Credit Unions Prepare For A New, Uneven Playing Field

Between wildfires, hurricanes, civil unrest and an international pandemic, running a credit union (CU) in 2020 has been all about reacting to rapid, radical and sometimes unexpected shifts in members’ behavior, experts told Karen Webster in PYMNTS’ latest “On The Agenda” discussion.

“As we went into the early pandemic, we saw lines and lines of cars, people coming and wanting cash from our branches — we literally couldn’t keep enough cash in our branches,” Unitus Community Credit Union CEO Steven Stapp told Webster. “That happened for about two or three weeks, and then guess what? They brought all the cash back … over the last couple of months, because suddenly all they want is the card.”

Stapp joined Webster, PSCU CEO Chuck Fagan and Credit Union 1 CEO Todd Gunderson on the panel to discuss how CUs should modernize their card strategies for a post-pandemic world.

Key excerpts from their discussion:

Consumers Want High-Quality Contactless Experiences

Panelists agreed that far more is uncertain than certain in today’s landscape, but that identifiable trends are emerging. For instance, CUs can see that U.S. consumers are saving more and spending less, and that they’re shifting toward debit cards and away from credit cards — and toward shopping online and away from in-person purchases.

The industry is also seeing that when members do shop in-store, they prefer contactless payments that don’t require interacting with a public keypad. And Gunderson noted that members don’t fancy waiting any longer than necessary, so getting real-time assistance is no longer a preference, but an expectation.

“I think people are on Google and Amazon, and they don’t get onto our websites and say, ‘we’re okay with dropping it down a notch for performance,’” he said.

While Much Remains Unknown, Ease Of Use Will Be Key

Panelists admitted that for everything they know about current market conditions, there’s a lot they don’t know. What are CU customers’ long-term financial outlooks? What does the U.S. economy’s future look like? What specific elements should the CU’s digital toolbox have to best meet customers’ needs?

The panel agreed that there’s no one-size-fits-all solution for credit unions when it comes to modernizing their digital offerings in general or card strategies specifically. Different regions and consumer demographic groups exist in different contexts, which means modernization roadmaps might vary widely between CUs.

PSCU’s Fagan said various solutions will “have to really develop to meet those different generational and contextual needs.” But he pointed out one common theme: “Easy is the new loyalty. As we look at those modernizing payment products, keeping ‘easy’ in the back of our minds is going to be key. And that’s regardless of generation and regardless of context.”

Solidifying Seamlessness

Consumers’ experiences with financial services have been wildly dislocated by the pandemic, not to mention by the regional disasters like hurricanes and wildfires that have recently hit parts of America.

According to the panelists, that means it’s critically important for credit unions to be prepared to meet consumers where they are and where they want to be at that moment. For example, CUs need to build rewards packages around what consumers are doing now — using streaming services and ordering online — instead of what they did a year ago, when T&E was more of a focus.

For example, Gunderson said American Express’ decision to offer consumers reimbursement on things like Netflix subscriptions or Amazon Prime memberships looks like a loss leader on its face, but makes its top-of-wallet status more likely.

Or, as Unitus’ Stapp noted, it means being available to consumers immediately and across multiple channels. He said that during the pandemic and the recent West Coast wildfires, that has involved upgrading Unitus’ technology (with an assist from PSCU) to enable the availability of video conferencing with a banker. Stapp said the feature has taken off quickly on the firm’s site because it’s immediate (something every consumer wants) and offers an easy face-to-face connection.

But panelists said that building something smooth and seamless requires digging into data to find what “easy” means to the customer.

Take digitally provisioning new or replacement cards to digital wallets, something Fagan called out as a core competency going forward. A card a customer gets into their digital wallet nearly instantly is one they can use right away, as opposed to waiting five to seven business days for a new piece of plastic to arrive by mail.

But Gunderson noted that digital provisioning isn’t quite a silver bullet, as it relies on a customer having a digital wallet that the person actually uses. A consumer who isn’t a digital wallet enthusiast is just going to switch to a different card in the person’s physical wallet.

It can take six to 12 months — if it ever happens — to get the customer back to regularly using that card the way they once did. That’s why Credit Union 1 sends new physical cards to customers overnight.

Building The Right Products

While simplicity and seamlessness matter, the panel noted that offering customers the right products also matters.

Gunderson said CUs often link their card offers to too many things aimed at too many users. Many combine a low interest rate with T&E rewards and cash back, cramming them all into a single mediocre offering built to work for everyone — but that in practice works for no one. He said the lesson Credit Union 1 has learned is to curate different products to individual customers’ needs.

“We’re trying to segment those out and say, ‘if you want cash back, here’s your card. If you want travel rewards, here is your card,’” Gunderson said. “I think where credit unions struggle [is] that they try to figure out a way to do all of that [at once]. But there isn’t anybody except the credit union space that tries to put those all into one card.”

CUs Must Act Before Competitors Do

On the whole, the credit union space is learning that data and customization are key as CUs build products to better serve their members, Fagan said. He believes that using those elements gives credit unions a clearer picture of both who their customers are and what products they’re seeking.

Panelists agreed that if CUs don’t do that, FinTechs and Big Techs are both ready and able to step in and provide the desired products. Fagan noted that credit unions are all too often “scrambling to catch up” with FinTechs’ products.

“I think this has been a needed kick in the pants, quite frankly,” he said. “I think both banks and credit unions have been complacent, and then someone comes along and they’re a disruptor. And now the old establishments are seeing that this isn’t going to pass. It’s not a fad. They better figure out how to do this.”

And figure it out fast, the panel agreed. Because as unsure as the future is, it’s certainly coming — and bringing permanently changed CU members along with it. Credit unions can either meet their member’s new needs or see their business slip away to competitors who will.