Credit Unions Cure Churn With Enterprise Focus on Innovation

In a world where big banks have long dominated the financial landscape, a quiet revolution is underway.

Credit unions (CUs), those member-owned financial cooperatives that have always prided themselves on their community focus, are embracing innovation with open arms, proving that size does not always equate to strength — particularly across the 21st century’s shifting digital landscape.

“Credit unions are faced with competing priorities from left to right all the time, but those CUs that actually have an enterprise strategy around innovation are better poised to excel and grow,” Scott Young, senior vice president, Emerging Services at PSCU/Co-op Solutions, told PYMNTS.

This strategic approach not only sets the foundation but also drives the commitment necessary for investment in cutting-edge technologies. That’s because with the rapid advancement of technology and shifting consumer expectations, credit unions have found themselves at a crossroads: evolve or risk being left behind.

At the same time, the narrative that credit unions are technology laggards is being dismantled, piece by piece, as they begin to adopt and adapt innovations that were once the sole domain of FinTech startups and global banking giants.

“The pandemic told us that member self-service is now, and it’s going to be the future,” Young said, explaining that digitization is “the hallmark” of most successful credit unions, helping CUs meet their members’ need to “save time and make life more convenient.”

Prioritizing innovation based on the needs of credit union members and determining whether to build, buy, or partner for solutions are critical considerations, he said.

The Importance of Strategy as the Bedrock of Successful Innovation

Historically, credit unions have cultivated a reputation for close community ties, personalized member service and an innate understanding of the local economic climate. This history serves as a compelling backdrop to the journey of credit unions toward innovation, positioning next-generation initiatives as not just about adopting new technologies but also about a fundamental shift in mindset. It’s about recognizing the potential of innovation to enhance their mission of service to their members and communities.

“The credit union is the members’ trusted advisor, meaning that innovation is about what tools they can provide the member to help with their financial status and along their financial journey, as well as asking how you can differentiate your credit union from some other competitor in the industry,” Young said.

From instant-decision lending to real-time access to account credentials, credit unions must adapt to meet the expectations of an on-demand culture, he said.

That’s why, from mobile banking apps that rival those of any large financial institution in functionality and user experience to implementing cutting-edge security measures to protect their members’ data, credit unions are starting to show that they can move just as fast, if not faster, than their larger counterparts.

After all, digital transformation is no longer a choice but a mandate, particularly post-pandemic.

Understanding member needs and preferences is paramount for credit unions aiming to enhance member loyalty and engagement. Young emphasized the importance of delivering personalized experiences, particularly as competition intensifies and credit unions must prioritize innovation to retain and attract members, especially from younger demographics like Gen Z.

Read more: Investments in Payments Innovation Reduce Credit Union Member Churn by 57%

How Innovations Help Credit Unions Win With Younger Demographics

Embracing tech-forward initiatives helps credit unions not only attract a younger, more tech-savvy membership base but also to deepen the engagement with their existing members. For example, by leveraging big data analytics, credit unions can offer personalized financial products that cater to the unique needs of their members, enhancing their overall banking experience.

“More investment into innovation equals less membership churn,” Young said, noting that winning “share of mind” is crucial for younger demographics. “Sometimes credit unions will deprioritize installs, upgrades or new versions of solutions. When that technical debt continues to compound, it not only creates a resource concern, both human and financial, but it can be a real obstacle to deploying new products and features for members.”

It’s crucial for CUs to do their homework when it comes to investing in innovation versus relying on a “spray and pray” approach to see what sticks, he said.

By staying agile, member-focused and strategically aligned, credit unions can navigate challenges and seize opportunities to thrive in an increasingly digital world.

“Credit unions can be more nimble than banks when it comes to decision making and deciding what technologies to embrace,” Young said.