An unprecedented year drives the need for rapid digital transformation

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Credit Unions Double Down on Digital to Meet Member Needs

It is no secret that the number of credit unions across the U.S. is falling. According to IBISWorld, the 5,001 credit unions in operation at the start of 2021 represent a 1.9 percent decline over the previous year.i 

At the same time, member numbers are rising. Last year, federally insured credit unions added 4.2 million members to their ranks,ii  as consumers sought lower fees and higher rates.

The falling number of credit unions in operation, combined with an increase in the number of consumers seeking credit union membership, spells an opportunity for these financial institutions. However, attracting and retaining members will increasingly rely on innovation, as digital capabilities capture the minds and wallets of the American public.

An Unprecedented Year Drives the Need for Rapid Digital Transformation

A global pandemic served to accelerate the consumer migration to digital in 2020. As social distancing mandates and stay-at-home orders changed the face of society, 34% of consumers increased their usage of banking apps.iii  More importantly, two-thirds plan to continue using these apps as the employment of digital banking channels overall continues to grow.iv 

In addition to increasing use of existing apps, consumers stepped up the number of technology aids they were using to manage finances during the pandemic. Around half of respondents to a recent survey indicated that they now employ three or more fintech apps to handle money matters.v 

Trends like these speak to an underlying need for efficiency as consumers seek faster and more streamlined methods for managing finances. Survey findings reveal that 57% of respondents relied on digital capabilities to save time, while 42% sought cost savings.vi

Businesses also increased their usage of digital channels. Hit by a wave of economic fallout as the pandemic wore on, access to financing became the lifeblood of many organizations. The government rollout of the Paycheck Protection Program (PPP) and a special round of Emergency Injury Disaster Loans (EIDL) were credited for saving small businesses that were able to obtain them.

The problem was, not all businesses were able to access these critical financial supports in time to save business operations. Lacking digital capabilities to speed the end-to-end lending lifecycle, many credit unions were unable to meet member needs before the initial wave of funding ran out.

In January of 2021, an ongoing survey conducted by the U.S. Census Bureau revealed that nearly half of businesses continued to feel moderate impacts from the COVID-19 pandemic.vii  Just over 30% felt a large impact.viii

As economic hardships persist, both businesses and consumers will be looking to credit unions for faster turnaround on loans to support basic financial needs. The growing trend toward online banking adds another layer of complexity to credit union operations, both inspiring the fast evolution of digital capabilities.

That leaves many credit unions between a rock and a hard place. Legacy core system providers aren’t recognized for best-in-class capabilities, leaving credit unions behind the curve of consumer adoption and expectations.

Changing the core, however, isn’t always a suitable option, since core transformations can open the credit union to a number of risks as well as the need to overhaul other systems, such as card payments and processes.  

Taking the Digital Initiative

Consumers today are looking for more than share checking and share savings accounts  from their credit union. They expect the credit union to act as a financial concierge, providing for a complete realm of services, such as:

  • Simple dashboards to explain spending habits
  • Personalized saving strategies and support to adhere to savings plans
  • Real-time SMS fraud alerts
  • Hassle-free micro investments
  • Simple peer-to-peer payments

While consumers can currently accomplish many of these activities utilizing third-party resources, the experience isn’t seamless and requires members to shift from app to app to complete tasks. As credit unions explore innovation, they need to consider factors like these, focusing on creating not only a product-rich environment, but a seamless flow between the wide variety of products and services being offered.

As credit unions seek new ways to fulfill the changing needs of members and to remain competitive, many are implementing innovation teams. Tasked with leading the credit union into the future, these subject matter experts are focused on improving the customer experience and exploring a number of avenues toward digital adoption.

Member interaction is crucial for innovation teams to identify consumer habits, trends and preferences, but collaboration with IT, security and vendor teams is equally as critical. While improving member experience is the overarching goal, thought must also be given to cost and the timeframe of transformation initiatives, as well as how any proposed transitions will impact existing credit union operations. Overall, the goal is to pave a 5-year path toward a more member-centric operation.

Credit Unions Must Begin Now

In the current climate, ample opportunities await credit unions, but competition is growing and fierce. Sixty-five percent of consumers would be willing to move their financial accounts to Amazon, while 58% would trust Google with their financial management.ix  Acceptance of challenger banks is also increasing.

Putting these trends together paints a picture of both opportunity and challenge as credit unions must accelerate digital change to keep pace with expanding competition and rising consumer interest.

i Credit Unions in the US – Number of Businesses 2001-2026.” IBISWorld, Sep. 24, 2020. Web.
ii  “National Credit Union Administration Quarterly Credit Union Data Summary 2020 Q3.” National Credit Union Administration, Sep 30, 2020. Web.
iii  Steve Cocheo. “How COVID-19 Permanently Changed Americans’ Financial Habits.” The Financial Brand, Sep. 16, 2020. Web.
iv  Steve Cocheo. “How COVID-19 Permanently Changed Americans’ Financial Habits.” The Financial Brand, Sep. 16, 2020. Web.
v  Steve Cocheo. “How COVID-19 Permanently Changed Americans’ Financial Habits.” The Financial Brand, Sep. 16, 2020. Web.
vi  Steve Cocheo. “How COVID-19 Permanently Changed Americans’ Financial Habits.” The Financial Brand, Sep. 16, 2020. Web.
vii  “Small Business Pulse Survey.” United States Census Bureau, Feb. 17, 2021. Retrieved from https://portal.census.gov/pulse/data/.
viii  “Small Business Pulse Survey.” United States Census Bureau, Feb. 17, 2021. Retrieved from https://portal.census.gov/pulse/data/.
ix  “The Time to Change Is Now: How Credit Unions Can Please Members and Displease Competitors.” Finastra, 2020. Web.