By Ray Birch
RANCHO CUCAMONGA, Calif.—After fintechs saw explosive expansion over the last few years, credit unions are now poised for “massive growth” as consumers’ perception of service is swinging back their way, according to a forecast from PSCU/Co-op Solutions.
Carrie Stapp, SVP-marketing for the company, Solutions, told CUToday.info new research from the organization reveals in opportunity for credit unions, as consumers need help managing their finances as the drive to digital and the simpler and faster access to credit and purchases has overextended many household budgets.
“Where credit unions’ growth opportunity lies is in the engagement of their members,” Staap said. “When we talk about engagement, often credit unions interpret that in terms of ‘I need to e-mail members more. We need to have better in-person service models.’ And what we're really seeing in the data is all about that actual daily engagement.”
The ‘Iron is Hot’
Staap pointed out the new data show 45% of consumers say engagement is the number-one reason for maintaining a primary financial relationship.
“Our research also shows that credit unions are still leading the way when it comes to the traditional definition of trust,” she said. “They're still leading when it comes to data privacy security. The place where we’re lagging is in that digital engagement that leads consumers to financial wellness. We're good at financial wellness, but how do we connect that digitally with members? How do we enable financial wellness through these digital tools? That’s where the real opportunity lies.
“The iron is hot right now for credit unions to strike in that space, and strike a chord with consumers that are becoming more disenfranchised and more disaggregated in their financial lives and craving what credit unions offer,” she continued. “We have an opportunity to rebrand the entire industry around this movement of financial wellness and digital engagement.”
The Role of Payments
Payments play a big role in this effort, Staap said.
Carrie Staap
“It’s really being able to embed yourself in the daily lives of your members,” she said. “It's where we've seen fintechs and large national banks really winning out and where credit union growth had stalled.”
When the pandemic arrived in 2020, there was a rush to ecommerce and the entire digital experience, said Staap.
“And not just in banking, but in the way we do everything, the way that we make reservations, the way that we buy, the way that we shop,” she said. “All of this has completely changed. Even the way we consume data.”
Fintechs Benefit, But…
Co-op’s new research reveals just how much that trend has benefitted fintechs.
“From 2020 to 2022 there was enormous growth (500%) year over year in consumers saying that fintechs were their primary financial relationships,” Stapp said. “What's interesting is that in our 2024 research we are seeing a snap back to where credit unions are actually faring very well with consumers that we surveyed, saying credit unions are their primary financial relationship.”
…Credit Unions ‘Snap Back’
As CUToday.info reported here, that finding aligns with results from the latest American Consumer Satisfaction Index study, which shows consumers are moving back toward in-person service and that credit unions are benefitting from the shift.
“In our latest data we saw fintechs actually have negative growth year over year and credit unions stayed stable year over year. We've sort of stemmed that negative tide,” Staap said.
Stapp emphasized digital remains as important as ever with consumers.
“But, the data show, consumers started to find themselves spiraling out of control and not being able to understand what's happening with their financial picture. I'm swiping way too much. Subscribing way too much,” she explained.
Feeling the Effects
Staap further said consumers are now beginning to feel the effects of all that digital ease, due to inflation and “all of the temptations that are out there, with social media purchasing, all of the ways they can just buy, including BNPL. They're saying, ‘Wait a minute I actually need a provider that's thinking about my total wellbeing and is going to provide me with the tools to help me manage all of these conveniences.’ They want those conveniences to remain. But who's helping me with my entire financial picture?”
Where CUs, Community Banks Are Winning
Stapp said that’s where credit unions, and regional and community banks, are now starting to win.
“Consumers are saying these organizations are actually the people that are looking out for me, and are not just providing me a digital technology in a one-off scenario, like PayPal,” she said.
But to really win iin the current market and take advantage of this shift, credit unions must “lean into” the digital technologies that give consumers the everyday convenience they're looking for, but also find ways to digitally deliver financial wellness.
“How do we bridge that gap? How do we actually give them the overall financial wellness?” Staap said. “If we focus there and bridge the gap between these digital tools and financial wellness, credit unions are poised for massive growth.”
