As Chuck Fagan, president and CEO of PSCU, told Karen Webster, credit unions (CUs) are moving beyond the “fast follower” designation and toward real innovation leadership. CUs have to be forward-thinking or risk losing members.
In 2019, about 30 percent of credit union executives said that they were fast followers. As a result of the pandemic and credit unions quickly adapting to changing consumer behavior, that number increased to 46 percent in 2020 — then dipped back down to 33 percent this year, according to a recent Credit Union Innovation Study, a collaboration between PSCU and PYMNTS. As more FinTechs quickly introduce innovative offerings, the market around credit unions has been changing, said Fagan. CUs have become aware that simply observing what others have done and imitating them is no longer enough — they must strive to be cutting edge.
Investments from the likes of Apple and other large tech companies have moved consumers to digital wallets and other offerings, where contactless payments and other advanced technologies (even biometrics and voice-activated capabilities) are becoming part of the everyday experience. The recent CU Innovation Study found almost twice as many CUs invested in contactless this year than in 2020, and voice assistant innovation more than doubled among CUs so far in 2021. Credit unions will have to continue to accelerate these innovation efforts, said Fagan.
“As [CUs] look at partners to work with, integration will absolutely be key. It has to be one seamless environment in order to be successful,” Fagan said of innovation. One of the key areas lies with authentication and using voice or fingerprints for secure verification.
In Fagan’s estimation, hybrid branch banking will also be a key ingredient in fashioning the credit union of the future and will influence the CU’s ability to innovate. “You’ve got to have that minimum viable product and then enhance those products — often — as you push them out,” he said.
Brick And Mortar, Reimagined
The lasting importance of the branch — in a modernized, digital format — is evident with CUs continuing to open new offices.
Fagan relayed an anecdote about a recent board meeting in which PSCU had 13 credit union CEOs in the room, many of who are still building or opening new branches. “However, the footprint is way different, much smaller,” he said.
The branch setting is a microcosm of innovation, emblematic of the great digital shift and changing consumer expectations. The branch has become a bit of a retail center, with inspiration from Apple stores and even Starbucks — where people get personalized service for individual and immediate needs. No longer is the branch simply a place for checking and savings account activity, and staff are no longer confined behind the counter but are out on the floor engaging with members.
“The branch turns into a place for life-changing experiences, like buying a home, planning for retirement or education, as opposed to simply being transactional,” he said.
As Fagan told Webster, trust and proximity are somewhat interrelated for a CU. As relayed in the CU Innovation Study, 68 percent of all CU members say they would choose a financial institution (FI) at least partly based on trust, while 49 percent would choose one based in part on whether it had a convenient branch location. This trust is further reinforced if CUs can adapt to and offer the right digital services – especially for underserved communities that have not typically been a focus for traditional FIs.
Beyond Muscle Memory
Achieving that goal may take time, said Fagan, as we move beyond the “muscle memory” of using plastic and gravitate toward using mobile devices instead.
CUs that best provide ease of use — the Study found that 80 percent of members will shift to another FI if their current provider fails to provide the level of personalized experience they demand — will deepen member relationships into the future. Other features and functionality, from alerts and controls to buy now, pay later solutions, are also top of mind for consumers. Additionally, Fagan said, we’ll see more focus on financial wellness moving forward, especially as we move out of the pandemic.
“It’s all about the experience — and the member wants ‘easy,’” Fagan said.