Credit Unions Turn to Members to Help Shape Innovation

When it comes to designing the digital journeys that link banks with members, the old approach that “if you build it, they will come” holds no water.

Smaller banks, especially credit unions, are resource-constrained and have finite capital and staffing — and especially time — with which to plot innovations.

The PYMNTS Intelligence report “Roadmap to 2030: The Seven Strategic Planks for Credit Unions to Capture Top of Mind,” a collaboration with Velera, found that 64% of CU members have converted their memberships to primary accounts. That leaves more than a third of members who have not converted those accounts to primary status, which reveals the potential to get some switching in place.

It also implies some competitive pressures. CUs will have to recalibrate the ways in which they try to woo members away from the financial institutions (possibly larger banks) where they hold those accounts. The report found that 53% of members chose these CUs to be “top of wallet,” which leaves room to make inroads and for CUs to see their debit and credit cards used more often.

Taking the Measure of What Consumers Want

A CU can create a compelling case for why everyday spending and financial lives should be attached to it by offering everything from rewards to budgeting apps. Consumer and commercial clients of CUs want more digital solutions at the ready, but they expect to have those solutions tailored enough so that they are personalized, instantly usable and intuitive. According to the report, 55% of CUs were planning to innovate to create and enhance self-service solutions such as mobile banking and digital onboarding through the next few years.

Listening can do wonders, and CUs should listen to their members to gain insight and input into what they value most and how that value can be (digitally) delivered.

The report found that CUs billed as top-performing — as measured by “innovation readiness” — had a score of 77, which meant they aligned with customers’ preferences 77% of the time. The bottom performers had a score of 29. The overall sample of the more than 500 banking executives surveyed stood at slightly more than 50, indicating that CUs were meeting members’ innovation needs about half the time.

As for the dollar cost of it all, top-performing CUs invested 5.6% of their assets in innovation and, as a result, had a 1.7% rate of member churn, compared with a 3.3% churn rate among bottom-performing members.

Members are already signaling what they need and want, per the report. Innovation spurred 52% of consumer CU customers who said economic incentives and rewards were the most important factors when choosing cards.

There was also an indication that CUs can take a cue from their larger peers when it comes to innovation. CUs that approached innovation as followers were a key group that did well striving to meet members’ needs because they benefitted from a proactive innovation approach without taking on all the risk. In the fourth quarter of 2024, 83% of CUs identified as followers.

In terms of testing and design, half of top-performing CUs tested innovations in-house and with members, compared to 37% for the sample average.

The data showed that a well-planned, structured approach to innovation saw dividends. Top performers were more likely than the average CU to have specific processes for taking member innovation suggestions and testing innovations with staff and members.

Processes that encouraged member engagement played a pivotal role, with 49% of top performers implementing procedures to gather member suggestions versus 38% for the overall sample.