PYMNTS Intelligence: The Best Lending Product Wins in Retention and Enrollment

Credit unions know they need to be digitally savvy, but having the most user-friendly mobile app is not enough to catch and keep consumer attention. Fifty-six percent of surveyed CU executives said that convenient banking matters, and 46% of surveyed members said it is something they care about. Only 10% of members, however, said convenience was the most important factor in choosing a lender.

More than one-quarter of all consumers would likely change financial institutions (FIs) for better credit products. For members, that portion is 26%. Despite their reputation for being motivated by convenience, consumers who bank primarily through digital channels are even more influenced by the hard numbers. Interest rates and loan terms are the primary motivators determining where 32% of those borrowers apply for loans, compared to 27% of all consumers.

Younger and Higher-Income Consumers Are More Likely to Switch

The potential for consumers seeking loans outside of their primary FIs is much higher as consumer age decreases and income increases. Millennials and bridge millennials are the most likely to switch, with 49% saying better loan terms could lure them away, followed by 38% of Generation Z respondents. In contrast, only 26% of Generation X respondents and a mere 7.2% of baby boomers share that sentiment.

As for income, 36% of those earning more than $100,000 a year are likely to jump ship for a better offer, compared to only 16% who earn less than $50,000. However, income alone is not the whole picture regarding finances. More than 42% of those living paycheck to paycheck and having problems paying bills said they are likely to switch, compared to just under 15% of consumers not living paycheck to paycheck. At the same time, almost 33% of those with credit scores between 650 and 750 and nearly 36% of those with credit scores below 650 are likely to move for better terms.

Better Data Informs Better Lending

Technology can still play an essential role in complementing the best lending products. Consumers are seeking financial wellness in 2023, and a solid understanding of their habits and needs will be critical to helping them find it. Technology can reinforce this well-known CU strong suit and make it even easier to personalize products and services.

The answer for FIs of all sizes has been to turn to greater banking automation through artificial intelligence (AI) and machine learning. CU adoption has been hampered by size and scale, but CUs can take advantage of the expertise of third-party providers with a broader view of the marketplace. With the proper implementation, a CU can provide personalized offers and targeted messaging based on member behaviors and habits that reinforce the deeply rooted relationships for which they are known.

Lending and Credit Products Are a Growth Sector for CUs

CUs have already had success taking a large share of the auto loan market and could seek a larger share of other loan types. Near the end of 2022, CUs held almost 35% of all vehicle loans in the U.S. It has helped that many consumers seek vehicle financing outside their primary FIs, but the same is true for other lending products as well. For instance, 52% of consumers are motivated more by mortgage rates than loyalty to an FI when buying a home.

Across the board, CUs are already seeing increased inquiries for lending and credit products. The demand for personal loans is up at 71% of CUs, while 74% of CUs offering credit cards said applications have risen for that product as well. CUs offering business lines of credit have also seen greater demand, with 71% saying applications have risen. At the same time, CUs are identifying the need to speed up the loan application process, with almost all surveyed CU executives saying they are taking steps toward that end.