The value proposition of the credit union (CU) is changing.
The sector has always been known for its member-centric “people helping people” philosophy. That part hasn’t changed, although the personal touch now is handled less frequently within the physical branch.
It comes down to experience. Members are looking for a partnership, for someone to give them trusted advice and help them make good decisions throughout their financial journey. Even though the format is shifting to digital, that partnership is increasingly being found with CUs.
As PSCU Managing Vice President of Digital and Data Jeremiah Lotz told PYMNTS in an interview, consumers are shifting ever more deeply into the digital space. They want to get what they need, when they need it — in terms of all financial services and payments — but they need some guidance along the way. As noted in PYMNTS’ April Credit Union Tracker, the National Credit Union Administration (NCUA) estimated that 378,000 new members joined U.S. CUs in January, up 2 percent year over year. At least some of that growth is due to the desire for financial guidance.
And the CUs themselves are forging partnerships with other providers in a bid to bring end-to-end services to their members. More than half of CU members, the Tracker found, are using credit products offered by competitors.
“Partnering up with technology providers to provide a range of services is huge when you look at the numbers [like the membership growth],” Lotz noted.
CUs, not surprisingly, want members to keep their CU cards top of wallet. Thus, the CUs are examining how they can partner with FinTechs, the digital-first firms that have made it a practice to go direct to consumer, leveraging multiple cards and accounts as part of daily life.
The advantage of partnering with a credit union service organization (CUSO) is the scale it provides, allowing CUs to have a competitive advantage by partnering with a FinTech and not just competing against them, according to Lotz.
Amid those technological shifts is the rise of contactless payments. PSCU’s transactional data revealed that contactless debit and credit transactions more than doubled from January 2020 to March 2021. However, a PYMNTS study also found that CUs are working harder to extend emerging payments solutions.
CU members’ desire for contactless payments is undeniable. That trend started well before the pandemic, said Lotz, as evidenced by the way we work with our devices, the way we’ve been purchasing at the point of sale (POS) in stores, and even the way we’ve tapped to pay along the daily commute.
The merchants that have yet to enable contactless payments will have to modernize their hardware and software in order to meet consumers’ expectations. Lotz noted that over 98 percent of POS devices shipped out today are enabled with contactless functionality.
Drilling down a bit, the changing expectations are borne by a consumer demographic that is skewing younger and more tech-savvy, especially Generation Z and millennials, who are shopping online more than ever before.
“Digital is a prominent way of communicating with all consumers, but especially these generations that are going to become the primary ones,” said Lotz.
CUs will have to make things easy and convenient for members. But that means CUs have to streamline their own interactions with core providers, digital platforms and payments providers — and platforms like PSCU’s own Lumin Digital can make those partnerships possible. PSCU also allows CUs to provision and issue cards digitally through its digital issuance offering, enabling CU members to continue to transact even before the physical card arrives.
According to Lotz, CUs as a whole understand preferences and personalization, and they understand that members, regardless of their age, represent an opportunity to create new relationships and new experiences.
“Seeing that digital shift happening means there will be adjustments and opportunities quickly coming for new functionality,” Lotz said. “It’s important for credit unions to take advantage of that and to integrate these features to market quickly. It’s important for their survival and for them to get interest from younger member segments.”