Navigating Members’ Financial Lives After COVID-19

With COVID-19 vaccines beginning to launch around the world, credit unions are looking toward life post-pandemic. After a stressful and disruptive year, financial services leaders could be forgiven for yearning for a time before quarantine. Yet, despite an end being in sight, the global crisis has rapidly changed member behavior and expectations – perhaps permanently. An October 2020 report titled “COVID-19 and the Changing Financial Consumer: Impacts and Implications for FIs” by NY Pay and Phase 5 of banking services users’ behavior showcased the unexpected repercussions of prolonged branch closures and what financial institutions need to do to meet the new reality.

As they did during past financial downturns, consumers became more frugal with their spending and more focused on saving, even though nearly half saw no reduction to their income. In fact, many do not see their previous habits returning, even after the crisis ends. This disconnect correlates to the top concerns that have been expressed by consumers: The stability of investments, fear of debt and managing day-to-day expenses.

These apprehensions are also likely being faced by your members, who must manage the cash flow of their businesses as well as their personal finances. The presence of this stress meant that all types of consumers looked to their financial institution for support and direction during an unprecedented 2020. In fact, those who reported feeling unengaged with their financial institution expressed a higher level of worry.

How Member Satisfaction Levels Changed With COVID-19

In general, consumers of financial services are typically happy with credit unions and community banks, as their strong personal approach makes them stand out from the competition. Indeed, consumers expressed an overall positive view of these types of financial institutions in the abovementioned NY Pay and Phase 5 report. However, big banks saw the largest increase in consumer trust for their level of support and COVID-19-related adjustments.

A Digital Reckoning for Credit Unions?

The financial world has long been moving toward more digital practices, but as the pandemic shut many branches for extended periods, this change accelerated. Those with high satisfaction with financial services attribute their impression to the presence of digital tools and the institution’s ability to offer convenient methods of service, such as telephone and online banking. According to the October 2020 COVID-19 report referenced above, the lockdowns forced 84% of non-digital customers to begin using online methods for the first time and the vast majority – 94% – will continue this practice, even when all in-person options resume. Customers also reported moving away from checks and toward other types of transfers. Any credit unions that do not offer a digital alternative to their services should be concerned.

The Impact on FX and Global Payments

Sending and receiving money from different countries is a major part of the activities of many businesses that source products from abroad, hire internationally or ship overseas. Numerous credit unions and community banks either neglect to offer international services or require an in-person visit for transactions. As member behavior continues to move toward digital, these approaches may no longer work. According to the survey, global payment capabilities are accelerating and financial institutions must be able to meet demand.

How to Improve Your Credit Union’s Strategy

Though the pandemic is temporary, its impact on consumer behavior in the financial sector is proving to be permanent. The expectations and needs of individuals have changed and institutions need to adapt or risk losing out to the competition. Because large banks were quick to pivot their offerings and allow for digital alternatives, consumers expressed greater trust in their brands. Additionally, the demand for digital capabilities, especially in international transactions, will likely only grow. All credit unions need to critically examine the new needs of their members and start taking steps to adjust their strategy to match.

2021 and Beyond for Credit Unions

Although many consider 2020 to be the year of the pandemic, the repercussions of the event will be felt for years to come, and the speed at which vaccines can be administered across the world means that full branch reopenings will not be possible right away. More importantly, the nearly year-long quarantines have forced members to adjust their behaviors, and because of this, a return to pre-COVID-19 actions is simply not possible at this time. Even consumers who long rejected digital options tried this method and most will continue this way of banking. Additionally, exposure to easier and faster transactions will only spur more desire for the latest technical capabilities. Although credit unions are well-regarded for their personalized approach, they must find a way to incorporate the new consumer profile or risk losing business.

Stephen Kuhl, CFA is Head of Financial Institutions and Strategic Partnerships for Western Union Business Solutions in Denver.