For banks — and especially for credit unions — the battle with Big Tech for the hearts, minds and wallet share of consumers may seem a more than challenging proposition.
After all, Big Tech’s role across all facets of everyday life is pervasive, touching on everything from commerce to search to social media to the actual devices in one’s hand (think Android and Apple) where banking services and products can be delivered.
In the report “How Top-Performing Credit Unions Innovate to Stay Competitive,” a collaboration between PYMNTS Intelligence and Velera, we found that even among top-performing credit unions (CUs), who have relatively high scores on membership satisfaction, a majority (at 56%) view Big Tech firms as key competitors. Overall, 28% of CUs say they compete with Big Tech companies.
There are, of course, signs that the competitive landscape will only get more competitive. As has been seen through the past several months, and as noted here, last year the Consumer Financial Protection Bureau (CFPB) sought to extend the same supervision to Big Tech firms that already is in place for banks and credit unions. The supervision would apply to companies that see volumes of more than 5 million transactions annually, which of course covers everyone from Apple to Amazon to Meta’s financial ambitions. All told, the CFPB’s rule-making would add 17 new entities to its purview, companies that facilitated about 12.8 billion transactions in 2021, with an estimated value of about $1.7 trillion, covering 88% of known transactions in the nonbank sector.
The tech firms have the critical mass that would seme to put the CUs at a disadvantage, particularly given the user level data — rendered in real time — that they possess.
If data is the gold, the oil, the … well, you name the precious commodity as metaphor here … underpinning banking services, it should be noted that last year we found 57% of consumers said they trusted banks to keep their credentials secure, edging out Big Tech players.
The traditional financial institutions (FIs) already are regulated, and have been regulated for decades, as they’ve sought to innovate, funding those innovations with the deposits already on the books. But for forwarding-thinking banks, specifically for credit unions, we’ve found in playbooks and interviews that two-thirds of CU members want more payment capabilities. The CUs that are putting time and effort into digital/omnichannel initiatives invest 13% more in payments innovation than bottom performers and benefit from 57% lower member churn, which conceivably blunts the movement of “churned customers” to Big Tech.
The banks themselves have insight into the payment behaviors and account usage that can help them take a proactive approach to keeping those members engaged. While Big Tech’s point of access is through the mobile device, the banks have the digital and in-branch settings to keep customers’ attention, and to offer loans and other services in data-driven context.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
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