Credit Union Innovation Gets A Big Rethink

The cellphone is an invention; the smartphone is an innovation. That gap between creating something and putting it to ingenious use is where innovation does its magic.

PYMNTS’ July 2020 Credit Union Innovation Playbook, done in collaboration with PSCU, surveyed 100 credit union (CU) executives and CEOs to learn how the highly interdependent CU/CU member community has succeeded — and sometimes failed — to innovate for digital demand.

“CUs, which historically cater to very specific communities and industries, are in a unique position to understand and serve their members’ specific needs. This focus can also make credit unions and their communities vulnerable to the COVID-19 crisis. However, some CU members and their communities bear a disproportionate amount of the pandemic’s economic impact,” the Playbook states.

“As these communities struggle, so, too, do their CUs. Nowhere is that balancing act more evident than in the relationship between credit unions, their members and credit and debit products, pre- and post-pandemic.”

Situation Stormy, With Scattered Optimism

Going straight to the numbers, CUs overestimated the demand for credit over debit products in their 2020 product planning – not knowing, of course, that a pandemic would shatter the economy and bring economic woes that make debt positively radioactive.

“Executives at large credit unions were considerably more likely than those at mid-sized or small credit unions to have planned to innovate [card issuance] to both attract new members and improve fraud protection,” per the new Playbook.

“Our study shows that 83.3 percent and 66.7 percent of executives at large CUs reported planning card issuance innovations for these reasons, respectively. Only 65.3 percent of mid-sized CU executives were interested in innovating new card products to attract new members, and 32.7 percent were interested in innovating to provide better fraud protection.”

Be that as it may, there’s actually a bullish outlook buried in the findings.

“Among CU executives who believed they would be producing just as many credit card products as debit card products in the next three years, 78.4 percent believed their financial performances would not change, and 21.6 percent believed their performances would improve. None believed their financial performances would suffer,” the Playbook states.

All Roads Lead to Digital

The financial fate of credit unions is no longer as strictly tied to the health of industries so much as it is to the financial wellbeing of its collective members. That’s the mountain that CUs and their member are now climbing, as their sector undergoes its own COVID-19 reset.

“Financial expectations were set high before the COVID-19 pandemic’s onset, so it makes sense that CU leaders would want to seize the opportunity to innovate as many card-issuing products and services as possible to meet consumers’ projected demands,” according to the Credit Union Innovation Playbook.

“Our research shows that 91 percent of CU decision-makers reported having been ‘very’ or ‘extremely’ interested in innovating such products. Only 9 percent were ‘slightly,’ ‘somewhat’ or ‘not at all’ interested in developing new card-issuing products during the months prior to COVID-19’s outbreak.”

Clearly, that’s not happening – at least not the way CUs thought it would. The big rethink now underway involves the fast onboarding of digital-first experiences for debt-averse cardholders.