5 Areas Credit Unions Need to Rethink in 2022
CUs must take action to stay competitive in an industry that has seen dramatic change and is becoming more crowded.
The last 22 months have been a whirlwind. With the pandemic came various changes to how consumers bank and what their preferences are. If there’s anything credit unions have learned during this time of change, it’s the importance of being nimble and pivoting to serve members’ evolving needs better. To keep up in 2022, institutions must consider a few key trends.
1. Credit unions should carefully outline their cryptocurrency strategies. Research from Gemini showed more than 20% of people with investable assets already invest in crypto, and this number is expected to grow. Those investing typically do so through a cryptocurrency exchange. Additionally, more than 60% of those people would prefer to trade with their trusted financial institution. The cryptocurrency space is going to continue to gain traction, and credit unions must keep up. The NCUA just issued guidance clearing the way for federally-chartered credit unions to work with third parties on crypto products and services. Institutions need to have a thorough understanding of cryptocurrency and decentralized finance use cases, market cap and circulation so they can ensure that quality cryptocurrencies are available for members.
2. Payments preferences are changing. We continue to see growth and development in payments outside traditional channels. While many credit unions have onboarded non-traditional offerings, these payments differ from the typical point-of-sale card payments, and they present their own type of fraud. The pandemic also accelerated the adoption of contactless transactions, and issuers have worked to provide these types of cards to cardholders. However, supply chain issues have affected credit and debit cards nationwide. The shortage of silicon chips should be on the radar of every credit union, given the importance of keeping members equipped with active payment cards. The issuers that effectively plan for this can minimize the potential impact on their organizations.
3. Automation is back on credit unions’ roadmaps after a two-year hiatus. During the pandemic, many institutions delayed conversations on automation (robotic process automation, artificial intelligence, loan decisioning) to free up IT bandwidth for short-term imperatives. Now, many institutions are restarting these conversations. Although major technology projects are typically a focus of larger institutions, many smaller credit unions have realized that now is their time to take these projects on. In 2022, more credit unions will leverage aspects of conversational AI to support call centers. Also, smaller institutions are resisting the urge to customize, and we’re starting to see better APIs available to assist in this area. Credit unions must realize that they need to do a quick RPA or a full integration.
4. Credit unions will need to get creative to increase loan growth. Institutions are still drowning in deposits, new household formation has been cut in half from pre-pandemic numbers and online account openings are not what they should be. Credit unions must carefully outline member acquisition strategies for 2022, focus more on digital marketing and improve the online account opening experience. Additionally, we are seeing instances of institutions buying lenders that typically sell loan originations to keep more earning assets on their balance sheets.
5. Digital versus branches remains a battle. While branch traffic is unlikely to pick back up to what it was pre-pandemic, many still long for human interaction and still prefer to have in-person interactions. Credit unions need to carefully consider their member base’s preferences and determine their plan in terms of their branch footprint.
In the last 22 months, there has been a significant amount of change, including the increased use of digital banking, innovations in the payments landscape, and the need to provide exceptional member experiences both in-person and digitally. The financial services industry will continue to become more mature and crowded, so the credit unions that want to maintain their position in the marketplace must keep up with these new technologies and services and do what it takes to remain competitive.
Ben Mrva is EVP of SRM (Strategic Resource Management), a Memphis, Tenn.-based independent advisory firm serving financial institutions.