Credit Unions Walk Tightrope Between Tech Adoption, Personal Service

Despite their sterling reputation for member experience and personal service, credit unions (CUs) are up against stiff competition from all corners in the digital shift, and they need to keep up.

We see this in the study “Credit Union Innovation: Product Innovation As The Key To Membership Growth,” a PYMNTS and PSCU collaboration, which found that 24% of consumers are considering switching financial institutions (FIs).

That’s partly because loyalty among consumers who’ve been slow to adopt digital is starting to erode in favor of the convenience online banking offers. And as face-to-face interactions fade away — and with them feelings of personal attention and care — smaller financial institutions like credit unions and community banks face do-or-die digital decisions.

“The marketplace shifted, and credit unions had to adapt. They’ve done a good job of adapting and figuring out how to service and create that high-touch experience in a digital environment shifting away from in-person,” PSCU Chief Growth Officer Brian Scott told PYMNTS.

“But limiting that personal touch, I think that’s had the biggest impact” on the switchers.

Not to downplay competitive pressures from companies and products that didn’t even exist five years ago, as Scott observed. That’s where harder challenges must be overcome.

When speaking with CU leaders, “It’s one of these things where the biggest threat is coming from FinTechs, challenger banks, companies that were not around five years ago,” he said. “That’s what we talk to our clients about most — the threats you’re facing are not from the traditional competitors, the ones that you’re used to competing with.”

Citing the 2016 book “The Innovator’s Dilemma” by Harvard Business School professor Clayton Christensen, Scott said new entrants in any space tend to win — even when they’re up against entrenched rivals. It all boils down to how quickly organizations can pivot to leverage their advantages.

FinTechs have been able to adapt and change more quickly than [CUs], which also goes for community banks. “They face the same challenges that a credit union does,” he said.

See the study: Credit Union Innovation: Product Innovation As The Key To Membership Growth

'Early Launchers' Pull Ahead

Identifying fast-moving CUs as “early launchers,” the PYMNTS study notes that of these firms, 79% today offer loyalty programs, 74% have mobile banking, 74% do contactless cards, and a rather impressive 68% offer buy now, pay later (BNPL) and P2P payments to their members.

The idea is to keep switchers from seeking greener pastures and cooler products elsewhere — what Scott calls “moonlighting” with other financial brands.

He said, “It’s easier now than ever to moonlight, have a secondary, [tertiary] even a fourth financial relationship, and it’s easier now than ever to actually leave. It used to be [you had] to go into a branch, and it was a hard process to switch financial institutions. Not anymore.”

CUs are cognizant of this shift and understand how vital trust is in keeping these relationships intact and engaged.

“Trust is one of the key things that consumers are making decisions on now,” he said. “Trust is developed sometimes digitally and through having the right technology,” pointing to the example of the Apple Card as a known entity with a good track record among consumers who use it.

See also: Credit Union Service Organization PSCU Acquires Juniper Payments

“People trusted that Apple Card experience because it was fast, it was easy, they got what they needed, it felt personalized and customized to them,” he said. “That’s kind of table stakes to being able to provide the great service that historically we’ve always done.”

Team Up to Tech Up

Despite a mountain of contrary evidence, some in the CU space still think there’s a “going back to normal” out there. Scott said forget that. It’s not happening.

Holdouts aside, he said, “What [CUs] are thinking of is how do we go back to that same level of service, but go forward and to provide that same level of service differently?”

Increasingly, CUs are working more closely with credit union service organizations (CUSOs) like PSCU, making the tools and integrations available to bridge the tech divide.

On that front, he said, “We’ve partnered with a couple of new companies recently, including a company called Amount which will help our clients provide that Apple Card lending experience. In 60 seconds or less you can get a loan, it feels fully customized, you get the approval, you get access, whether it’s to a credit card or to the line of credit.”

In May, PSCU acquired Juniper Payments, a cloud-based non-bank third-party provider of inter-bank transaction and reporting systems focusing on P2P transfers.

“We’ve got to use those future-forward technologies before we can actually create the great service that we’ve been known for throughout history,” he said.