Old Habits, New Tech: Bringing Progress to Credit Union Payment Strategies

Your members’ old payment habits aren’t just hard to break – they are expensive to maintain.

Despite the prevalence of digital transactions, many consumers continue to repay their loans by mailing a check, paying with cash in-person at a branch location or calling member service to pay by phone, according to a recent PayNearMe loan payment study.

These high-touch payment practices take a significant bite out of credit unions’ tight budgets. They also keep members tethered to old habits that will gradually lose support as credit unions work to move members to digital, self-service payments.

Here’s the good news: Most members are willing to adopt electronic payments if you make the transition seamless and give them a one-click payment experience.

Modern payments platform providers can work with credit unions to make that possible, not just by rolling out new digital payment types members demand such as PayPal and Venmo, but also by innovating around how to transition members to self-service payments.

Before exploring solutions, it’s essential to examine the data around high-touch, high-cost payment practices, which can inform how credit unions bring progress to their payments strategy in a way that balances member needs with reducing operational expenses.

Old Payment Habits Die Hard

A shrinking but still sizable number of members continue to use outdated (and expensive) loan repayment methods, according to the same study. The costs to credit unions of servicing those old habits add up quickly:

• Nearly a quarter of survey respondents said they (22%) prefer speaking with a member service representative to pay bills. Each contact center call costs $8.01 on average, according to Gartner – 80 times more than a self-service interaction.
• One in five survey respondents (20%) still relies on postal services, using checks or money orders, with a cost of $1-$2 per transaction (per the AFP 2022 Payments Cost Benchmarking Survey) for credit unions.
• About one in eight of those surveyed (12%) opt for in-person payments at the credit union’s branch location, incurring a cost of approximately $4 per visit for credit unions, according to MyBankTracker.

The data clearly shows it’s time to bring progress to payments without leaving members behind. Here are three ways credit unions can transition members to digital, self-service payments.

1. Upgrade Payment Reminders

Sometimes borrowers choose traditional payment methods because digital payment has too many hurdles. Unnecessary steps in the payment process like having to navigate biller websites, enter passwords and account numbers, and remember payment dates and amounts causes stress and anxiety. Three in five respondents (60%) said they wish managing and paying bills was easier, according to the study.

With the right payments platform, credit unions can take this burden off members by sending email, text or push notification reminders containing personalized payment links. These reminders not only prompt members when it’s time to pay but also include direct links to their payment screens, eliminating the need for password entry. The payment screen is prepopulated with the member’s scheduled payment date, amount due and last used payment method, creating a click-and-pay experience.

For members who prefer mailing payments, QR codes offer a bridge to electronic transactions. By printing personalized QR codes on billing statements, credit unions enable members to make online payments without logging in or entering account numbers. Members simply scan the code to access their payment screen.

2. Increase Self-Service Payments

According to the study, approximately one in five respondents (19%) reported regularly calling member service to pay their loans – nearly double what we found in our 2021 study. Interestingly, a similar proportion (17%) regularly uses automated systems like interactive voice response (IVR) for loan payments.

This data suggests an opportunity for credit unions to leverage more self-service options like IVR or, even better, prevent the need for a phone call in the first place.

That starts with making the online payment experience easier through a simple, easy-to-navigate payment interface, and one that’s as easy to navigate by mobile phone as by computer.

You can also make sure you’re offering the payment types consumers want so they don’t need to conduct multiple transfers – for instance using their Venmo or PayPal balance to pay a loan.

Finally, you can make it easier for members to register for and use auto pay. The recent study found that 65% of loan payers hadn’t signed up because they want more control over when they pay. Modern payments platforms can build in a certain level of flexibility so payers can choose a pay date to align with their income flow, within certain parameters. Sometimes offering a carrot, like a gift card, can also incentivize payers to make the leap.

3. Digitize Cash Payments

Despite the rise of digital payments, cash retains a strong foothold among certain demographics. In fact, 53% of U.S. adults are using cash more frequently now than they did a year ago, according to a 2023 Fortune article.

While credit unions currently accommodate cash payments in person, they have an opportunity to put a modern spin on the habit – and turn cash-pay into self-pay – by working with a payments platform provider that enables them to digitize cash payments.

The process is straightforward: Credit unions provide members with a reusable payment barcode that enables them to pay loans using cash at popular retail locations where they regularly shop, such as Walmart, CVS and 7-Eleven. The cashier simply scans the member’s barcode, accepts the cash payment and provides a printed receipt. The credit union receives notification of the transaction within minutes.

The demand for this service is clear. Of the respondents who pay some or all of their loans with cash, 84% consider it important or very important to have the option to make cash payments at retail locations during checkout, according to the study.

By embracing this innovative approach to payments, credit unions can cater to the persistent preference for cash while offering members a convenient, digital cash payment option.

Reshaping Loan Repayment Habits

When done right, digital loan repayment is the best, most convenient option for members. It’s also the right move for credit unions, costing pennies on the dollar compared to in-person transactions, and freeing tellers and member service agents to work on more complex or high-value tasks.

Changing long-standing habits is challenging, but credit unions have two powerful advantages. First, most members are already adept at various forms of digital commerce, from online shopping to ride-hailing apps. By mirroring the intuitive nature of these familiar experiences, credit unions can ease the transition to digital payments.

Second, members are creatures of habit – and habits can be reshaped. By offering seamless, user-friendly digital alternatives that outperform traditional methods, credit unions can help members form new, beneficial payment habits. Over time, these digital practices will become second nature, just as previous payment methods once did.

By partnering with a modern payments platform provider, credit unions can rapidly deploy solutions like cash pay at retail, enhanced IVR and personalized payment reminders.

That’s how you make it easy – even desirable – for your members to break their outdated payment habits and transition to digital, self-service payments.

Jill Conrad is the Senior Director of Sales at the Santa Clara, Calif.-based payments platform provider PayNearMe.