KOLOA, Kauai–The most frequent question asked of Co-op Solutions by credit union leaders, according to one company executive, is a common one: where should the CU should be investing?
For any credit union looking to grow, the answer is payments, because the vertical creates relevance, generates revenue, offers daily interaction with members, and fundamental to both a defense and offense strategy when it comes to members’/consumers’ embrace of fintechs, according to Samantha Paxson, chief experience officer with Co-op.
As Paxson and Co-op Solutions have done at other company events, the presentation included numerous insights drawn from the unique research it has done in conjunction with the Filene Research Institute (which surveyed credit union leaders) and EY (which surveyed 2,000 CU members and 1,000 non-member prospects). That research has now been running for three years.
The research has revealed an “opportunity” gap showing CUs are thinking about their needs in one way and members are thinking about their needs in another, said Paxson.
For credit unions, she said, it’s now about “embracing the new member centricity,” which is all about meeting members where they are.
Paxson said one key takeaway from the research that should concern credit union leaders is that consumers are increasingly comfortable looking someplace new for a place/solution to meet their needs.
Paxson again featured a chart, as she has earlier, showing which providers are their most trusted financial brands, with PayPal far outdistancing credit unions.
In response to that, Paxson said the question for any leader is what to do? In response, she cited a number of steps CUs can take to help members understand their financial position, including offering:
- Exclusive premium content to help manage financial plans.
- All financial products in one place and financial health advice
- Annual check-0up with financial advisor
- ID theft protection
- Access to certified financial planner in person
- Fraud detection and protection
Following those steps, Paxson said the research further shows CU should then implement the 10 actions shown below.
Weak Spots
For all their market dominance and 500+ growth rates in market share, they have a weak spot, according to Paxson.
“What fintechs have done is focus on transactional relationships,” she said, adding that leaves an opportunity for CUs in meeting member/consumer needs beyond immediate-term transactions.
But that doesn’t mean the threat shouldn’t be taken seriously, she stressed.
“Fintechs and big techs are really your competitors. They are slowly disintermediating those relationships,” Paxson cautioned.
Then there is the surprising weak spot in credit unions that was turned up by the research. As Co-op has previously revealed, consumers have indicated they don’t trust credit unions to meet their needs with the necessary tools, many of which are payments-related.
“We are in a battle, use case by use case, daily interaction by daily interaction,” said Paxson.
But payments offer the daily engagement to build trust and relationships,” she stressed again.
Indeed, consumers trust fintechs over credit unions to serve their digital payment needs and wants, while the perception credit unions can do the same has dipped 3% in new research, Paxson said.
The Credit Union Perspective
What’s on the minds of credit unions, according to Filene research?
- Earnings: Evolve the Risk
- Experience: Deepen Member Engagement
- Expenses: Manage the Infrastructure Transformation
- Decision-making: Capacity is limited. “This is overwhelming. There is so much change it can be really challenging. In doing the daily battle it’s really tough to look at the long game,” Paxson said.
Decline Seen
“What’s important about this is the payments relationship has been declining among consumers,” Paxson told the meeting.
The research found:
- 41% of members said they would consider leaving because products/services don’t meet their needs.
- 66% of consumers use some form of digital payments, but only 16% of members do payments directly with their credit union. “The opportunity here is huge,” said Paxson,
- Sixty percent of members who use digital services from their CU said they would increase the number of CU products they use.
Financial Well-Being
Paxson said no credit union can effectively help members in their financial lives if they lack the data on how those members are interacting.
“When you build that active relationships you are able to see how your member is behaving and then you can take action to make it better,” she said. “If we can show up for them in their daily lives we can really make a difference.:
To create active daily engagement with members to win market share, Paxson said CUs need to:
- Incorporate digital payment ot8ions
- Use payments to create daily constancy
- Enable daily and long-term financial wellness journey
To create financial transparency and help members take action, Paxon said CUs need to:
- Develop member data insights
- Utilize payments to deepen member relationship
- Enable member activation and top of wallet status.