The selling point for CU should be relationships
This is a critical time for credit unions, as there is a real risk that members will seek tempting offers and better terms from competing financial institutions.
According to PYMNTS August 2021 Credit Union Innovation Handbook: Portfolio Leak Edition, 55% of members are currently using at least one other product or service from a competing financial institution. Even more disturbing is the finding that only 45 percent of credit unions have expressed a willingness to innovate new business credit products to try to prevent this migration from happening.
young dean, head of experience at PSCU, told PYMNTS in an interview that, surprising as it may sound, the simple fact is that many credit unions choose not to do it because it’s not something their members want.
“Innovating in business credit services to further diversify their products is not always perfectly aligned with the interests and evolving preferences of each member,” said Young.
Further reading: New Credit Union Study: 100% of CUs Identify Wallet Leakage as a Current Problem
Additionally, Young said some credit unions say they don’t have their members’ demand for these kinds of solutions, despite the wallet drain they see. There is also the issue of limited resources, which hinders the ability of some credit unions to innovate in the first place, especially those located in more rural areas.
“Business School 101 teaches us that when you try to be everything to everyone, it’s almost impossible to be good at everything,” Young said. “So for credit unions with limited resources, the goal for them is to figure out what they need to be great. They need to focus on the areas that are really important to the needs of their members.
Low rate bait
One of the most compelling reasons credit union members turn to other financial institutions is the lower rates offered for their loan products, as cited by a third of respondents in the latest playbook. Another 16% said the fees were lower, while a quarter said other lenders could offer plans for specific purchases.
Young admitted that it might be difficult for credit unions to compete with the lower rates offered by banks and new FinTech startups and neobanks which also have the benefit of reducing friction.
Similar: Credit unions are good at being “quick followers” rather than cutting edge technology
“On top of that, many credit unions focus on direct and indirect auto loans and they find that automakers sometimes offer 0% on loans through their own finance departments,” Young said.
Therefore, he said, credit unions should take advantage of their advantages, the most important of which is their close relationship with their members.
According to Young, it’s more important than ever for credit unions to maintain an open dialogue with their members to help distract from rates alone. One of the most important things to keep in mind is that no one wants to be turned down when applying for a loan. While credit unions’ approval rates aren’t always better than their competitors, they’re willing to go above and beyond to help find solutions for their members.
“Credit unions [are member-centric]; they are still looking [ways] to help their members… So that can be a huge asset, ”Young said.
One statistic of perhaps concern for credit unions comes from the U.S. Customer Satisfaction Index, which shows that traditional banks have outperformed credit unions in terms of the overall level of satisfaction they provide.
You might like: Report: 60% of Credit Union Members Turn to Other Financial Institutions for Credit Products
Bridging the digital divide
Young said it was an almost blasphemous finding for credit unions and that one of the reasons it happened was that they didn’t provide that personal touch in the same way. that banks did during the first months of the coronavirus pandemic.
“Banks may have done a better job initially than credit unions in leveraging their digital activation and engagement channels,” he said. “But most credit unions have responded and we’ve seen a significant acceleration in digital transformation, which will definitely help over the next 12-18 months. For credit unions that did not prioritize [their innovation strategies, they have now kicked them into high gear.]”
PSCU has also responded similarly, stepping up its investments in its cloud-native digital banking company, Lumin Digital. The company will invest $ 54 million in Lumin Digital over the next three to five years to help it elevate its platform with more advanced capabilities such as online account opening. The additional investment will also help Lumin to expand product implementation and support capacity for higher than expected demand and market growth.
Read more: PSCU invests $ 54 million in Lumin Digital
With this investment, Young said PSCU would be better able to help credit unions implement new digital solutions cost-effectively, conveniently and securely and help them retain their members.
“Ultimately, consumer behaviors changed,” Young said. “The primary interest of members lies in innovative, personalized, simple and secure payment solutions and offers. They want to choose how and when to conduct their transactions. So anything digital is a [strategic] focus for both PSCU and our [credit unions], and it’s a fantastic alignment.