Navigating Deposit Flight: How CUs Can Thrive Amid Industry Turmoil

Following the turbulence within the financial sector over the past year, credit unions have found themselves grappling with a pressing challenge: Deposit flight. The initial rush of outflows following the notorious regional bank collapses of 2023 has subsided, but financial institution leaders are still facing a fiercely competitive environment where every deposited dollar counts.

As smaller institutions encounter rising economic pressures, some consumers are looking for the stability of larger banks to safeguard their finances or seeking institutions that can provide them with the highest possible interest rates amid ongoing inflation and high costs of living. Meanwhile, a sharpening demand for top-notch user experiences has caused others to search for financial providers that can meet their digital needs in a more modern, convenient and compelling way. These pressures have left credit unions at a critical juncture, compelling them to reevaluate their strategies to not only survive but thrive in the current landscape.

Facing increased competition and a new status quo, it’s important for credit unions to identify new ways to stand out from the pack and show their value to consumers. While this can come to life in a variety of ways, a key strategy I’m seeing leaders at these institutions turn to is offering modern financial education initiatives.

The New Competitive Landscape

The turbulence of early 2023 shook consumer confidence and triggered a substantial movement of deposits. Although the immediate crisis has passed, its aftershocks continue to shape consumer behavior. Individuals and businesses alike are scrutinizing their banking choices more closely, often prioritizing safety, higher returns and advanced digital capabilities.

Large national banks, with their robust financial health and sophisticated technological infrastructures, often attract those seeking stability and convenience while fintech companies and online banks often offer competitive interest rates and cutting-edge user experiences, appealing to tech-savvy customers. For credit unions, these trends translate into a pressing need to differentiate and articulate their unique value propositions more effectively to capture consumers.

Financial Education: A Strategic Differentiator

Amid these challenges, modern financial education initiatives emerge as a compelling strategy for credit unions. By providing high-quality educational resources and tools, these institutions can enhance member loyalty, attract new members and foster deeper, more meaningful relationships. A Greenlight survey found that 93% of parents say it’s important for financial institutions to provide banking and financial literacy education for their children, yet only 16% say their current bank provides such services, underscoring how consumers are craving greater support and consider it a critical offering.

Financial education helps demystify complex financial concepts, empowering consumers to make informed decisions. By offering workshops, webinars and counseling sessions, credit unions can position themselves as trusted advisors. This approach not only builds trust but also fosters loyalty, as consumers are more likely to stick with institutions that actively contribute to their financial well-being.

Educational initiatives also serve to enhance member engagement. Interactive platforms, such as online courses, mobile apps and gamified learning experiences can make financial education accessible and enjoyable. At Greenlight, we’ve found that combining high-quality financial literacy education with a gamified experience is a key way to empower young people to enjoy learning about personal finance on their own time. By integrating these types of resources into their digital offerings, credit unions can meet the growing demand for modern, convenient user experiences.

Millennials and Gen Z, in particular, value financial literacy and are more likely to engage with institutions that offer comprehensive educational resources. Another Greenlight survey found that 76% of Gen Z teens are stressed or anxious about money, and 75% want more personal finance education. By targeting this demographic with tailored financial education programs, credit unions can attract younger customers, securing long-term relationships and fostering generational loyalty.

Practical Implementation Strategies

To effectively leverage financial education as a competitive advantage, credit unions must adopt a strategic and multifaceted approach:

• Develop comprehensive educational content: Creating a diverse range of educational materials, including articles, videos, infographics and interactive tools, can cater to various learning preferences. These should cover topics such as budgeting, saving, investing and credit management to ensure that members have access to the information they need at different stages of their financial journey.
• Utilize digital platforms: Integrating financial education into mobile banking apps and online portals makes it easily accessible to members. Personalized learning paths and ongoing guidance can enhance the user experience, encouraging ongoing engagement.
• Promote community engagement: Hosting community events, such as financial literacy workshops and seminars, can strengthen the institution’s local presence and foster a sense of community. Engaging with local schools and organizations to provide educational resources can further enhance the institution’s reputation and visibility.

As credit unions navigate the complexities of deposit flight and heightened competition, modern financial education initiatives offer a promising pathway to differentiation and member retention. Embracing financial education as a core strategy can enable credit unions to demonstrate their value, fostering long-term loyalty and growth in an increasingly competitive market.

Matt Wolf is SVP of Business Development for Greenlight, an Atlanta-based provider of a financial wellness app for families.