Financial institutions (FIs) have spent many years researching consumers who are increasingly focusing on digital while striving to retain long-term customer loyalty. The pandemic adds urgency to both efforts as FIs seek to shake off the economic crisis, but research shows that some FIs, especially credit unions (CUs), still fail to meet financial expectations. their members in terms of innovation. Failure to provide the tools members want could prevent some FIs from reaching key demographics.
The stakes are particularly high for CUs. PYMNTS ‘February Credit Union Innovation Study found that failure to innovate was the most common reason members cited for being unhappy with their CUs. In fact, UC members are three times more likely than unhappy members to be unhappy with their FIs because they neglected to provide the latest technology. The study also found that 10% of all dissatisfied members say their CUs do not provide sufficient online banking capabilities, compared to just 3.3% of non-UC members who say the same.
It is even more dismaying that the problem appears to be getting worse, as a greater proportion of members said they were more dissatisfied with the lack of modernization of their CUs last year than they did in 2019. The results indicate directly the problem that CUs face: they need to meet better. their customers’ demands to satisfy existing members and increase membership, especially among younger consumers.
Attract young members
CUs are trying several strategies to convince young consumers, but recent data suggests they cannot rely on membership from children of existing members. Sixty percent of respondents to a investigation of more than 500 credit union members aged 65 and over, their children have chosen not to bank with their CUs. Only 9 percent of respondents had recommended their institutions to their children, although many of them had long-term relationships with their credit unions. The results of a separate FICO study were equally disheartening, with polls indicating that Millennials tend to end their relationships with CUs when they leave their parents’ homes. The study noted that about 20 percent of consumers under 25 use credit unions, while only 10 percent of those aged 25 to 34 do the same.
However, the situation is a little rosier when it comes to retaining members of the older generations. Sixty-eight percent of respondents to the investigation of members 65 and over reported having done business with their credit union for more than a decade, suggesting deeper ties and greater loyalty. The founder and CEO of a digital banking provider said that in order to generate such loyalty from young customers, UC would ultimately have to offer innovative products and services, such as real-time lending. and mobile-based investment solutions.
Another study out of nearly 700 FI customers found that the churn rate in the industry is expected to increase to 22% over the next few years, up from 12% before the pandemic. About 75% of those who indicated that they were interested in leaving their FIs for other institutions were Gen Z or Millennial consumers, further illustrating why it is important for credit unions to offer digital tools in plus competitive interest rates and lower fees which are considered features. from the experience of UC members.
Why good digital access is essential
Credit unions are known to focus on customer service, and members tend to be more satisfied than traditional bank customers. This does not mean, however, that CUs can rest on their laurels, as innovation remains a driving force behind members’ decisions to seek alternative FIs. This is especially true for the younger generations, with the Credit Union Innovation Study finding that 30 percent of millennials and 31 percent of bridge millennials UC members would be very likely to leave their credit unions for competitors with more innovative offerings.
Recent research also sheds light on what CUs need to do to meet these expectations. A investigation found that 79% of U.S. consumers believe that a full digital experience is a fundamental consideration when selecting an FI, especially during the pandemic. The choice of FIs that offer access to digital and mobile banking services is a particularly critical concern for customers, including over 84% of those aged 18 to 54. Young respondents also noted that UCs and banks need to replace branches with digital services.
PYMNTS ‘ Credit Union Innovation Study also highlighted a particular disconnect between the innovations that CUs launch and those that their members want to see. Seventy percent of CUs have invested in mobile banking capabilities, for example, although only 40 percent of members are interested. On the other hand, members’ interest in real-time payments innovations indicates an area of unmet demand as 29% of members are interested in these innovations, but only 15% of credit unions have invested in them. . These shortcomings show that reassessing and realigning their innovation programs to meet member needs could help CUs foster more loyalty and long-term engagement.
Another solution to keeping young members engaged could come from social media. Some enterprising credit unions following young consumers on their favorite social media channels, including new platforms like TIC Tac. Myrtle Beach, South Carolina Carolina Trust Federal Credit Union recently started experimenting with the platform with the aim of attracting younger members and reducing the average age of its member base, which is currently between 50 and 55 years old.
Digital innovation is the name of the game for credit unions, regardless of the demographics they aim to convince. However, they need to pay close attention to their strategies to make sure they hit the mark, especially when it comes to younger members. Deploying real-time payment capabilities, digitally driven engagement initiatives, and savvy social media outreach efforts could be what it takes to reach and retain these members for years to come.