Avoiding the Competitive Thunderdome

Member engagement has never been more critical, especially as we head into an uncertain economy. Both lending and consumer spending is slowing, and credit unions may soon find themselves in a post-apocalyptic Thunderdome, battling against big banks and digital disrupters to keep and attract members. (Welcome to the Thunderdome.)

OK, so there may not be any steel-caged matches, but credit unions must reimagine their current mobile banking apps – and it starts with understanding what members really want.

Mobile Banking Isn’t New

It’s hard to believe, but the idea of mobile banking has been around since 1981 (before some of you were born), when financial institutions began offering consumers access to their accounts via their home phone. With the emergence of the internet and smartphones, it has evolved in the last 40 years, but it’s still nothing drastically different. Back then, consumers primarily checked account balances. Guess what they mostly do now?

Yes, mobile and online adoption have increased. But the functionality of those platforms is not exactly interesting. Even for consumers, the most used features, according to a Ipsos-Forbes Advisor U.S. Weekly Consumer Confidence Survey, is mobile check deposit (35%), viewing account balances (33%) and transferring funds between accounts (31%). It’s not surprising then that mobile banking apps have some of the lowest engagement ratings when compared to other mobile apps.

Unfortunately, too many financial institutions are focused on the fact that demand for mobile banking is rising (it always was – this isn’t new) and less on the engagement of their offerings. If more members are downloading their app, that’s success and it’s good enough for them, right? However, this isn’t good enough for members, so no one should be patting backs just yet.

Member Engagement Is Critical

Consumers are increasingly abandoning brands that do not understand them or fail to personalize the experience. Even worse, it is easier today to break up with a financial institution. Credit unions must therefore move from a transactional mindset to an engagement mindset if they want to win over members and keep current ones.

According to research from McKinsey, 71% of consumers expect companies to deliver personalized engagement and 76% get frustrated when this level of engagement doesn’t happen.

Meanwhile, greater engagement leads to better numbers. A study by Gallup found that when companies successfully engaged with customers, they reported 63% lower customer attrition, 55% higher wallet share and overall performed 23% better than their competitors. Improved engagement and personalized experiences also lead to three to 10 times more cross-sell and up-sell opportunities compared to pure prospecting, according to NTT Data.

Self-Wellness & Financial Literacy

Like mobile banking, self-wellness is nothing new – but it is evolving. Estimated to be a $1.5 trillion market driven by consumer interest, self-wellness branches into many areas, one of those being financial wellness.

According to another recent survey, consumers aren’t that financially literate – and they know it. Over one-third of consumers give themselves a C or worse when it comes to their knowledge. Consequently, many Americans lack emergency funds or adequate savings. This problem may even get worse if the economy slips into a recession.

Currently, most younger consumers turn to digital for financial advice. The good news is that they’re aware of what they don’t know and they’re willing to do their homework. The bad news is that the sources they chose may not be the best. Social media platforms, like Instagram or TikTok (15%), blogs/vlogs (7%), podcasts (10%) and other online sources (27%) are gaining traction.

Think Like a Fitness App

As consumer interest for financial literacy increases, credit unions must consider how it fits in with their mobile banking offering. Delivering traditional PFMs no longer cuts it, as they simply provide updates into consumers’ spending. This isn’t always helpful, and it certainly isn’t engaging. This is why personalized financial guidance is the game-changer in financial fitness.

Additionally, apps need to be encouraging. Rather than reporting on what the consumer should have done, it must reward and encourage positive habits. As an example, what if a fitness app tracked and reported how many cheeseburgers you ate rather than reported how many steps you took. It’s a difference between shame and encouragement. Which app would you engage with?

For financial wellness, the same rules apply. Instead of shaming you for eating out too many times in one week, the app should reward you for meeting a certain savings goal or milestone. If consumers are discouraged, they’ll avoid the app and engagement declines.

Gamification: The Final Piece of the Puzzle

Finally, engagement is higher through use of gamification. It’s one thing to add financial wellness functionality into a mobile app. It’s another to keep members coming back to the app.

Consider how video games affect the brain. If there are rewards or levels to beat, the game triggers the release of dopamine, a chemical that reinforces behavior and keeps consumers engaged. This same concept can be applied to a financial wellness app, helping consumers engage with healthy financial habits.

Credit unions must blend the desire for financial guidance with a personalized and gamified digital approach, such as a financial health level, focused on helping to improve a member’s financial life. By combining the importance of financial wellness with the fun of gamification, members have a fun, interactive and engaging way to improve their financial health.

To ensure that the experience is highly personalized, credit unions must also have a scoring system that is based completely on each member’s financial lifestyle. Simply showing how much they’ve saved isn’t helpful. Customizing and personalizing to show how much closer they are to meeting a six-month emergency fund based specifically on their income and debt obligations is helpful.

As member engagement becomes more critical, credit unions must take a hard look at what their members need and want, and then deliver on that. It is likely financial wellness will become a higher priority for many, especially in the wake of inflation and rising rates.

While we may not see any Thunderdomes or cars from Fury Road, credit unions can differentiate themselves from competitors while also deepening relationships with their members. It will require combining mobile, financial wellness, gamification and personalization.

Parker Graham is Founder & CEO of Finotta, a fintech based in Overland Park, Kan.