A recent webinar hosted by CO-OP Financial Services on the status of credit unions and mobile banking hit on a point that deserves repeating. That is, credit unions have a valuable advantage over banks when it comes to mobile banking, and that is the element of trust.
The webinar included top financial technology experts whose companies provide products and services to the credit union industry: Stephen Bohanan, founder and chief strategy and sales officer for Alkami Technology in Plano, Texas; Brian Day, manager, mobile products for The Members Group in Des Moines, Iowa; and Jon Bartek, director, national sales and relationship management for CO-OP in Rancho Cucamonga, Calif. The webinar drilled down on the state of mobile banking, and the challenges and advantages of credit unions in that highly competitive space.
During the wide-ranging and informative discussion, Bartek pointed out that trust is an advantage that credit unions have consistently had over banks. "The trust factor among our members is higher than other financial service providers, according to studies," he said. "Credit unions have to leverage that advantage."
The Security Challenge
One of the big challenges that trust can overcome is that some consumers are still uncertain about the security of mobile banking transactions, especially with the recent retailer data breaches and other instances of identity theft. A study on mobile banking usage by Thrive Analytics' 2014 Digital Wallet Usage reports that while 80% of consumers surveyed are aware of digital wallets, 46% said they continue to have concerns about their security.
Nevertheless, even with a lack of security comfort, there is no doubt that mobile banking and use of digital wallets are rapidly growing, and will continue to have a dominate impact on the dynamics of the financial services industry. It is estimated that 53% of online customers at the nation's three largest banks use mobile banking, accounting for $52 billion in transactions in 2014, and that is projected to grow to $142 billion by 2019.
Credit Unions Will Capture Their Share
Credit unions will most certainly capture a portion of this growth and could outpace banks with the trust advantage in their corner, especially when concern over security is one of the critical factors that needs to be addressed satisfactorily. In fact, according to Rate Watch, the importance of trust could certainly be related to the fact that 68% of credit union members say they use mobile banking more than once a week, while 57% of bank customers say they do so.
Let's take a closer look at the connection between credit unions and the element of trust. In an August 2014 report, the Chicago Booth Kellogg School Financial Trust Index showed that consumers clearly trust credit unions more than banks. The index pointed out that trust in credit unions among their customers is 60%, while customers' trust in big banks is 30%. "Research is showing how effective credit unions are at creating trust with their members," the Kellogg report said. "As long as this trust is sustained, there is no reason to think credit unions can't grab more market share."
Adding to this body of research, an October 2014 report by the Harris Poll found that consumer trust in credit unions held steady during the previous year while trust in banks was in decline. Harris pointed out that many factors have a great deal of influence on the trust Americans have for financial institutions. Personal experience tops this list, with 66% of Americans stating this factor has a great deal of influence on their level of trust. The quality of products and services, quality of customer care and amount charged in fees all tie for next most influential, with 56% saying each of these have a great deal of influence.
The Role of Customer Satisfaction
According to the American Customer Satisfaction Index (ACSI) survey released in November 2014, credit unions are also ranked first in customer satisfaction, significantly outpacing all other financial institutions. (One can make a strong case that there is a link between customer satisfaction and trust.) The ACSI credit union customer satisfaction score of 85 is first among financial institutions, and the average bank score is 76. A respected and widely-used measure of customer satisfaction, ACSI ranks credit unions substantially better than traditional banks on every component including expectations, quality, value, loyalty and low complaint rates.
According to the report, members of credit unions have higher expectations of their credit union than customers of banks do – and over the past two years, not only have member expectations increased, but credit union satisfaction scores have increased as well. Furthermore, member loyalty is greater at credit unions. The likelihood that a member will continue to do business with the credit union is far higher (nearly 20%) than all others measured in the survey.
As long as credit unions continue to be viewed favorably by their members when it comes to trust, they should continue to improve their position in the mobile banking marketplace as they additionally demonstrate their ability to compete in terms of advanced products and services.
Ryan Zilker is the senior manager of market analysis for CO-OP Financial Services. He can be reached at 800-782-9042 Ext. 3482 or [email protected].
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