Better Innovation Tempts 27% of Members to Ditch Credit Unions

Loyalty’s a fickle thing, and credit union members’ allegiances may be tested over innovation.

The latest edition of joint research between PYMNTS and PSCU, as detailed in the Credit Union Innovation playbook, shows that technological advances are a key competitive advantage for forward-thinking FIs.

But the subhead of the report, we note, is “Product Development Slowdown Tests Member Loyalty,” which indicates that the pressure is on for the FIs, and for credit unions (CUs) in particular.

The fact remains that, like any other enterprise navigating the challenges of the current operating environment, there’s only so much money to go around. Inflation’s crimping margins mean that R&D budgets may not go as far as they once did — if those budgets are not being slashed in the first place.

Nearly half of credit union executives, we found, have said that a lack of resources prevents them from bringing innovations to market, which is visible in the data. That’s impacting how the credit unions view themselves when it comes to innovations. As the data shows, although 19% of CUs classified themselves as “early launchers of new products” at the end of 2021, only 13% gave themselves a similar label at the end of last year.

Looking to Partnerships 

The data also shows that many FIs are turning to partnership models in a bid to fine tune their technologies and bring new products and services to markets. More than half of the CUs we surveyed are partnering with industry consultants and credit union service organizations (CUSOs) to roll out new innovations.

Time may be of the essence. As the chart below shows, 27% of CU members say they would switch where they keep their financial accounts to find product innovation. That’s up from the 17% of CU members who were willing to do the same as recently as 2018.

The CU members are at least pointing the path forward for the financial services firms who might want to pivot to where consumers want to be met.

We found that 64% of CU members want their primary FIs to offer more payment capabilities, demonstrating their strong influence. In addition, 79% of the FI account holders who would switch where they bank to obtain more innovative products would like to see more payment products and services from their current providers.

The hints are all there. Now it’s just a matter of the credit unions finding the ways — and the means — of heeding those calls for innovation.