How Credit Unions Are Driving Successful Banking
In 2020, we experienced a black swan event, something seemingly improbable, yet enormously far-reaching in consequence. A global pandemic unexpectedly and fundamentally changed our view of the world. It changed the way we do things, including how we bank. We saw radical shifts in the industry with bank customers transitioning into primarily using mobile banking, cash applications like Venmo, and contactless payment methods. Coming out of the pandemic, more community financial institutions have moved towards having less physical branches, fewer in-person services, and by-appointment only banking.
Today, consumers look to digital payments, mostly using cards, as the essential way they access their financial lives. It’s how they connect to their primary financial institution, through the regular - almost daily - use of their cards. As digital payment methods have become a mainstay, a circumstance that was accelerated by the pandemic, their use has led to increased efficiency for both consumers and businesses. We are moving more towards a society that favors contactless payment methods in many aspects of our lives and credit unions are set to benefit from this continued transition.
With these changes, I would argue that the loyalty from their members places credit unions in a better position than traditional banks for the future development of the financial services sector.
For many Americans, switching banks is viewed as a hassle with little apparent upside. However, credit unions have seen a rise in popularity, with more consumers opening new accounts. In the future, banks and credit unions will be much more digital and there will be far fewer reasons for members to visit a branch in-person. This presents a prime opportunity for credit unions to step in as leaders in this field as more services become primarily digital.
The shift to more digital or app-based banking offers credit unions an opportunity that national banks don't have. With digital transactions, credit unions have the ability to offer lower fee structures to their customers, enabling them to personalize their service to the customer rather than taking a broader approach as a bank would. Credit unions also take on fewer risks than traditional banks with their large investors, so members have a better peace of mind when it comes to trusting a credit union with their accounts.
Being rooted in their communities, being community focused, and supporting local businesses gives credit unions a greater sense of permanence. As the credit union branch evolves in the future, I believe we will see branches become community centers where financial education, public meetings, and community events will take place next to regular branch functions. In my experience, we are already seeing early advances in this direction, and I think this will continue.
I would offer one additional advantage that credit unions have. We have seen a rise in consumers demanding hyper-personalization and consumer-centrality in their banking experience. The new age of rapid and instantaneous services led consumers to have expectations of getting what they want, when they want it. I believe that credit unions, which have always been member-focused, will benefit from this trend.
Credit unions have always been attuned to knowing their members, both consumers and businesses, and providing the services they need. Being member-owned and responsive to community needs, credit unions have always offered personalized approaches to personal and business financing. In a very real sense, macro shifts in consumer mindsets are favoring credit unions. Moving forward, credit unions would be very wise to double down on their natural inclination to get personal, as that is what they have proven to do best.
Credit unions do not have to fear falling behind in technology to large national banks. As the CEO of a company that has offered electronic payment solutions and services to credit unions for 25 years, I can assure you that the technological revolution in banking is something that credit unions can compete with and win. Married to a determination to offer high levels of personal service, I see core values that well position credit unions for the future.
High quality, personal attention and service has been credit unions’ greatest advantage to success to this point. If credit unions hold to that course and invest in the technology and digital access to meet consumer demand, greater success will follow.
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