How a Cashless Future Could Impact the Credit Union Industry

The verdict is in – society is moving toward a cashless future. According to a recent report by Visa, a mere 11% of consumers prefer cash payments to credit. This number will only decrease as members of Gen Z join the workforce and start to make financial decisions in today’s world. In fact, an Accenture survey found that “68% of Gen Z consumers are interested in instant person-to person payments – more than any other age group.” Credit unions must fervently answer this call and strategically plan for changing demographics and their dynamic needs.

To meet consumer demands and prepare for a society in which cash is no longer the king, credit unions will have to consider the following:

Increased Investment in Digital Channels

Mobile banking has been at the forefront of the conversation among credit unions for years, and this trend shows no signs of slowing down anytime soon. A continued area of focus is mobile payments. Credit unions need to be at the cutting edge of this technology, or risk being left behind in an increasingly crowded marketplace. Competition is growing from companies that go beyond traditional banking to provide payments at the click of a button – without the need for a credit or debit card. Cleary, it is essential that the user experience of your credit union’s mobile app is as seamless as possible, effectively beating out the myriad of other options that are currently on the market.

Focus on Member Relationships

Competition from payment services like Apple Pay and Venmo will continue to take a bite out of the financial industry. What these services don’t provide, however, is the relationship a consumer gets from a credit union. Credit union relationships are built on a foundation of trust. Currently, only 53% of Gen Zers, compared to 72% of baby boomers, trust their primary financial institution the most with their money. Continuing to focus on the member experience will be critical – members are still going to branches, and they still expect superior service. For example, PwC’s 2019 Consumer Digital Banking Survey found that 61% of consumers still feel it is important to have a local branch available. As such, encourage member participation with your credit union both in-branch and digitally, and continue to focus on providing the resources that differentiate credit unions from other financial institutions. These actions will be critical as the financial industry continues to undergo fundamental changes.

Bolstered Loyalty Programs

Loyalty programs will continue to be key in setting credit unions apart from some of the other financial institutions and payment apps out there. Not only do these programs drive engagement from members, but also revenue for the credit union. Loyalty rewards can help to ensure that your credit union’s cards are top-of-wallet for members. For example, according to an Accenture survey, “48% of consumers would switch their primary rewards card to get more value for their purchases, and 42% would switch for a large up-front sign-up bonus.” A robust loyalty program that rewards members for doing business with the credit union is and will continue to be a must-have.

Cybersecurity Concerns

While the fintech industry is booming, there are still many consumers who have expressed significant hesitancy to fully integrating mobile phones into their monetary transaction capabilities. KPMG’s Consumer Loss Barometer report found that “financial institutions have a large base of users across all age groups who are not comfortable with digital enablers, such as mobile phones (28%) and biometric authentication (26%).” Fear about data security is widespread and legitimate – in fact, one easily could argue that data breaches, and their resulting fallout, are among the greatest threats to consumer confidence in the 21st century. This fear is also the main barrier to a cashless future. Conducting transactions with cash certainly makes it difficult for a fraudster to obtain personal information. Nonetheless, cyber-threats are always changing, and it is up to credit unions to remain knowledgeable and vigilant of potential threats. Credit unions’ expertise into cyber-vulnerabilities can be the factor that helps to break down the walls of trust with their members, resulting in increased loyalty and member retention.

It would be unwise to say that all monetary bills will be out of circulation in the near future, but the signs are pointing to a severe decline in use. By investing in digital platforms and member relationships now, you can position your credit union for an evolving financial landscape. Over the past three decades, credit unions have shown a distinct proclivity to adapting to technological and monetary change. Therefore, I am confident that credit unions will be prepared for the innovations that the cashless revolution brings to the financial industry.

Jami Jennings is Director of Digital Channels for EPL, Inc. She can be reached at 205-408-5300 or jami.jennings@epl.net.