Credit Union Growth Must Balance Personal Connection to Members With New Digital Tech

Credit unions (CUs) have seen some impressive growth throughout the pandemic.

But in an interview with PYMNTS, PSCU Senior Vice President and Chief Growth Officer Brian Scott said there’s room for further improvement, leveraging the competitive advantages CUs already enjoy. In short, they can use their service know-how to better serve members’ needs.

Globally, CU membership surged by 29% in 2020 as CUs expanded access to financial services, especially for groups that have historically been underserved. Scott pointed to the fact that CUs have recently focused on expanding access to digital services and tools in less affluent communities, which have proven to be lifelines during the pandemic.

And yet, even with that growth rate, he said, roughly half of CU members still have banking relationships elsewhere, which means there is at least some business going to those other providers that, at least in theory, could be going to the CUs.

“The holy grail is for the CU to be the primary and only financial institution [(FI)] for their members,” said Scott. But CUs (and traditional FIs, for that matter) are facing competition from FinTechs. “A lot of those consumers are trying out [Block], Stripe, Klarna and Chime.”

Many of those competitors have compelling, easy-to-use digital offerings, which helps explain the fact that so many consumers are using CUs but are gravitating toward those other firms as well, he said. Not all that long ago, a loan application could take days or even weeks. But with these digital firms, loan applications can be done in less than a minute, with high approval rates.

Getting the Primary Relationship

“If my credit union doesn’t offer something that I want, I am going to moonlight and go somewhere else for the services I want,” he said.

As a result, CUs must rethink their offerings, and perhaps retool their suite of products and services, he said. Financial executives are taking notice. Two-thirds of CU decision-makers queried by PSCU and PYMNTS have stated that they are at least interested in moving beyond pure consumer relationships and deepening their business-focused offerings.

“If credit unions are not focused on the business segment right now, I think that’s a mistake,” Scott said.

Small- to medium-sized businesses (SMBs) are enjoying something of a renaissance right now as consumers look to support their local businesses and CUs (although Target, Amazon and Walmart are not going away anytime soon). And many CU members are forming small businesses — which means the CUs, naturally, have an installed base through which to cross-sell business-related financial services.

Although the global growth rate might have recently reached double-digit percentages, Scott noted that the normalized growth rate has been in the low-single digits.

To accelerate growth, he said, CUs need to capitalize on the trust given to them by their members — which has long been a competitive strength. Now, it’s imperative for CUs to learn to innovate and attract younger members (the average age of a CU member right now is about 45).

But, he cautioned PYMNTS, “It’s important to focus on where the member is on their financial journey — and it’s especially important to provide robust mobile banking, digital payment tools, digital loan approval tools and understand where the member is individually.”