WASHINGTON–The bad news: Fintechs are winning (500% growth over two years) and credit unions are losing market share, as the data make clear. The good news: Credit unions have the capacity to change, re-capture share and help not just themselves but members, according to one person.
Speaking to the Underground Tik Tok meeting sponsored by Mitchell Stankovic here in remarks themed “We Can Do It,” Samantha Paxson, chief experience officer with Co-op made the argument that while loan volume is important, the real value that credit unions must unlock can be found inside payments and payments data.
“We are not only leaving income on the table, we are leaving service on the table,” said Paxson. “The average CU member has five different financial relationships. So, when we think about how we are engaging and interacting with those members, how does that happen?”
The answer, said Paxson, lies in actively managing debit and credit transactions to help members in their financial lives.
Beyond the ‘Lagging’ Numbers
“How do we best guide members to live their best financial lives if we don’t understand their daily interactions?” Paxson asked.
She noted that as a CU board member herself much of the time at the monthly meetings is consumed by the loan numbers. But those are “lagging” numbers, she added, saying the future calls for a “more balanced approach.”
“The battle today is in the member journey,” Paxson said, pointing to three rapid market shifts taking place: the change in needs, change in expectations, and change in interactions. “The way you win today is in the way you engage with your members.”
Citing research Co-Op conducted with EY in 2020 and 2021 with EY, Paxson said a side-by-side comparison revealed a “giant difference” in one statistic that came from a survey of 3,000 consumers (2,000 of whom were CU members).
That big difference? The pace at which PayPal has become the “most trusted financial relationship” in many consumers’ lives. The survey offered dozens of insights, she added.
“The way PayPal is winning is, firstly, they are helping members to understand their financial lives,” Paxson told the meeting. “The next 10 things, which are helping them to win share, were about helping to take action on those things.”
What to do Differently
What should a credit union be doing differently? Leveraging their data, especially around card spend.
Paxson said the research revealed that if members have a clear picture of their financial lives they can grow their business 2x among exiting members, and 2.3x among prospects.
“It’s an incredible opportunity,” said Paxson. “We just saw in our most recent research we could grow 4.9-million members in three years’ time if we just put the focus on the day-to-day lifestyle of our members.
“Payments is the place where we can make that happen,” Paxson continued. “It’s the place where members are moving their money. They need to pay for things. Everyone needs access to credit, to debit. This is where people are engaging digitally. Do you have a payments leader on your executive team? Are we just looking at things through the product lens, or through the holistic member journey lens?”
Challenging Assumptions
Paxson challenged credit union leaders to also rethink some of their assumptions, pointing to research conducted in conjunction with Filene that found some disconnects between what CU management is thinking about and what members are thinking about.
“You are thinking about earnings, expenses and experience,” said Paxson. “And you’re saying the way to get there is loans. But members get a loan once every five years. Members need you every day. How do we show up for members every day? You do that when they order an Uber, when they buy on Amazon Prime, when you can give them the advice they need. You have the data.”
Paxson cited data showing fintech providers grew more than 500% over the past few years at the same time credit unions lost 3% member share. Moreover, for three years in a row the American Consumer Satisfaction Index has registered a decline in member satisfaction with their credit unions, said Paxson, saying the data reflect a consumer belief credit unions can’t deliver digitally. “And then all of a sudden you are disintermediated.”
Thinking Holistically
But Paxson said there are also reasons to be optimistic.
“I know I sound like Debbie Downer, and I don’t mean to,” she said. “We can do this. We have to put our attention on digital, on payments. It isn’t just that we are growing income, we are growing service, we are growing share. We can be the most essential provider in the financial services space for years to come. I know we can do it
“I think we can grow and I think payments are the place to do that, digital engagement is the place to do that, and financial wellness is the place to do that. This is built into our DNA as credit unions. We need to think about our business holistically.”
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