Credit Unions Don’t Need Fintech Partners to Survive – Just Member Intuition

The COVID-19 pandemic has caused dramatic shifts in consumer behavior and workplace practices that threaten to further destabilize credit unions weathering the recent economic tailspin.

While credit unions can’t predict when or how the economic recovery will unfold, they can turn to the one asset that has distinguished them from traditional banks over the years: Their relationship-building skills.

Credit unions have been under pressure to shore up reserves and expand their membership bases. They have faced fierce competition from larger banks and lenders that have successfully claimed niche markets, as well as from fintech startups offering highly integrated digital banking capabilities.

The pandemic now means they must also contend with work-at-home and social distancing practices that could become the new norm, at least for the immediate future. The key to successfully navigating the downturn lies within their ability to cultivate quality member relationships, particularly as they look to expand their digital capabilities to adapt to these changes.

Credit unions, however, don’t always have the money, resources or connections to boost digital offerings through fintech partnerships, such as the one struck recently between Google, Citigroup Inc. and the Palo Alto, Calif.-based Stanford Federal Credit Union.

They shouldn’t overlook the significance of the digital-first era, particularly for younger consumers, but should be aware of the substantial effort and financial resources required to form a partnership with the right fintech.

According to Cornerstone Advisors, a successful partnership hinges on the ability of a credit union to truly understand the fintech landscape. Mapping the scope of a potential union and prioritizing its opportunities, technology-related and beyond, is more challenging than many realize. Credit unions that don’t do their homework risk agreeing to flimsy strategies that can lead to major organizational and financial burdens.

Credit unions have demonstrated member loyalty and community care as major national banks have struggled to re-establish the public trust they lost during the 2008 financial crisis. Now, distressed national bank customers are contending with prolonged call service delays as they scramble to reclaim economic security. To remain competitive, they can engage their base with more customer-centric technologies and better response times. Specifically, they could boost essential interactive help within mobile apps in the form of live chat or voice-enabled digital assistants.

Credit unions have felt pressured by increasingly digitally-savvy consumers to keep pace with large tech-driven financial institutions. According to recent research by the CUSO PSCU, 59.9% of consumers feel that credit union mobile app offerings are “very” or “extremely” important. A 2018 Javelin Research & Strategy study also indicated consumers were interacting with digital channels three times more than they were visiting local branches for services. And in a recent analysis, CUNA economists said credit union members who have resisted mobile and digital banking have begun to embrace the technology.

An archaic web or mobile platform can be an impediment to credit unions’ success. According to Google Developers, progressive web apps enhance the user experience by being reliable, fast and engaging – characteristics that don’t necessarily require a fintech partner.

Credit unions can seek member feedback on how to improve their service, whether through a feedback tool in an app or an email survey that incentivizes responses with bonuses and rewards. Many are drawn to credit unions because their membership status makes them feel like more than a number.

In addition to live chat features, they also could add more personalization elements to their desktop and mobile channels, such as the ability to post a profile picture or customize wallpaper, to foster that relationship. Mobile interface upgrades can help attract and retain younger members. Interactive digital tools can be used to help educate them on the lower rates and other benefits credit unions offer.

New customization options can also help credit unions compete against the larger institutions. Traditional banks often limit the ability to customize features – a customer may be able to activate a low balance or payment alert, but not choose the frequency or trigger for those alerts. Credit unions can take advantage of their feedback channels to offer a range of customizable features based on member preferences.

Ultimately, credit unions can embrace what they know best – and what larger, more impersonal, financial institutions have often failed to master. They can initiate more immediate change based on the individual needs of members, instilling a sense of ownership and community. As member-owned cooperatives, they can seize competitive tools already within their reach and help maximize their potential for success during the economic recovery.

Gina DeCorla is a Senior Analyst for the Boston-based Informa Financial Intelligence.