Credit Unions Lead Banks on Innovation: Study Shows

A study commissioned by Filene Research Institute found credit unions scored ahead of most banks on innovation this year.

The 2023 study found credit unions scored 69 on a scale of 1 to 100 on innovation, just below the average of 70 for all 200 brands in the study. However, credit unions scored above most banks in the study despite credit unions being “stigmatized with the perception of falling behind on innovation.”

This study is the second of the Credit Union Innovation Success Study conducted in partnership with the American Innovation Index, which measures innovation in the overall U.S. economy by quantifying the experiences of customers from more than 200 brands.

The Credit Union Innovation Success Study measures the state of innovativeness in the credit union sector based on member experience, and identifies opportunities to differentiate themselves from banks and fintechs.

The second-highest score in the banking sector was 78 for the nation’s largest credit union: Navy Federal Credit Union of Vienna, Va. ($168.4 billion in assets, 13.2 million members). Navy Federal was treated separately in the study, so its results were excluded from the credit union average.

The study indicated that Navy Federal’s size allows it “to invest in systems and strategies to keep it at the forefront of the financial services sector. It may also benefit from broader name recognition compared to credit unions with a more local presence.”

Fintech brands were among the highest scorers: Chime (79), CashApp/Square (74), SoFi (73) and PayPal/Venmo (72).

The study was conducted by Lerzan Aksoy, a marketing professor at Fordham University in New York, and Gina Woodall, president of Rockbridge Associates, a marketing research firm in Great Falls, Va.

In the forward, Aksoy wrote that their research showed a surge in innovation among financial service providers during the pandemic.

“In the past year, however, financial service brands have slowed their pace of innovation. Some have even pulled back investments, resulting in declining Innovation Index scores among major bank and some fintech brands.

“Not so for credit unions!” Aksoy wrote. “Charged with serving the needs of the members they serve, credit unions experienced a slight increase in their Innovation Index scores and appeared to be doubling down on their innovation efforts.”

Aksoy and Woodall wrote that innovation matters to credit unions because of its relationship to member loyalty, brand attractiveness, satisfaction, and product usage. “Innovation has been shown to spark loyalty by triggering positive emotions of both excitement and fulfillment,” they wrote.

The authors recommend that credit unions:

• “Focus efforts on areas that are both desirable and innovative, including caring about members, always being available when needed, and offering fast, responsive service.”
• “Invest in areas based on how much room exists for improvement and differentiating power. Based on this, the top areas to work on in the future include reinforcing members that their credit union cares, ensuring they offer excellent products and services and reward loyalty (a higher priority for younger members).
• “Realize that certain social innovation areas present an opportunity for long-run differentiation because they are both desirable and drive perceptions of social innovation. This includes making members feel they belong, adapting products and services to meet the needs of members and the community, and working with them to build or repair their credit.”