Credit union members are famed for their loyalty.
That historic bond is being tested as more CUs take a cautious approach to digital innovation due to prevailing macroeconomic headwinds.
PSCU President and CEO Chuck Fagan, NAFCU CEO Dan Berger and Suncoast Credit Union SVP of Digital Strategy Jana Manley told Karen Webster that the optimal approach to improving technologies — to improving member experiences can be boiled down to a simple concept:
Don’t chase the shiny squirrel.
We’re in a world where, as PYMNTS/PSCU data has found, 38% of CUs see themselves as tech laggards — up from 29% last year. The jump has a bit to do with a reining in of tech budgets, but also a recalibration of what innovation actually is.
Buy now, pay later (BNPL) has some potential, said the trio, though there’s danger of stacking debt. Crypto may be a bit unnerving. Digital wallets might be a game changer.
But as Berger noted, “It’s up to every individual institution to decide whether members want these innovations or if it fits into the CU’s business plan.”
“There’s been a long, historic trend in the industry where innovation has come in the form of new products, and new service,” said Suncoast’s Manley, and in chasing the shiny object (or squirrel, in Berger’s telling of it) — the distraction that’s drawn attention and money and time.
There’s been a long-lived mantra, she said, that can be summed up simply: “You just bolt on a product — and if you build it they will come.” There’d been little time examining what the bolt-on actually did in terms of impacting the overall customer experience.
But now CUs are looking to redefine innovation, having gone through the pandemic, which has demanded some mulling of processes and the overall impact on the digital interactions.
Judicious spending would be the order of the day — as looming caps on interchange revenues and card late payment fees would put a dent in the money that funds innovation. Expanding credit to small and midsize businesses (SMBs) across digital options is a must have. Real-time payments are coming soon to … just about everyone.
The stakes couldn’t be higher. The data shows that more than a quarter of customers surveyed would switch away from their CUs to more innovative providers. Younger consumers, agreed the panelists, are especially susceptible to jumping ship.
As Fagan said, “The younger generations do not have the same tolerance for not having what they want.”
And what they want? Well, it’s the ease and simplicity of instant gratification, of interacting, through digital channels, with the likes of Amazon and Facebook. COVID has accelerated the expectation that each and every online experience be personalized.
That eCommerce experience, said Fagan “sets the stage for how credit unions need to deliver.”
The CUs, said Manley, have an inherent advantage, because they have data that spans years and spans online and offline channels that can, in turn, help fine-tune new technologies and offerings.
In fact, as Manley said, “The data that FIs have had for so long is probably some of the most powerful data on the planet. … There’s so much that can be known about a member to create a hyper-personalized approach.” Using the right data, in context, can make it easier than ever to speed up applications, to fund accounts and to reduce the frictions of stepped up authentication and fraud controls.
Getting there is a challenge, and NAFCU’s Berger said that CU CEOs are taking a step back and realizing they need some help in getting to a place where core experiences and functions are strengthened while delivering a delightful end user experience. Speed and efficiency are becoming table stakes, said the panelists, and now consumers want to be served up new ways to proactively manage their money.
That means, he said, developing partnerships and relationships with the providers and platforms, with FinTechs too. The FinTechs themselves know that building a consumer services brand on their own needs the reach and distribution potential of CUs.
As Berger said, “You have to collaborate and bring in partnerships with FinTechs, because these CUs cannot do it alone. They’re not Bank of America or Chase where there are 200 technologists working to develop new programs and apps.”
And as Fagan acknowledged, “The FinTechs have realized that there’s value in the credit union channel — especially because of the numbers.”
The digital-only upstarts, added Berger, are also in need of the regulatory seasoning and oversight that the CUs provide. Otherwise, as he said, “when a lot of these non-depository FinTech’s that are beginning to creep into credit unions’ marketplace — you’ve got some kid in Palo Alto in his garage creating a business without any regulatory oversight. And consumers can be in danger.” The danger is especially acute with the advent of third-party data aggregators, Berger said, where consumers might not know much about how their data are being collected and used.
Fagan noted that embedding FinTechs into the credit union space is aided by APIs, which can allow financial service ecosystems to be built in with ways that make it easy for several stakeholders to participate. Fagan offered up the example where PSCU last year began partnering with Amount, which offers a full suite of end-to-end omnichannel consumer, small business and BNPL solutions. To make it easier for FIs to create and issue credit cards, said Fagan, “we had to go to a FinTech in order to create that.”
The joint efforts between CUs and FIs can create a marketplace model, the trio told Webster, adding that the same data that’s housed within FIs and leveraged to FinTech’s tech pipes can present members with a continuum of services that can cement loyalty among members, no matter their age or station in life. The marketplace construct, they said, still has some regulatory hurdles to leap but also has the appeal of making it easier than ever for consumers to join platforms, open accounts and transact.
The marketplace construct, said Manley, can also make card marketing efforts more successful, with higher conversion rates. “And here is where we can use that ‘eCommerce lens’ for a big win.”
Fagan seconded that eCommerce approach, stating “If credit unions don’t have a program to get [those cards] through, they’re just missing out on an opportunity.”
Looking ahead, Manley said that 2023 will see Suncoast focusing more heavily on members’ financial wellness, Fagan said there are still encouraging signs that the consumer is well-positioned to take advantage of new innovations offered by CUs.
“We are seeing more utilization of credit card than in previous years, where debit was clearly dominant. Delinquencies are still very manageable,” Fagan said.
And as we leave the pandemic fully behind us, as the marketplace model takes shape amid CU/FinTech collaborations, Berger told Webster:
“It’s a great time to be a credit union. They’re built for this — to take care of their communities, to take of Main Street and to take care of their members.”
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