What Happens When Credit Unions Let Members Drive Rewards

Credit union (CU) members tend to be more loyal than their counterparts at big banks, and customer relationships play a more central role for CUs in attracting and maintaining a customer base.

But historically, CUs haven’t invested as much as big banks in developing loyalty and rewards offerings, two top PSCU executives told PYMNTS.

“I think in the past, credit unions have viewed rewards programs as expensive,” Denise Stevens, PSCU’s senior vice president and chief product officer, said in a recent conversation with PYMNTS and Annie Cox, PSCU’s vice president of loyalty solutions.

In fact, the recently released Credit Union Tracker from PYMNTS and PSCU found that only a third of CUs delivered loyalty and reward innovations at all last year. However, Stevens said the pandemic has changed the game. Big banks have begun curtailing their offerings in an attempt to level out falling revenues, opening up an opportunity for CUs to sweeten their loyalty and rewards programs.

“I think that sentiment has changed now, and I do believe that [CUs] see the direct correlation — that leveraging rewards programs brings up their overall brand loyalty and [builds] a top-of-wallet usage relationship with their members,” Stevens said.

But building rewards and building the right rewards aren’t exactly the same thing, Cox and Stevens said. Doing things correctly means not only giving members a reward, but one that’s directly relevant to their needs.

Building The Right Offer

Cox said the first and most critical step in building the right rewards program is to look at a CU’s actual membership and use the data that CUs have on their members. She said the data behind a rewards program is often as important as the reward itself. It’s also key that messaging about a rewards program makes the reward offered obvious and desirable to customers.

For example, Cox noted that while travel rewards — frequent flyer miles, discounted hotel stays, etc. — have long been a cornerstone of many rewards programs, those fail the relevancy test in the COVID-19 era. After all, few CU members are actually traveling right now, and smart CUs have adapted.

“We definitely saw the changes due to the pandemic ‘shape shift’ [in] redemptions from travel,” Cox said. “There was a push for cash options that might help members and supplement income at a time where they need it. There was also a move toward charitable donation. Being able to put that in front of the member as an option outside of travel has really been key.”

She said maintaining such a focus on members’ desires for rewards “really represents the future of putting many options into place. [It’s] having a program that’s flexible, that lets the member know: ‘We’re not just about travel. We have other options, and whatever best fits your needs, you can use your points or your cash back to deliver on that.’”

Cox noted that CUs already have well-established, trusted relationships with their members. By leveraging that to build rewards and loyalty programs around what CUs know their members value, they add the ability to “surprise and delight” those members. She said that’s critical in building a “top-of-wallet” relationship with members that pushes them to engage with a CU’s products more routinely in their daily interactions.

As for how to build those programs — and whether to do so in-house or partner with a provider — both Cox and Stevens said that depends on how comprehensive or complex an offering is.

Partnerships Can Provide Options

The key for institutions that want to build and manage loyalty programs in-house is to keep things simple, which means they should largely limit themselves to cash-based rewards systems, Cox said.

But she added that while that’s a good start for many CUs, it isn’t really enough to make the reward stick in members’ minds or make using the CU’s card much more appealing.

“Cash is a good redemption option — [but] once it’s spent, it is spent,” Cox said. “There’s no trophy value to the member; they probably don’t remember it. It’s just another dollar that was in their wallet.”

If CUs really want more creative rewards, they should probably find a partner who can help them expand redemption options by providing the heavier technological support necessary to run such programs.

“It does make sense to reach out to folks that can collaborate and get to economies of scale,” Cox said. “Credit unions will see more participation.”

Stevens said that’s because building the right rewards program is, at its base, custom work. She said designing the right program is always very specific to a CU’s membership, as member needs and engagement are personal — more personal than simple cash rewards can cover.

“Credit unions really have to think about how the type of programs they’d put together will resonate with their members,” Stevens said. “And then, of course, they always have to wrap that around great marketing strategies to drive the overall usage and top-of-wallet mentality for their members.”