How Progressive Credit Unions Pursue Member-centric Digital Transformation

Amid the turbulence of today’s economic landscape, consumers are increasingly turning to their financial institutions for expert counsel to navigate these challenges effectively. More than ever before, credit unions have found themselves in a strong position.

These community-focused institutions historically are known for providing personalized services to their members, as credit unions often have a deep understanding of their members’ unique financial needs and are often embedded in their local communities. To the average target member, particularly younger generations, this aspect is often undersold or misunderstood by the public. According to a consumer survey from Keypoint Intelligence, just 5% of millennials and 4% of Gen Z are credit union members – underscoring that while the challenge persists for credit unions to market themselves to younger generations, this is also an area of tremendous untapped potential.

Recognizing their growing importance as financial partners to their members, credit unions are increasingly seeking to innovate on technology to offer more personalized products and services to their members and potential new ones. For example, a lending platform that features both consumer and small- and medium-sized business options helps to increase member satisfaction while creating cross-selling opportunities to better meet members’ financial needs. For credit unions, there’s an untapped opportunity to both acquire new members and deepen existing member relationships by nailing the foundational elements of small, but impactful technology advantages. It’s not the complete operational overhaul you might expect – a bit of investment into the right areas will go a long way.

Digitizing the Experience: Striking a ‘Fine Line’ Technology Balance

As services become increasingly tailored to member needs, an important distinction is that credit unions aren’t striving for automation at all costs.

Human interaction is still preferred and very much a staple of the credit union member experience. Credit unions recognize that personalized interactions are fundamental to the member experience and essential for providing the level of customization that enriches member relationships. A recent survey of credit union executives found that institutions prioritizing a highly personalized digital experience not only have less member churn, but believe such investments will attract new members in the next three years, according to the 2024 PYMNTS/PSCU Credit Union Innovation Readiness Index.

Ultimately, your technology should make the process efficient, not robotic. While applying the technology in the right amounts can make the member experience feel quicker and seamless, credit unions also understand that human interaction and engagement is where they can really make an impact among their members, one that could risk getting lost with 100% digitization.

Tech-enabled Relationship Building

Today, those member relationships are more important than ever. But, there’s a catch. Credit unions in recent years have struggled to convert long-term/more full service members. They aim to expand the relationship with certain loan products – like auto loans, for example – but with little connectivity on the back end, credit unions can end up with a majority of single-product members whose relationship doesn’t go any further.

A more cohesive and sophisticated loan origination system can mitigate this issue, particularly as legacy systems tend to operate in silos. For example, consumers traditionally need to meet certain criteria to become credit union members. One must first apply to become a member, then apply for an auto loan or mortgage separately. A more modern system reverses the process. When a prospective member is applying for loan, the credit union then prompts them to set up a share account in the form of a checking or savings account.

This helps to build long lasting relationships between the credit union and its members and expand their book of business organically. Many credit unions today appear primed to seize the opportunity. From Q3 2022 to Q3 2023, credit unions’ loan books grew by 9%, outpacing the broader banking industry, according to federal data.

By embracing a more integrated loan origination system, credit unions can not only overcome the challenge of converting single-product members but also foster enduring relationships with members, which drives organic growth and seizes the opportunity for continued expansion.

Digital (Really Is) Just the Beginning

You can never re-do a first impression, and a first class digital experience helps you put your best foot forward. Credit unions are increasingly turning to third-party providers to accomplish this goal. Digital has become table stakes, and members expect you to get the digital experience right.

Fortunately, credit unions are advantageously positioned as trusted financial advisors to the members they serve. One avenue they can focus their energy on is to enhance their digital loan origination capabilities. In fact, a recent survey of credit union executives from Cornerstone Advisors revealed that implementing digital account opening capabilities for various consumer loans are a top priority for their institutions in 2024.

Another top strategy for credit unions is to capitalize on the treasure trove of member data they have. A good CRM can easily help small credit unions double or triple their AUM.

By integrating an effective CRM with advanced digital loan origination capabilities, credit unions can introduce new loan products tailored to meet the evolving financial needs of their members while also attracting new members. This approach fosters enduring relationships within the communities they serve.

The Future Forward

Looking ahead, credit unions are positioned to serve an important purpose in today’s financial climate. They can be a viable option for consumers often left behind by banks during tough economic times. To accomplish this, credit unions can and are taking steps to modernize their technology in ways that are truer to their existence, which is membership-driven at its core. It’s not the complete operational overhaul you might expect; a bit of investment into the right areas will go a long way, and credit unions have an opportunity to chart their own path to modernization.

Nicholas Chang is Vice President, Head of New Ventures for the Chicago-based fintech Amount.