Credit unions deciding where to put their next technology dollar are getting a different answer from consumers than they might expect.
The PYMNTS Intelligence playbook “Credit Union Innovation Readiness: The Rewards Opportunity Credit Unions Can No Longer Ignore,” produced in collaboration with Velera, found in August that 27% of consumers who want their financial institution to innovate rank loyalty or rewards programs as the feature they most want their institution to invest in over the next three years.
Rewards finished ahead of account fraud protection, cited by 23%, mobile banking capabilities at 19%, and online banking capabilities and data security innovations, each at 18%. The survey tested 25 banking features.
Small- to medium-sized businesses (SMBs) pointed in the same direction, with 24% ranking loyalty or rewards programs as their top innovation priority.
The findings broaden what counts as technology investment for a credit union. Fraud prevention, security and digital access remain important, but the consumer-facing technology agenda also includes the systems required to make rewards useful enough to affect where members spend.
Credit unions have room to improve there.
Only 14% of credit union members used a loyalty or rewards program at their primary financial institution during the previous year, compared with 25% of national bank customers, according to the playbook.
Member behavior suggested the opportunity is larger than rewards participation indicated. Among consumers with multiple cards, 40% cited better incentives and rewards such as cash back as a factor in deciding which card to use, more than any of the other 17 factors tested. Among credit union members, the share rose to 44%.
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The implication for investment decisions is straightforward. A digital banking experience can make an account easier to use, while a competitive rewards experience can give a member a reason to use the credit union’s card more often.
Rewards Reach Beyond Existing Members
The potential return isn’t limited to engagement with current members.
Among consumers whose primary financial institution isn’t a credit union, 32% said better rewards or cash back would make them prefer a credit union for their primary account. Only lower rates or fees, at 34%, ranked higher. Better online or mobile banking trailed rewards at 26%, while better data security came in at 20%.
Rewards carry even more weight among people who already belong to a credit union but keep their primary account elsewhere. The report showed that 39% of these consumers said better rewards would make them prefer the credit union as their primary institution. Among Generation Z consumers, the share was 37%, followed by millennials at 36%.
Credit unions themselves appear to recognize more of the opportunity. According to the report 47% offer a rewards program, and another 31% plan to launch one by 2029. More than half of credit unions open to external support expect to use a partner for loyalty and member-engagement programs.
Technology budgets still must protect accounts and provide reliable digital access. Consumers’ priorities suggest those capabilities are no longer the full innovation agenda.
For more than one-quarter of consumers, the next feature they want their financial institution to improve is the one that gives them something back every time they use it.
At PYMNTS Intelligence, we work with businesses to uncover insights that fuel intelligent, data-driven discussions on changing customer expectations, a more connected economy and the strategic shifts necessary to achieve outcomes. With rigorous research methodologies and unwavering commitment to objective quality, we offer trusted data to grow your business. As our partner, you’ll have access to our diverse team of PhDs, researchers, data analysts, number crunchers, subject matter veterans and editorial experts.
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