This modern approach to ‘People Helping People’ occurs when members are most in need of a trustworthy lending option.
Finding the right strategy for growth is a challenge for many credit unions today. According to the most recent data from the NCUA, annual membership growth hovers around 4.4%. And credit unions often struggle to reach younger consumers who have a lifetime of financial needs ahead of them. Despite the median age of U.S. consumers being 38, the average age of credit union members is 53 in North American, according to 2020 data from the World Council of Credit Unions. The majority of millennials (68%) prefer to do business with larger, well-known banks like Wells Fargo, JP Morgan Chase or Bank of America or nontraditional financial institutions and fintechs like Chime or SoFi.
Credit unions often lag behind national bank brands and digital banking alternatives because of one shortcoming: the failure to connect with a more modern digitally-minded consumer. This is not only because CUs can’t compete with the marketing budgets of bigger brands, but also because they rely on less modern tactics to acquire new members across the demographic spectrum. Because of this, credit unions’ superior suite of services are less often presented as a financially positive alternative to prospective members.
Word of mouth and brand reputation fueled by local events and direct marketing have proven successful in the past, but they aren’t enough to acquire the next generation of members. This is the case for both younger digitally savvy generations as well as convenience-centric consumers across all demographics whose daily lives and digital habits shifted and accelerated significantly during the pandemic.
Creating change starts with demonstrating how credit unions can help support the needs of an expanding digitally native population. Credit unions often have the most competitive rates in the market. The key is finding a way to place them in front of broader demographics, giving more people easy access to information and opportunities rather than forcing them to proactively find local credit unions for loans. Credit unions need to discover new ways to level the playing field and meet consumers at their time of need and preferred experiences.
Embedded finance is the answer.
Embedded Finance Helps Consumers at the Point of Sale
Embedded finance is second nature for today’s consumers, whether it be in the form of an e-commerce merchant providing insurance, a coffee shop offering one-click mobile payments or a department store’s app combining checkout, delivery or pick up. Credit unions can embrace more flexible fintech partnerships to get in front of consumers throughout their digital day, across every shopping and commerce experience big and small. This will allow them to compete on new levels, attracting both younger and older demographics with local, competitive and advantageous offers. Embracing embedded finance means that credit unions can acquire members and book loans by being embedded in any consumer experience imaginable.
A consumer looking for a house on Zillow might benefit from seeing competitive mortgage offers they are already pre-approved for from credit unions in their local area. A consumer shopping for a new vehicle, researching solar panels or other major purchases, could benefit from seeing financing offers at the exact point of sale within another brand’s digital experience. Armed with that information, consumers can make healthier financial decisions, and credit unions have the opportunity to leave a very positive first impression.
The credit union consumers choose from their list of embedded offers will benefit from acquiring a new, credit-worthy member they wouldn’t otherwise have had access to, paving the way for a broader financial relationship in the future. This shift in acquisition strategy also brings credit unions’ traditional strengths of service and community trust directly to the younger generations when they most need it, which will prove especially valuable as these consumers move through their prime spending years.
Embedded finance is people helping people—one of the central values of credit unions—but with a modern twist.
It’s a win-win for everyone involved. According to Plaid, 88% of companies that implement embedded finance report increased engagement, and 85% say that it helps them acquire new customers. This modern approach to lending can change the game for credit unions, helping them serve the new faces of their local neighborhoods. They will also increase loan volume, elevate their brand and better compete with fintechs and other financial institutions targeting their communities.
Credit unions need to change as consumers change, this much is certain. If credit unions cannot serve the needs of younger people by keeping up with their changing digital habits and technology, they will miss out on serving the next generation of banking consumers. And if credit unions don’t stay in front of the changing financial needs of older generations—we’ve added an extra thirty years of living during the past hundred years alone—they’ll miss out on some of the fastest growing segments for consumer loans. The choice is pretty clear.
Embedded finance offers a reliable, efficient and cost-effective solution, enabling credit unions to deliver faster, more seamless and more personal experiences to all consumers at their exact time of need through their most preferred channel. This will breathe new life into the credit union’s business model and will power long-term growth.
Creating value for your communities and new members? That’s just the credit union way.
Dave Buerger is co-founder and CEO of fintech startup Union Credit, the first marketplace for credit unions to make firm offers at the decision of purchase. He previously co-founded CuneXus, where he served as CEO for over 15 years, and has worked within the credit union movement across several decades. Buerger's companies focus on providing consumer lending automation and loan acquisition technology to financial institutions and have been recognized for excellence in fintech innovation by organizations such as NAFCU, KPMG, Fintech Breakthrough, American Banker, LendIt (now Fintech Nexus), and more.