By Frank J. Diekmann
The coronavirus pandemic of 2020 and 2021 may be forever remembered for the mask wearing, but what you and credit unions should be be paying attention to is everything the pandemic has unmasked. And that begins with a lot of assumptions and the fact at least one competitor is stealing something credit unions have always believed can’t be stolen—their DNA.
We’re all familiar with the new debates being hashed out as the world returns to “normal,” including around the permanence of e-service adoption, if members need branches, and (no doubt the subject of many a future doctoral dissertation), what is meant by “workplace?”
But here’s something else that has been unmasked by coronavirus: emerging truths and realities around fintechs.
Consider this example: A new study from J.D. Power has found trust in lenders actually increased during the past year and, perhaps even more surprising to many, traditional lenders actually outperformed fintechs in a number of critical areas.
The analysis was released as part of the J.D. Power 2021 U.S. Consumer Lending Satisfaction Study.
"To attract and retain customers, personal lenders need to deliver easy-to-use technology and adapt communication channels to market demands,” said Jim Houston, managing director of consumer lending and automotive finance intelligence at J.D. Power.
I think we can agree lenders have figured that out.
Key Findings
According to J.D. Power, whose research was based on responses from 2,467 personal loan customers and was fielded in December-February 202, here is some of what else it discovered:
- Customer Satisfaction Was Flat for The Personal Loan industry: Fintech lenders saw their overall satisfaction scores decline five points (on a 1,000-point scale) this year due to slower application approval times and tighter credit criteria. By contrast, traditional bank and credit card-branded lenders saw overall customer satisfaction scores rise four points this year, J.D. Power said.
- Trust in Lending Partners is up Year over Year. Consumers said traditional lenders significantly outperformed fintechs in putting the “customer first; in providing guidance; in being aligned with their social views; in providing honest communication; by treating people fairly, and by providing more reliable technology.”
- Easy-to-use Websites and Mobile Apps Gain Even More Importance. J.D. Power found fintech customers were more likely to use their personal computer to engage, while traditional lenders relied on mobile applications. No matter how they were accessed, secure and easy to use sites were high on consumer wants, as they “continue to compare site-use against all of their other web interactions.”
The E-Table Stakes
That last bullet point is one CUToday.info has reported on before. The pandemic has pulled back the mask on the reality that easy-to-use (think of Amazon and the apparently-I-just-ordered-something-I-really-didn’t-want one-click experience) and secure e-transactions more than serve the consumer; they are the new e-table stakes.
If your plan for 2022 even hints that everything will soon be back to the way it once was, you’re now wearing your mask over your eyes.
Acorns Becomes an Oak
Meanwhile, here’s another face from which the mask has been removed: a fintech called Acorns has grown into an oak by tapping into roots many in credit unions thought were theirs alone. And it’s using those roots to nourish a growing forest that’s beginning to cast a shadow
CO-OP Financial Services recently hosted a THINK Virtual Forum at which Noah Kerner, co-founder of Acorns, an Irvine, Calif.-based fintech founded in 2012 that now has more than eight-million users, shared his company’s approach. And if you think credit unions have dibs on the whole “helping people” thing, the company called Acorns thinks you’re the one who’s a nut.
When Kerner was speaking during the virtual presentation, it was easy to imagine you were listening to a credit union CEO talking philosophy and the growth that has come about as a result.
“Acorns is all about helping people stay committed (to their financial future,)” said Kerner. “We get actively engaged in people's lives. It started with our Roundup feature…and the reason that's important is because it's not about trying to change behavior, it's about trying to merge into someone's behavior and trying to leverage what somebody already does to help them. You are also helping them do something good for themselves, which is why the Roundup, investing the spare change, is so powerful. We're not saying skip that cup of coffee; we are saying have your coffee and the extra will get invested for you. It’s those little things, everyday behaviors, that will help you lead a better life and create a better future for yourself and your family.”
A better life. A better future. I dunno, but I feel like I recall reading something about those things being at the core of another industry’s “mission.”
Will Also Sound Familiar
Another key to the Acorns model will also sound familiar to credit unions, with Kerner saying the company is a big proponent of financial education.
“It’s about that idea of how do you help people actively learn and how do you educate people at the moment of decision-making?” he said. “In financial services, the concept of just having a product where people engage with you but may not understand the product without education to support it, in my view, doesn't work. So, we think about those moments, particularly when you think about investing: how do you actively educate people when they're making decisions.”
Kerner said Acorns’ growth clearly indicates the model of being very transparent with pricing and products, while also providing financial education, strikes a chord with consumers.
And hey, I’m not sayin’ a certain company looked to credit unions and pulled out their phone to shoot a photo of the business model blueprints so they could be used elsewhere, I’m just sayin’…
“Our level of trust has grown very much in the past few years,” said Kerner. “We have a high level of trust among our customers and we track it. It comes back to doing the right thing. We really have a high net promoter score—in the 95th percentile. We deliver responsible products and make sure people get education. Being on the right side of history, and doing the right thing, is just in my DNA.”
Get Back Onboard the Ark
Every time I hear credit unions fretting over their futures and whether they can compete in a changing world, it seems someone comes along (fittingly, in this case, a man named Noah) to point them back to the ark and what really matters to consumers.
Act in their interests. Be transparent. Keep it simple. Build relationships and trust. And you’ll more than survive the flood. Maybe it’s time to remind yourself of your own DNA.
Just don’t hide it behind a mask.
Frank J. Diekmann is Cooperator in Chief of CUToday.info and can be reached at Frank@CUToday.info. Mr. Diekmann is also author of a brand new book, “The Last Lyric,” a humorous satire about a murder investigation at the Rock & Roll Hall of Fame in which every line of dialogue is either a classic pop/rock song title or lyric. Available on Amazon, Apple iBook, Barnes & Noble and Smashwords.