How the 'Great Comeback' Will Be a Time for Credit Unions to Shine

As the world adjusts to a new reality created by the coronavirus pandemic, consumer preferences have also changed, as people now prefer a lower level of physical interaction when receiving a variety of services, including from their banking institution. This creates both a challenge and a significant, unique opportunity for credit unions to maximize their competitive advantage.

One of the most attractive elements of credit unions is that their format brings people together into a mutually supportive and beneficial collective. However, because they are not profit-first institutions, credit unions do not always have access to the same expansive budgets and offerings of traditional banks. Indeed, the feeling of community and service has spurred credit union membership to grow.

This can lead to a challenge as our new reality makes traditional face-to-face interactions less appealing.

But there’s also a tremendous opportunity for credit unions as one of their limitations – fewer branches than commercial banks – becomes less of an issue.

Now, if credit unions adopt the right types of technology, and combine them with the familiar human elements their members have come to expect, credit unions can reach new heights of success to thrive during the “great comeback” that will follow the “great lockdown.”

Limited Branch Networks: No Longer a Big Deal

As not-for-profit organizations, credit unions don’t offer the same number of branches as traditional banks – even as they’ve gotten better at providing members with access to ATMs. But the relative dearth of branches is no longer the issue it used to be.

First, the shift toward digital banking is nothing new in the financial sector. In fact, 27% of millennials and 30% of Generation Z have an account with an online-only bank, according to a 2019 Neobank Adoption survey from Finder.

Moreover, credit unions’ emphasis on equalizing access to good service goes hand in hand with promoting digital options and reducing the need for branch visits. For example, rural individuals and shift workers are particularly well-served by better digital options that are always available. From an inclusivity and availability standpoint, digital wins over in-person, in-branch banking.

Second, the coronavirus has now clearly made remote banking the preferred choice. All demographics, not just younger generations, are wary about going back to physical branches even as they begin to re-open, with as many as 49% of consumers indicating they would avoid taking a loan out if it required a physical visit to a financial institution.

And this hesitance about going back to “normal” isn’t just about fears of infection. During the lockdown, digital banking went from being an alternative banking option to being the standard. The result was that even groups who normally would shy away from digital banking had the opportunity to become more comfortable with it.

Concerns around safety drove everyone to bank online at the height of the pandemic. Newly discovered convenience will keep them online.

Digital Helps Make the Most of Limited Funds

Credit unions function quite differently than big banks, which means credit union leaders need to think carefully about how they allocate their funds. Digitization of banking allows the credit union to serve all of its members efficiently, rather than invest in location-specific services that aren’t scalable and are quite costly.

In fact, McKinsey found that banking institutions can reduce their cost base by 20 to 25% by switching to digital customer-facing services and processes.

This shouldn’t come as a surprise. An average customer transaction at a physical branch costs banks $4, while banking on a website costs just $0.09 per transaction. Mobile banking is the most cost-effective of all, costing banks just $0.019 per transaction, as reported by The Financial Brand.

Financial factors may make it cost-prohibitive for credit unions to compete with traditional banks when it comes to the number of branches – but this is no longer the drawback it once was. Rather, credit unions can stretch their resources further by investing in more front-end technologies that provide their members with an excellent mobile and digital user experience.

But What About Preserving the Human Touch?

Credit unions take pride in the level of customer service they provide, and with good reason. Consumers generally seek out credit unions for better rates and more personalized service than a large bank can provide. Doesn’t digitization compromise credit unions’ unique advantages?

If digitization means developing a mobile app and maybe throwing in an automated chatbot for good measure, credit unions won’t be playing to their strengths. The last thing credit unions want is to institute partially digitized processes that start online but eventually force members to show up at a physical branch anyway, or completely disconnect their members from their institution. Automation is not a substitute for a human agent.

But if done right, digitization can augment the human touch at credit unions – and vice versa. Digital tools exist that allow members to conduct all interactions via web or mobile, but still have a human banking professional available to guide them through the process. This helps members fill out forms and applications accurately the first time, prevents bouncing between channels, and preserves the human element that credit unions are famous for.

Now is the time for change, growth and taking brave steps to thrive. By adopting technology that provides streamlined, digital processes combined with the warm, human experience members are accustomed to, credit unions can be massive winners during the “great comeback.”

Gilad Komorov is Chief Revenue Officer at Lightico, a New York, N.Y.-based customer experience software company.