BOSTON–New research suggests consumers are increasingly turning away from traditional financial providers such as banks and credit unions for core products and instead turning to other providers, such as fintechs. But those traditional providers still have some strengths, the survey found.
In a new report, “Credit Union Innovation: How Credit Product Rates Impact FI Selection,” PYMNTS Intelligence said it surveyed more than 4,000 consumers, 100 CU executives and more than 50 fintech executives to assess consumer criteria when selecting credit products, and how their decisions influence their choice of FIs.
The Findings
PYMNTS said the survey found:
- 83% of consumers indicated their primary FIs offer credit cards, followed closely by personal loans at 80%, auto loans at 79%, and mortgages at 77% — making up the top four commonly provided credit products.
- Comparing the range of credit offerings between CUs and other FIs, CU members more often perceived their primary FIs as providing a broader array of credit products, except for business lines of credit.
- 63% of account holders possess at least one of these four credit products with their primary FIs. Among these, personal loans and home equity loans emerged as the most prevalent, held by 67% and 56% respectively. “This could imply strong customer loyalty to primary FIs, potentially influencing decisions when rates and terms align across multiple FIs,” PYMNTS reported.
A Closer Look
“A closer look at the data also revealed that interest rates and payment terms are the most important factors for consumers when choosing an FI, and they are the primary reasons for account holders to switch to another FI with better offerings,” PYMNTS said in releasing its findings. “Credit union members (32%) were found to be more likely to switch accounts based on rates and terms compared to non-credit union members (26%).”
Aside from rates and terms, consumers also valued the speed at which funds become available after applying for a credit product. While credit unions have made significant progress in reducing setup times for many of their offerings, they still face competition from fintech companies, particularly in providing installment payment plans like buy now, pay later (BNPL) directly to consumers.”
According to PYMNTS, the study further revealed that although 75% of account holders stated their primary FIs commonly provide major credit products, such as mortgages and auto loans, consumers are inclined to explore competitive interest rates and payment conditions for these specific loans.
Seeking ‘Better Terms’
“Notably, 48% of mortgages and 41% of auto loans are sourced from banks or CUs distinct from consumers’ main FIs, suggesting that consumers actively seek better terms elsewhere, aiming to enhance credit affordability and save money by exploring alternate providers,” PYMNTS stated.
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