Many CU Execs Think They're Overinvesting in Digital, FIS Finds

More than one in four credit union executives (28%) think their credit unions are investing too much in digital transformation, and 8% expect to dial back their efforts over the next 12 months, according to new research from FIS.

The survey of 355 bank and credit union executives in the United States also found that 87% of credit union executives thought digital transformation was “very important” or “extremely important,” compared to 93% of executives from top 50 global banks.

Nonetheless, 64% of credit union execs expect to increase their investments in digital transformation in the next 12 months, compared to 70% of those at community banks, 75% at regional banks and 83% at top 50 global banks.

“In general, 55% of all banks think their current digital investments are on target. However, credit unions have a much different viewpoint,” the study said.

Feature futility

FIS also found that even though credit unions and other financial institutions typically offer several types of features in their mobile banking apps, fewer than half of small and medium-size business (SMB) members are actually using many of those features.

Though it did not break out SMB usage rates for credit union mobile apps, the company reported that just 37% of SMB community bank customers used their financial institutions’ mobile apps to monitor account balances and transactions, 30% used them to initiate transactions, and just 20% used them to manage alerts or controls for company cards. Fewer than a quarter used their financial institutions’ mobile apps to approve transactions, apply for loans, process invoices or invest unused capital.

“This highlights the urgency for smaller banks to educate SMBs about their mobile banking capabilities,” the study noted.

With the money they are investing in digital transformation, credit unions said their biggest priorities were to enhance digital channel functionality and enable faster payments. Fraud prevention and mobile payments were a close second, followed by branch automation, ATMs, artificial intelligence, integrating payables or receivables and regtech.

“Credit unions and community banks are investing in ATMs much more aggressively than larger banks,” the study noted.

Making the switch

Overall, about one in six SMBs plan to switch banks in the next 12 months, and digital services aren’t the only things credit unions must provide in order to retain those members, according to the data.

Over a third (35%) of SMBs said the biggest reasons to switch banks were competitive fees and referrals from other companies; 33% said being declined for a loan or other credit product and being unable to customize services or products were also reasons to switch. Inconsistent or complicated pricing structures and failure to resolve problems quickly and courteously were enough for 29% and 27%, respectively, to switch.

Only about one in five said poor customer service our outdated banking processes were reasons to switch.

“Bank executives badly underestimate the importance of referrals/recommendations from other businesses in encouraging SMBs to switch banking providers,” FIS noted.