Digital Transformation is Key Driver of Improved Member Experience for Credit Unions

July 18, 2023 Co-op Solutions
Samantha Paxson

by Samantha Paxson,
Chief Experience Officer,
Co-op Solutions

For credit unions to stay ahead of the curve in the rapidly changing and increasingly competitive world of financial services, they need to fully embrace and integrate digital solutions.

Declining consumer satisfaction indicates that credit unions aren’t meeting member expectations for digital services – and this erosion threatens credit unions as top-of-mind financial service providers. 

Going all in on digital means simultaneously addressing two sides of the same coin: transforming internal operations and integrating digital solutions to drive engagement with members whose lifestyles – and needs – are quickly evolving. 

Today’s credit union members (and consumers generally) are moving at their own speed. And that speed is fast

They are “digital nomads” who are comfortable patching together financial solutions from a variety of providers to meet their own, unique lifestyle needs. They also no longer feel the need to show loyalty to any single financial institution or financial services provider. 

Digital Payments

Fintechs understand this, and that’s why they are winning on digital engagement and payments. According to Co-op’s CU Growth Outlook research, conducted in partnership with EY and Filene, fintechs are harnessing payment products to accelerate growth and take over the marketplace. For example, PayPal experienced five times the relative growth in primary financial relationships and Chime showed 18 times growth. Meanwhile, 41% of respondents would consider leaving a credit union because the products don’t meet their current needs. 

This trend is particularly true of younger millennials and Gen Z. They know what they want, and they expect to have access to all the tools to do their banking anytime, anywhere and on their own busy schedule. 

For credit unions to deepen lifestyle engagement and own the primary financial relationship, they need to deliver the full member experience, and develop a new definition of member-centricity. Digital technology is a critical piece of this puzzle, and a way to enhance the member relationship

A New Definition of Member-centricity for a Digital Future 

The new definition of member-centricity relies on three keys to gaining active primary financial relationships: 

  1. Know your members like never before: Traditional banking presumes increased financial needs and complexity over time. However, this approach no longer meets members’ needs, as evidenced by the fact that less than 50% of young people own the financial products they need to be fully prepared for a life event, and that, on average, consumers own five banking relationships across different financial institutions.

    To combat this, credit unions should pursue a multi-dimensional strategy that considers traditional, demographic-based market segmentation (e.g., gender, age, wealth tier, marital status, geography), coupled with a needs-based segmentation that incorporates life events, lifestyles and a mix of solutions that address both.

    The key lies in activating a strategy of Lifestyle Enablement — creating active, daily engagement with your members aimed at being the hub for financial well-being. In fact, our research finds that by adjusting their product offerings to offer a mix of “high valued” and “standard” lifestyle banking features, credit unions can achieve a 34% increase in member market share, and 40% growth among prospects.
The New Member Centricity Framework
  1. Be their choice for every moment: Consumers have bifurcated their PFRs between a primary savings institution (read: “passive”) and a primary transactional interface (read: “active”). Whereas credit unions are in a strong position with regard to passive relationships (ranked #1 for loans, savings and checking in Co-op 2021 CU PaymentsOutlook survey), fintechs have achieved the top slot in active relationships (and credit unions fall to #3).

    Placing payments at the center of the member relationship is key. According to research from Accenture, 80% of people’s interactions with their financial institution are through payments. Payment products like contactless, P2P and mobile wallets drive more engagement, and form the heart of these active, transactional relationships.

    The ability to activate deep insights from the payment data you already have at your credit union is vital to understanding your members’ behavior and unlocking actionable growth opportunities. Credit unions can gain real-time access to cardholder account information – all in one place through a single, simple-to-use web application. Coupled with strategic guidance from leading industry experts, such as those on Co-op’s SmartGrowth team, this makes for a powerful combination.

  2. Embrace the power of connection: Fintechs have risen to relationship primacy over the past few years through the deployment of innovative digital technology and solutions. The pathway to primacy for credit unions will require accelerating their investment in digital capabilities and bridging the gap between their digital and non-digital channels, which will enable them to deliver financial well-being through digital tools.

    Consumer behavior and desires are trending toward digital tools that improve financial well-being. Daily movement and management of money behaviors lead consumer preferences and reinforce the need for active relationships with members.

    According to the Co-op CU Growth Outlook report, one-third of respondents, especially younger demographics, report needing any form of digital payment to be prepared for relevant life events. All respondents ranked spending behaviors, viewing personal trends and cross management of payment/financial sources as the top insights they are looking to obtain to manage their daily finances.

    To compete with the fintechs, your credit union needs to offer a full complement of digital, self-service payment products. Members desire the convenience of making payments anywhere and anytime, whether via their favorite eCommerce sites using their preferred digital wallets like Google PayTM, Apple Pay® or Samsung PayTM, or in-store through the touchless capabilities of a contactless card. You also need the ability to deliver digital credit and debit credentials instantly through digital card issuance.

    It also means growing member engagement by keeping their payment activities within your digital banking ecosystem, by offering solutions like P2P Payments through Zelle®, a fast, safe way for members to send money securely to friends and family.

    It’s critical that every interaction with your credit union is simple and easy for your members. This includes offering self-service digital card controls and alerts, along with robust loyalty rewards programs, based on lifestyle needs. Beyond payments, it’s important to engage your members where and when they need it most, through mobile-friendly online loan applications and new member onboarding capabilities.

Co-op’s role is to provide credit unions with the right tools and show them how to use them. Not by simply offering a web of discrete solutions – but by helping you to connect the dots. Reach out to us for help in navigating the rapidly changing world of financial services as you fully embrace your digital evolution. 

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