Credit Unions Shift to Innovating in Age of Instant Gratification and Payments

Credit unions need to innovate — and quickly.

Scott Young, managing VP of emerging services as PSCU, said credit unions (CUs) have the tools, and, importantly, the member and enterprise relationships in place to build relationships for the long term.

No matter how impatient we might be in the post-pandemic age.

The conversation came against the backdrop where joint research from PYMNTS and PSCU found that more than a quarter of CU members say they would switch financial services providers in pursuit of better innovations in banking.

“The data’s not all that surprising to me,” said Young. “We live in a culture of immediacy and our expectations have changed to real time or on demand,” no matter if the interaction is digital or in person.

For financial institutions (FIs) at the moment, the top-of-mind innovations revolve around mobile banking and around digital lending, with automated or instant loan decisioning. It’s no longer enough, he said, for FIs to confine the lending process to paper-based applications, with decisions that are returned after several days, or even weeks.

Forward-thinking CUs, he said, also need to be focused on digital issuance, or instant replacement of debit and credit card credentials.

“That immediate access,” said Young, “to a new account or the ‘uninterruption’ of account usage, if you’re in a lost/stolen situation, is table stakes these days,” he added noting that “there’s so many wallets out there today that offer this, and as a consumer, I want to be able to use my account right away.” The FI that enables that uninterrupted account access can enjoy seven to 10 days of uninterrupted spending (and interchange revenue) if consumers don’t have to wait for their cards to come in the mail.

In many cases, he said, PSCU (operating as a credit union service organization, or CUSO) and credit unions in general, have been making strides to innovate upon existing financial products and services. In one example, PSCU earlier this year announced it had launched a solution that helps credit unions implement buy now, pay later (BNPL) offerings. The Installment Payments solution allows some post-purchase credit card transactions to be converted into installment payments. Young noted to PYMNTS that credit unions, having already underwritten the member’s credit line, have visibility into the borrower’s debt load, while the consumer has the benefit of interacting with a trusted partner.

Authentication Is Critical

But amid all these digital innovations, Young told PYMNTS, there’s an overarching theme, a pressing concern: the need to authenticate users. The digital age is one where business isn’t conducted face to face, so it’s getting harder for FIs to know just who is on the other side of an online interaction. Though we, as consumers, have become used to FIs’ additional requests for information, and stepped-up authentications, the methods need to improve so that friction is reduced as payments move toward instant (and irrevocable) status, changing everything from payroll to B2B.

The reduction of friction, he said, “is front and center right now.” So is education, which needs to be in the mix as consumers (and even some enterprises) may not fully understand just what instant payments really might mean for financial services. PSCU’s Juniper Payments, for its part, has three seats on the U.S. Faster Payments Council, has been active in the FedNow working group and pilot programs and has just completed the FedNow pilot certification.

“When FedNow throws the switch in July”, he said, “we will start seeing transactions traverse the instant payment rails, in real time.”