The Good, the Not So Good & the Better for 2021

This year may have started with a bit more excitement than we perhaps expected. But regardless of how it started, it’s here and we might as well make the most of it. 2021 looks like it is shaping up to include the good, the not so good and the better.

The Good: Nowhere to Go but Up

According to The Conference Board, the U.S. economy has nowhere to go but up in 2021 based on three economic scenarios it has offered up. And with the country struggling to recover from the single most significant quarterly economic contraction in 75 years, up is the most desirable direction to move in. From the consumer/member perspective, high levels of unemployment will tamper with their badly-needed spending, however.

Here’s how credit unions can use their data to help members:

Understand the Member

This year, members are acting differently than they did the year before. Their spending has increased online and, most likely, moved to different retailers. Additionally, online capabilities and consumer expectations of this channel have dramatically changed as well. According to The Economist, in 2020 over 47% of Americans over age 55 started shopping online. In 2021, click-and-collect sales are expected to climb by 10%, ballooning to 60%.

If members have school-aged children, they have been attempting to work and provide educational instruction for nearly a year – the burden accompanying that effort falling on the shoulders of mothers. With one and five working adults unemployed, some members’ financial condition has dramatically changed as well.

The Not So Good: Vaccination, Unemployment & Defaults

While the COVID vaccine has been released to the market, the rate at which it is getting into human bodies is lower than expected. In March, the U.S. will reach the one-year mark since the pandemic began. That is longer than anyone predicted, and economic outlooks are tepid at best until death rates decrease and vaccination rates increase. The markets will not be able to move faster until the pandemic can be controlled.

This, of course, leads to increased unemployment, and when that happens, loan defaults increase too.

Here’s how credit unions can use their data to help members:

Leverage Member Spend Insights 

One of the tiny advantages of 2020 was the increase in data that became available due to online purchasing behavior. Member transaction data holds a real gold mine of member spend behavior and cash flow insights, to name a few. By understanding member spending behavior, you’ll discover ways to engage them through credit card use, lending opportunities and a bevy of other relationship-building and engagement insights. Understanding deposit and cash flow trends is pretty much like having a digital coffee with each one of your members.

Leverage transaction data to understand current member spend behavior and when it changes. Member spend behavior may hold signs of member economic pressure and raise awareness about the fact that the credit union should see if the member needs assistance. Helping a member with their finances early is vital to keeping them from defaulting and increasing their trust.

The Better: Telebanking & Auto Loans

One pandemic trend that has been predicted as here to stay is telemedicine. Telemedicine was always the wave of the future; the COVID pandemic just hastened its arrival. As hospitals remain overwhelmed with coronavirus patients, many medical centers have transitioned to virtual experiences. Credit unions have also moved to virtual banking. Many credit unions have started servicing members on video calls, and ideally, that trend will stick around.

Car manufacturers have been forecasted to receive some relief from pent-up demand in 2021. Sales of new and used autos will accelerate by around 15% this year, according to a recent Fortune article. That means both auto and home sales will return to pre-pandemic rates, potentially generating loan growth of 6% for credit unions. Also, the Federal Reserve has been predicted to keep short-term deposit interest rates around zero until late 2023.

Here’s how credit unions can use their data to help members:

Continuously Reduce Member Friction in Telebanking & Loan Experiences

Member friction refers to the friction the member experiences while doing business with the credit union. With the projected increase in auto loans and the continuing trends of video banking, credit unions can more easily identify friction in the member experience and take steps to reduce it. Here are four actions a credit union can take to accomplish this:

1. Get data (survey). Gather perceived data on the current state of the member experience. Seek this input from leaders as well as those close to the member. A great starting point is to identify external end-user (member) friction, then identify internal friction (the friction business units experience when interacting with each other.) This provides a perceived friction landscape to start with.

2: Map the MUX. This can be accomplished with software or a simple process map. The key actions are to identify critical phases in the member journey and identify the friction points.

You’ll also want to add any data as it’s available to each phase that either supports or refutes the perceptions.

Using the example of an auto purchasing journey, common frictions would be:

• A low level of awareness of credit union financing in channels the member uses;
• Few or no evaluation tools provided by credit unions;
• Difficulty engaging online for the loan, requiring the consumer to visit a physical office;
• Little or no engagement with the member post-purchase;
• Few channels being provided for advocacy; and
• Repurchase efforts that suffer due to the application process.

3. Analyze your findings. A list of frictions will appear and they need to be prioritized. The best way to prioritize them is by what will significantly impact the member with minimal effort. The “friction list” can be divided into short- and long-term projects.

4: Create a friction roadmap. Build out the roadmap by looking at it as a timeline with work streams that include people, products and processes. Understanding your members’ friction should be a strategic goal; if it isn’t, make it one now.

While this year will not be an easy one, members are looking to their credit union to help them navigate it, and the best thing credit unions can do to help them is look at their data.

Anne Legg is the Founder of THRIVE Strategic Services, a San Diego, Calif.-based company that assists credit unions with data transformation, and author of “Big Data/Big Climb,” a credit union playbook for data transformation.