Get, Keep and Grow Customers: Credit Unions Double Down on Digital

Credit unions have long jockeyed to gain consumer loyalty and top-of-mind status against mega-banks, and more recently, digital-only banks.

The competition may seem a bit skewed in favor of the larger, marquee names in financial services. After all, they spend millions of dollars — sometimes billions of dollars — annually in pursuit of innovation, particularly on digital initiatives that will attract younger consumers as they set up primary checking and savings accounts and provision credit cards into digital wallets.

However, as Denise Stevens, executive vice president and chief product officer at Velera, told PYMNTS, “the credit unions are closing the gap — and they’re much more focused on the prioritization of investments in meaningful products and services for their membership base.”

The conversation came in the wake of the report “Roadmap to 2030: The Seven Strategic Planks for Credit Unions to Capture Top of Mind,” released earlier in February as a joint effort between PYMNTS Intelligence and Velera.

Beyond the ongoing competition with large banks, there’s also a gap between the “best” performing credit unions (CUs) and the lower echelons. The report found that 55% of CUs are planning to innovate self-service digital solutions in the next three years, and half of top-performing CUs test innovations in-house and with members to make improvements.

The “Innovation Readiness” Index featured in the report revealed that the top performers’ Index score was 77, which indicated that these CUs anticipated and met their members’ expectations and preferences 77% of the time.

Forward-thinking CUs have “doubled down on digital,” Stevens said. “If it’s not the top priority, then it’s one of the top priorities.”

These credit unions are focused on bringing activities that traditionally were done in the branch setting to the mobile phone — a move that is resonating with younger demographics. Testing has proved critical in meeting members’ preferences.

The report found that those CUs that didn’t conduct extensive testing had an average Innovation Readiness score of only 37, which meant they met members’ needs only 37% of the time. Running “friends and family” type programs gives CUs the ability to make changes in a flexible way before products and services are rolled out to the entire membership base, spanning budgeting tools and buy now, pay later (BNPL) features, Stevens said.

“They get to see their feedback reflected in the design of the product — and that’s really satisfying,” she said.

The Business Member Opportunity

Beyond the appeal of gaining more of the primary banking relationship with individual members, Stevens spotlighted the opportunity that lies with serving small- to medium-sized business (SMB) clients with digital offerings. The market is largely untapped, given the fact that 82% of SMBs said they had not enlisted a CU for banking services.

“This screams that CUs should raise awareness in business communities,” she said.

Enterprise clients want expense tracking and budgeting features and the ability to embrace digital corporate cards in a bid to streamline day-to-day operations management, Stevens said. Partnerships help fast-track innovation initiatives, and Velera offers a FinTech Engagement program that brings FinTechs and CUs together to collaborate on new projects.

Digital tools also enhance a key competitive advantage for CUs, which have a natural agility due to their relatively smaller sizes and membership bases, she said.

They can make lending and other decisions not just based on what software and models are telling them, but with the knowledge they’ve gleaned from being part of the local community.

No matter the client, there’s also a universal need for digitally driven security products, including advanced biometrics and authentication tools that help foster a self-service approach to banking, she said.

Members “want digital account opening, digital lending and even chat features — and they’re all important in creating stickiness,” Stevens said, adding that “relationships are a credit union’s superpower — and it’s what they are known for.”