Credit unions (CUs) shuffled off a somewhat lackluster image decisively since early 2020, and along with their credit union service organization (CUSO) partners are now joining the vanguard of digital innovators shaking up that sector and bringing it forward with speed and scale.
PYMNTS’ July 2021 Credit Union Innovation Study done in collaboration with PSCU surveyed over 5,200 U.S. consumers along with 100 credit union decision-makers and 50 FinTech executives in Q2 to uncover innovation agendas and look for areas needing improvement.
Among findings that stand out, a notable one involves the reasons that consumers choose certain financial institutions (FIs) over others. Researchers found, not unexpectedly, that fewer consumers now select FIs based on branch footprint. “Consumers’ consideration of physical branches has dropped lower,” per the study, as 55 percent of all consumers “now say they choose where to bank at least in part because of convenient physical branch locations — a majority, but 17 percent less than the share that said the same just two years ago.”
That’s just a sampling of the insights contained in the latest Credit Union Innovation Study, conducted at a critical moment in the lifecycle of CUs, CUSOs and consumers alike.
Loyalty, Security And Digital Products Win The Day
With trust replacing branch presence as the most common factor weighing on consumer decisions on where to bank, that brings other considerations to the forefront for CUs.
According to the July Credit Union Innovation Study, “The number of credit unions investing in digital innovation has dramatically increased over the past two years, especially in four key areas: loyalty and rewards programs, security and authentication, customized product offerings and planning and budgeting tools. The share of CUs investing in customized product offerings, data security and authentication capabilities and planning and budgeting tools all more than doubled between 2020 and 2021, and the share investing in loyalty and rewards programs has increased 27 percent over the last year.”
CUs are also putting money and effort into contactless payments and voice assistants, “with roughly 42 percent and 27 percent doing so, respectively,” per the study.
This is leading to some of the highest member satisfaction figures seen by CUs in a while. “Eighty percent of all CU members now say that their CUs are implementing innovations ‘somewhat’ to ‘very’ well — up 3 percent from last year. This is also the fourth consecutive year in which members have grown more satisfied with their CUs’ innovation levels: Overall satisfaction has increased 6.5 percent since 2018,” the study states.
CU Innovations Efforts Create Spike In Satisfaction
The expense and effort of a rapid digital transformation among CUs is in part designed to stem the flow of members away from CUs and into the arms of the many alternatives available.
As the Credit Union Innovation Study states, “Members’ willingness to switch FIs correlates with reduced satisfaction with their CUs’ abilities to bring new products and services to market. Members who report feeling ‘somewhat’ satisfied or less with their CUs’ innovation levels are 80 percent more likely than ‘very’ or ‘extremely’ satisfied members to say they would at least consider switching FIs over innovation.”
The finding puts digital innovation for CUs and CUSOs in a more urgent light, but the good news is that their work is paying off in higher satisfaction levels and fewer defections to other FIs.
Noting that “very” or “extremely” satisfied members “are 54 percent more likely to say they value CU innovation but would not switch FIs over it than members who are only ‘somewhat’ satisfied or less,” the study concludes that “this shows just how far innovation can go in helping credit unions maintain the trust they work so hard to build among their members.”