Leaning In: Credit Unions and the Fintech Revolution

male profile over top of financial charts
Jeff Chambers Photo
Lumin Digital

4 minutes

As financial technology companies innovate and influence consumer preferences, how should CUs respond?

Sponsored by Lumin Digital, a PSCU company.

To compete and succeed in this ever-evolving and changing financial marketplace, credit unions must continue to push themselves to think and act differently. Fintech companies across the payments industry are continuing to influence consumers’ preferences and financial decisions, in turn impacting the way credit unions, banks and other financial institutions deliver services and offerings. 

For credit unions, to not only keep up in the fintech space but to capture the opportunities these changes provide will first require understanding the trends in the market landscape and how those changes are shifting member preferences. Here are some jarring examples of the changing marketplace and consumer expectations:

•    According to a December 2018 study by Javelin Research & Strategy, consumers are interacting with their financial providers through digital channels three times as frequently as they are in-branch.
•    Sixty-nine percent of consumers do not understand compound interest and more than 78% live paycheck to paycheck (according to CareerBuilder), pointing to a population base that is less savvy when it comes to their personal finances.
•    More than 87% of millennials do not know what a credit union is and nearly 45% feel credit unions are less focused on digital than larger banks, according to a May 2019 article by Credit Union Journal.
•    Findings from a January 2018 Epsilon report indicate personalization is extremely important to 90% of consumers.

To keep pace with audience needs and preferences, credit unions must focus on building digital experiences that address these market shifts and continue to provide guidance and value. Specific considerations include:

Extend personal relationships to online channels: One of the major reasons members have been attracted to credit unions is because they are made to feel like they are more than just a number. Yet, positioning themselves as valued financial advisors is often easier with in-branch interactions or even phone calls. However, creating digital experiences that feel friendly and helpful, while still offering access to the offerings and capabilities members expect, is very possible. This allows a credit union’s digital experience to become an extension of its brand by treating members with the same values they have come to expect from their trusted financial partner. 

Combine personalization and education: Consumers today expect personalization, and credit unions have a unique opportunity to leverage this expectation to their advantage. Credit union offerings should support a member’s understanding of his or her financial choices in a personalized way. Personalization can be achieved through many channels and does not always need to be overt. Google Maps and Waze, for example, are two companies with mobile apps that seamlessly utilize personalization to make a user’s experience more simplified and streamlined without necessarily calling attention to the information they are collecting and using to make this happen. Combining personalization and education is an extremely powerful tool credit unions can use to help stay on par with big banks, fintechs and other providers. 

Leverage experts and best practices: Fintech funding rose 120% since 2017, according to Bloomberg, giving fintech companies ample resources to invest in new technologies and advancements to better provide consumers with the services and offerings they expect. Fintechs are currently seeing success in three main areas: personal lending, digital money management and person-to-person (P2P) payments. Credit unions should evaluate competitor offerings and consider experimenting with these new products and services to determine if a more formal partnership might address credit union challenges and member needs. 

Credit unions are poised to not only offer personalization and education to their members, but can also utilize partnerships with select fintechs to further their offerings to better meet shifting consumer needs and expectations--quicker than they might be able to on their own. All signs point to fintechs being here to stay. Learning to embrace and work alongside them, while tapping into fintechs’ technologies and best practices, will help credit unions stay relevant and better compete with big banks and other financial institutions and cement their relationship as members’ trusted banking partner.

Jeff Chambers is president of Lumin Digital. He has an extensive background in the banking and credit union industries. Prior to Lumin Digital, he served as COO of Alkami Technology and VP/global product management of ACI Worldwide. Lumin Digital, a PSCU company, provides members of PSCU Owner credit unions with a tightly integrated and customized experience that rivals the offerings available from the big banks.

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