While digital banking services may have made its mark in the last few years, it strikes many as no surprise that membership growth in credit unions has been at its slowest since 2014.
Well, it’s not a fluke the slowdown coincided with a worldwide pandemic that just happened to necessitate a shift to digital banking. Credit unions, after all, have typically languished behind their revenue-focused bank counterparts when it came to digital adoption; per CU Rise research using NCUA data, more than half of credit unions achieved no results in implementing digital banking services from 2014-2018. Only about 5 percent of credit unions made significant progress in their digitization efforts with a digital adoption (DAS) score of more than 15 percent. Even for credit unions lagging in their digital adoption efforts, the upside in reaping the benefits by participating is huge. All credit unions with positive growth in DAS also had higher increases in both assets and members in 2018 versus 2014.
Instead, those credit unions continued to focus on such legacy principles as improved customer service, low fees, and enduring customer relationships. All of which, of course, are crucial to the credit union movement. But what credit union executives must keep in mind is that customer expectations are never static and always evolve.
According to a PSCU/PMTS study in February 2021, 31 percent of bridge Millennial credit union members would at least consider leaving their credit unions for competitors that offered more innovative products and services. In light of accelerated growth in digital technology and competition, it is imperative credit unions adopt digital banking assets to attract and retain members in the effort to build on their existing relevance in their communities.
Why updating your digital offerings is essential for your credit union
Dual influences are placing significant strain on credit unions to revamp their digital transformation efforts: increasingly changing member and customer expectations and a shifting financial services landscape.
The first influence should be obvious to all the members and customers who adapted to a more remote, or digital, work environment once COVID-19 advanced around the world and into their communities. We had no choice but to adapt and rely on digital platforms for our work, health care, financial services – even groceries in many instances! – and any number of other areas. A fall 2020 study found that eight months into the pandemic, 50 percent of consumers were employing digital banking tools and services more than they had been at the start of the pandemic. Even more revealing, 87 percent claimed they will continue to use those services when the pandemic recedes.
Concurrently, the digital expectations and upgrades consumers witness in other industries and culture as a whole will inevitably bleed into the financial services industry. Such technological evolutions figure centrally into today’s banking environment, an environment that grows increasingly dependent on credit unions of all sizes to adopt front-line digital services and fintech that will set themselves apart from their competitors.
Member research appears to be lending truth to those expectations. A report by Celerity found that 63 percent of leaders said the pandemic led business organizations to embrace digital transformation sooner. This shift, coupled with increased branch closures, has escalated the need for reputable and effective digital products and services available day and night.
If, after all that, you still don’t believe in the power and necessity of undertaking a digital transformation in your credit union, consider organizational returns. Meeting consumer preferences where they now reside – digital, mobile – will improve consumer and member experience. Keeping focus on a customer-centric culture has proven to make companies 60 percent more profitable than those who aren’t, per the BAI.
The benefits are also reflected through member retention and increased revenue. In a study from FiServ and Bank of the West quantifying the value of digital banking, the following results showed financial institutions experienced substantial increases in revenue generation, increased product holdings, lower customer attrition (less likely to leave the financial institution), with higher transaction activities.
4 ways your credit union can get the most out of your digital banking assets
There are many credit unions that have slipped in their efforts to begin their digital transformation journey. Here are four places to start focusing to ensure long-term success.
Concentrate on building out your digital foundation
Looking throughout the expansive financial services industry, you often see or hear about a great many financial institutions who are adopting the newest digital services tools or mobile banking solutions to address customer needs and demands. But they overlooked or failed to address the underlying digital architecture. Without a stable foundation, any building or structure is doomed. Same for implementing digital services; the expected worth and scaling will fizzle.
Your customers or members have priorities; deliver on them
Depending on any number of factors across various bases, discover what priorities your members expect for specific digital services. Account management may involve end-to-end account opening; security that includes instant account verification or even biometric authentication; Money management that includes financial wellness platforms or spending forecasts; Money movement with remote deposit capture; Self-assisted serving through in-app communication, chat bots, and video call support; Alerts can include customizable card controls, including mobile and wearable devices.
Hear your members’ feedback, and inquire regularly
The process of incorporating digital services into your credit union’s systems doesn’t happen overnight. Employ a mindset that makes it easier and faster to perform projects that help you build, optimize, and automate over time. Listen to your members and look for their feedback often to make sure the digital tools you have implemented are fulfilling their financial needs. From marketing and underwriting to customer service, use the data available to provide dynamic, efficient, and personalized service for an already finicky consumer base.
Ensure your partners’ goals and values are aligned with your own
You want to build long-term and robust relationships with your credit union’s partners – your mutual goals, cultures, and values aligned – while they provide continuous guidance. Your partners should be progressive and innovative, always thinking of the next step while taking advantage of the tech industry’s best practices. They’re malleable to customization, and open to feedback to any development that will help your organization move forward and evolve on behalf of your credit union members.
Today’s credit unions can no longer fully depend on in-person customer service to resist the advancement of digital banking in the age of digital transformation. And it’s only grown bigger due to the COVID pandemic. Competition from bigger financial institutions who are already adopting and building out their digital infrastructures only heightens the need for the credit union movement to adopt those same digital and mobile capabilities.
Many credit unions have indeed made the investment, and the benefits have been promising; benefits of which are becoming clearer and clearer as we continue to grow in 2022.