To Capture Primary Financial Relationships, Credit Unions Must Win the Moments That Matter

May 28, 2024
CU Growth Outlook

by Carrie Stapp, SVP, Marketing Velera

The market for financial services is increasingly fragmented, commoditized, transactional and competitive. 

At a high level, many—if not most—credit unions know how to win in this context. They know that in order to earn their members’ trust, deposits and daily transactions, they must understand their behaviors, challenges and mindset. They also understand that competitive pricing and legacy product offerings are no longer enough to break through in a noisy financial marketplace. To achieve a successful member-centric strategy, credit unions must transform their business through clearly defined value propositions, strategic alignment, enhanced digital delivery, data activation, personalized products and tailored experiences, all supported with the right talent, technology and organizational culture and capabilities.

The challenge for credit unions lies not in the “why”—nor even the “what”—but in the “how” of business transformation. Credit unions’ ability to bridge the implementation gap will define their levels of success over the next few years.

For the fourth consecutive year, Velera (formerly PSCU/Co-op Solutions) has partnered with global consulting firm EY to survey how financial consumer and member behaviors, preferences and pain points have evolved. We also worked with Filene Research Institute to gain the perspective of credit union C-suite leaders, with a specific focus on understanding the tactical and operational barriers credit unions face in executing their growth strategies and achieving lasting business transformation.

This year’s research has identified one big shift in how thriving credit unions are approaching business transformation and 6 critical areas that are barriers to transformation, but—with the right focus, prioritization, execution and optimization—can be bridges to a successful future.

Interactions and relationships are diverging

Since Velera launched our groundbreaking market research in 2021, we’ve uncovered several important insights. In 2021, consumers reported they wanted more digital engagement from their financial relationships. And in 2022, the research showed that fintechs had made that happen.

In 2023, 45% of consumers surveyed cited engagement as the top driver of relationship primacy. For national banks and fintechs, this primacy is earned by offering interactive convenience. In contrast, we found that those respondents that name a credit union as their primary financial relationship (PFR) have, on average, three times the number of financial relationships as those that choose another type of provider as their PFR, demonstrating that credit unions don’t yet offer everything their members need to run their daily financial lives.

With this year’s research, we found that the relative importance of interactions and relationships are diverging, as consumers conduct different types of financial activities with different institutions. Relationship primacy is tied to where consumers hold most of their money, but interactions are where they are managing it.

In partnership with Filene, we confirmed that in 2024, credit union leaders have a solid understanding of where the consumer mindset is today. These leaders aren’t looking to reinvent the credit union value proposition, and they have a stronger sense of how to compete effectively. In fact, almost 80% of credit unions describe their current strategic footing as making “strategic gains”—identifying opportunities for growth but being careful about picking the right strategy and not over-extending their resources.

But implementing lasting change continues to be a challenge. More than 3 in 4 credit union leaders surveyed (77%) say they have identified a strategy and have now shifted their focus to executing on it as successfully as possible.

Here are some of the other key findings from this year’s research:

  1. Fintechs saw their Primary Financial Relationships grow by 505% between 2021 and 2022. However, primacy trends have since shifted back to long term averages, as the rate of change for most institution types remained flat from 2022 to 2024.
  2. The top benefits consumers seek in a financial provider include: convenience (65%), customer service (65%) and the ability to help them reach their financial goals (63%).
  3. As a member’s financial wellness improves, the level of importance their primary relationship has on their next purchase decision increases. Nearly 60% of consumers in the top three financial wellness stages turn to their PFR for their next purchase decision.
  4. National banks and fintechs are leading the way with consolidating relationships and interactions for consumers. By doing so, these providers have increased the longevity of these relationships as well as enhanced loyalty.
  5. Growth-oriented credit unions are 5x more likely to emphasize "strong internal alignment and culture" as their top priority.

Credit unions are not short on strategic vision, ideas for innovation and growth, or data. But to bridge the implementation gap, they need to turn their gaze inward, and commit to focused investment in people, process and technology.

Fortunately, credit unions don’t have to go it alone. Trusted partners are here to provide much of the technology, support, strategy guidance and digital payments ecosystem to enable credit unions to take this next step in their evolution.

The time has come to deliver on the promise of the credit union value proposition.

Learn more

For a deeper dive into the 2024 CU Growth Outlook research on how credit unions can transform their business models to achieve a member-centric growth strategy, download our latest white paper, “CU Growth Outlook: Approaching Member Centricity From the Inside Out.

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