What the Apple Card Says to Credit Unions
CUs must elevate their digital interactions and expand their offerings to attract and retain members.
Long gone are the days when credit unions could consider the community institution down the street, or even the biggest national banks, as their only competition. Large technology companies and retailers continue to dip their toes into the financial industry waters, causing concern for traditional institutions. What these entities lack in proven financial services experience, they’re trying to make up for with seamlessness and convenience. While these competitors haven’t won yet, if credit unions aren’t careful, they just might.
T-Mobile, Walmart and Amazon all have introduced new banking and payment products over the last couple of years that tout a superior user experience as the selling point. Arguably the most threatening, last month Apple introduced a new credit card that has low fees, easy-to-spend rewards, boosted security and a frictionless account opening experience. Nothing Apple is offering is particularly new or noteworthy individually, but by piecing together the best features and functionality of credit unions’ current digital banking and payment apps, Apple might be delivering a better overall consumer experience. This should serve as a bright red flag to credit unions that have been slow or reluctant to embrace digital transformation.
These tech companies often have flashy user interfaces and hefty resources behind them, but they lack one crucial differentiator that credit unions have: Member trust. According to a Harris Poll survey conducted on behalf of D3 Banking Technology, more than three-fourths of Americans (78%) feel more comfortable with their financial institution having access to their personal data when compared to a large tech organization. This is good news for traditional players.
However, convenience will ultimately be the deciding factor, trumping trust nearly every time. That’s why credit unions must be able provide an equally frictionless member experience as the big tech companies and retailers to maintain the upper hand. In light of Apple’s recent card announcement, credit unions should take a careful look at the features and capabilities they currently offer and evaluate how they measure up.
For example, Apple Card’s onboarding process is simple, requires little data entry and can be completed in a matter of minutes from consumers’ mobile phones. This is an area where many credit unions have an opportunity to improve; too many institutions still have a clunky onboarding process that requires cumbersome paperwork and redundant data entry. The new account opening process is a potential member’s first interaction with the credit union, so if this interaction isn’t fast and efficient, consumers will get frustrated and may even find another financial service provider – or tech company – to join. Credit unions must simplify, digitize and streamline the new account opening process to strengthen member relationships and reduce abandonment rates.
The Apple Card also offers sophisticated in-app personal financial management (PFM) capabilities. This should be an area where credit unions thrive, as they are uniquely positioned to access a significant amount of member data, gaining a more holistic view of their lives. Credit unions can provide members with PFM solutions to help them budget, manage daily finances and plan for significant financial milestones, such as buying a car or retiring. Taking it a step further, the most successful credit unions will even anticipate member needs and proactively send them offers and information that support their financial goals.
Fraud continues to be a significant concern; in fact, according to Risk Based Security, there were more than 1,900 data compromise events in Q1 alone. Apple’s new card has embedded security features to address the current mounting cyber risk and safeguard cardholders. The card number is different from device to device, and consumers’ sensitive information isn’t on the card itself, but rather in the app. Credit unions must also make sure protecting members from fraud remains a priority. Tactics such as enabling multi-factor authentication can help strike the delicate balance between security and seamlessness.
While Apple isn’t reinventing the wheel, the Apple Card is making the wheel a lot easier and more convenient to turn. Credit unions must elevate their digital interactions and expand their offerings to attract and retain members. A focus on and dedication to digital transformation and nimble, modern technology are essential to quickly introduce new capabilities and compete. Though they have member trust in their favor, if credit unions aren’t improving the member experience and embracing a more modern approach to digital services, they risk losing significant market share to non-traditional competitors.
Eric Brandt is senior market analyst for D3 Banking Technology. He can be reached at ebrandt@d3banking.com.