union On Innovating Credit Solutions To Extend Financial Lifelines

CUs have been key players in assisting small business owners and consumers hit hard by the pandemic. Ithaca, New York-based Alternatives Federal Credit Union is one such FI working to support communities through a variety of loan options and offering leniency on less-than-stellar credit scores to help members — and nonmembers — secure a financially sound future.

In this month’s Feature Story, CEO Eric Levine of Alternatives Federal Credit Union explains how the CU worked to provide financial lifelines after the pandemic began and what members want from their credit solutions today.

Deep Dive: Meeting Members’ Credit Needs During The Pandemic

Many CUs had to put their credit innovation plans on ice when the global health crisis hit and accept that consumers' preferences were going to change significantly. Consumers in good financial standing were hesitant to use credit solutions that carry debt and fees, leading CUs to develop innovative credit products to address members’ shifting financial situations.

This month’s Deep Dive examines how CUs are confronting the credit innovation planning reset and working to meet the evolving needs of members during the pandemic.

About The Tracker

The Credit Union Tracker®, done in collaboration with PSCU, is the go-to monthly resource for updates on trends and changes in the credit union industry.

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The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.