Report: Data Key To Credit Union Member Retention

One of the largest factors that sets credit unions (CUs) apart from large banks and FinTech providers is their emphasis on member relations. According to PYMNTS’ Credit Union Innovation Index, 65% of CU members said they chose a CU as their primary financial institution (FI) because they trusted it, as opposed to 45% of non-CU members who said the same.

It seems that CUs are often out of sync when it comes to knowing what members want, however. While the PYMNTS study found loyalty programs are members’ most popular desire at 49.1%, it was only the seventh-most important priority among CUs, which are instead focusing on open banking options that offer anti-money laundering (AML), data security and instant payments technology.

In the August “Credit Union Tracker,” PYMNTS explores the latest developments in the world of CUs, including new government initiatives in the U.S. and U.K., digital transformations reshaping CUs’ role in the financial space, and how open banking could change how CUs do business.

Developments From Around the CU Space

The Financial Conduct Authority (FCA), a non-government financial regulatory body in the U.K., has called for a relaxation of CU laws, enabling the institutions to make loans as small as £50 ($61). The change will allow CUs to serve as alternatives to payday lenders, which is a benefit to consumers as the institutions can only charge a maximum annual percentage rate of 42.6% in the U.K. Payday loans can have interest rates as high as 5,000%, however.

CUs are facing more scrutiny in the U.S., too. The American Bankers Association (ABA) implored the National Credit Union Association (NCUA) to withdraw a proposal that would allow federal CUs to have 50% of their deposits come from other CUs and government entities, boosting the current 20% cap. ABA’s request stems from concerns about rising fraud levels at CUs, as well as New York City’s recent taxi medallion scandal.

The scrutiny isn’t stopping mergers, however, as two of the largest CUs in Southern California are set to become one early next year. Ventura County Credit Union will purchase LA Financial Credit Union, giving the combined CU 120,000 members and $1.3 billion in assets. LA Financial is expected to keep its original name but operate as a division of Ventura County CU. The merger is the latest in a series of CU consolidations in the Los Angeles area, which has resulted in the number of CUs in the area dropping by nearly 60% since 2000.

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

How California Coast Credit Union is Transforming in the Digital Age

Financial technology continues to grow more sophisticated, but many of these innovations are solely for the large banks and FinTechs that can afford them. CUs looking to compete will have to play to their strengths, including member engagement and loyalty. For this month’s Feature Story, PYMNTS spoke with Angela Moran, chief information officer for California Coast Credit Union, on how the CU is taking a member-centric approach to its new digital revamp.

Deep Dive: How Open Banking Can Help CUs Succeed

CU members are known for their loyalty, with 60.8% saying they would not leave for another FI with the same services — but they should not be taken for granted. Common member complaints include inadequate security and slow payment times, problems that can be addressed with open banking systems.

This month’s Deep Dive explores how CUs are taking advantage of open banking to improve services, and how APIs can help CUs reach these goals.

About the Tracker

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