CO-OP Financial Services: 2021 was the Year of Rethinking

Hard times can serve as an effective catalyst for change. Todd Clark, president and CEO of CO-OP Financial Services, says smart credit unions used a tough 2021 to rethink their customer service models, embracing digitization and new credit offerings to stay in sync with member needs. Read his thoughts in the PYMNTS eBook, “In a Word: 50 Thought Leaders Sum Up 2021.”

In 2021, financial institutions were forced to rethink conventional wisdom about how the payments and financial services ecosystems work. When I speak with credit union leaders around the country, I urge them to use these difficult times as a catalyst to reimagine every aspect of how they serve their members.

We witnessed a rapid acceleration of consumer preferences for digital banking in the past year. According to a survey by S&P Global Market Intelligence, since the beginning of the pandemic, 52% of respondents are visiting branches less frequently, 65% are using mobile apps more frequently and 24% have tried mobile check deposit for the first time.

These evolving expectations extend to how consumers pay, as 82% of Americans used digital payments in 2021.

Meanwhile, financial consumers are taking advantage of new and expanded credit access models, such as buy now, pay later (BNPL) and decentralized lending (DeFi), which is built on the same distributed ledger technology that underpins cryptocurrencies.

As the pandemic relaxed its grip in the first half of the year, consumer confidence improved and the public began returning to “normal” activities, like leisure travel, dining out and attending concerts and other events. This helped to drive a rebound in spending and credit use through the summer. Unfortunately, the emergence of the delta variant, along with rising inflation and supply chain issues, dampened this momentum in the fall, resulting in a flattening in month-over-month spending in the second half of the year.

Competitive and Regulatory Pressures Will Drive Innovation in 2022

As we approach 2022, further challenges to interchange revenue — from Congress (if an expanded Durbin Amendment comes to pass) and retailers — will incent credit unions and other card issuers to seek new, innovative approaches to growing non-interest income.

In 2021, we also saw a groundswell of support, especially among the millennial and Gen Z segments, for organizations to implement coherent, cohesive environmental, social and governance (ESG) strategies, including a continued prioritization of diversity, equity and inclusion (DEI) action and sustainable banking practices. I expect this to continue in 2022, and a number of neobanks (such as Ando and Rallius) are springing up to explicitly fill this need, increasing the competitive pressure on incumbent players.

Opportunities for credit unions can be found in the increased automation and digitization of manual processes. With the rise of machine learning and artificial intelligence (AI)-based financial services that provide highly personalized and automated experiences, as well as API-based tools that level the playing field, credit unions will be well-positioned to compete effectively (and cost-effectively) in payments and digital banking.

The coming year may well become a turning point for the payments and financial services industries. By embracing new technologies to meet the needs of today’s consumers, credit unions can reassert and expand their status as their members’ trusted primary financial relationship.