September 16, 2021

Panel: Credit Unions and Changing Banking Preferences (Part 3)

SEPTEMBER 13, 2021

Find the original article online here.

What is the financial technology narrative that will last beyond the pandemic? What tools and techniques ensure members have a positive credit union experience? How do fintechs enable credit unions to keep up with advancing technology and allow credit unions to compete for accounts?

In this final installment of a three-part virtual panel discussion focusing on credit unions and changing banking preferences, a trio of banking industry financial technology professionals offer their insightful perspective.


Karl Dahlgren, managing director of Chicago-based BAI, which provides in-depth financial service research.

Chris Doner, founder and CEO of New York City-based Access Softek, a pioneering company in mobile and digital finserv solutions.
Mickey Goldwasser, vice president of marketing and chief of staff at Glastonbury, Conn.-based Payrailz, which delivers smart and engaging payment experiences for the financial services industry.


Many tech companies are way ahead of the innovation curve when compared with small to mid-sized credit unions. How do these tech companies make sure they do not overwhelm these community financial institutions (FIs) with new products and services?


Actively seeking ways to collaborate with community financial institutions is one of the best ways to avoid overwhelming them with technology, Doner advised. “Again, community institutions understand the customer and they have the data insights at their disposal to enhance the relationship. Meanwhile, tech companies usually have cutting-edge technology that can help build these customer relationships.” Doner suggested, “Together, these two can create powerful services that not only increase member loyalty, but also make the FI much more competitive among both other FIs and tech companies who are against working with FIs.”


Doner said Access Softek’s approach is to have a powerful “out of the box solution” that will not overwhelm these community financial institutions, tied with a powerful programming tool that allows them to customize the solution to meet their specific needs.


“When financial services organizations and fintechs collaborate, they often bring innovative digital products to the marketplace,” Dahlgren maintained.


Dahlgren explained, “It’s the regional and large banks, with deeper resources and larger IT budgets, that are aggressively partnering with fintechs to enhance the customer journey.” He added that more than half (64%) of financial services organizations with less than $5 billion in assets said they are doing nothing on the fintech front, according to BAI research.


“Penny-wise, pound-foolish credit unions and small community banks are missing an opportunity to collaborate with a fintech, which often requires an up-front investment. This approach risks foregoing long-term dividends in the form of an enhanced customer experience that translates to a healthier bottom line,” Dahlgren said.


“The key to partnering with a tech company is finding the right one that fits your credit union,” Goldwasser said. The Payrailz vice president recommended credit unions look for a like-minded vendor that shares its values and understands its goals. “It can be overwhelming to be presented with so many different technology solutions available to your credit union, but the right vendor will connect you with the most useful ones and ensure they are tailored to work for your credit union and your members. As credit unions evaluate potential partners, they need to determine if a fintech is a friend that helps provide better member service or a foe that competes to serve the member.”


Everyone is coming for credit union members. Big banks, little banks, fintechs, venture capitalists, retailers, not to mention digital marketplaces like Amazon and Zillow. How can credit unions compete for accounts?


Dahlgren said, “It boils down to a question of trust.” He noted when BAI asked consumers in 2021 to rank their most trusted financial services provider, more than half (54%) said it was their primary finserv provider, such as a bank or credit union. The fintech PayPal was a distant second at 12%, followed by Apple and Amazon at 10% and 8%, respectively.


“The bricks and mortar of a branch provide consumers reassurance, especially amid the fear and uncertainty of a global pandemic,” Dahlgren said. “Credit unions and banks that provide a safe secure environment for customers, while providing them best-in-class digital and personal service, will carry the day against the growing field of competitors.”


Goldwasser emphasized how today’s leaders inside and outside the industry have convenience on their side. “The best retailers, the best banks and the best fintechs all offer services that make consumers’ lives easier. To stay ahead with consumers, credit unions must also add value and make members’ lives easier by offering the products and services they want and need. Beyond that, the most successful credit unions will be able to give members what they need before they even know they need it. Proactively helping members using tools like artificial intelligence and machine learning is and will be a key differentiator for credit unions.”


“Credit unions have credibility, access to member insights and a reputation of quality service. While many fintechs and retailers can scale quickly, credit unions can build better experiences,” said Doner. He emphasized credit union leaders can form relationships with individuals and provide more tailored and personalized service that is not attainable for non-industry players.


“Credit unions are trusted community institutions, non-profits, unlike fintechs and retailers, and actively seek to create positive interactions between members and the credit union,” Doner emphasized. “Bigger or new does not always mean better. With the right solutions, credit unions can stand up to non-industry players and succeed.”


Credit unions, like small community banks, enjoy the inherent advantage of customer intimacy, Dahlgren observed. “Much more so than the regional and large banks, credit unions get to know their customers on a first-name basis in the branch. Today’s mantra is digital first, but personal relationships are still a vital part of the customer experience, and credit unions must maximize that advantage.”


Dahlgren, echoing what Goldwasser said, added credit union leaders have another powerful tool at their disposal – customer data, which can produce powerful insights. “But credit unions looking to foster positive experiences must ensure the protection of customer data.”


As more banking has moved online, customers’ fear of fraud has increased. Consumers’ biggest concern is the security of the online banking channel. Dahlgren referred to a 2021 BAI consumer survey in which 39% said fraud and security was their top source of anxiety. Concerns about digital security span the generations, although it is more pronounced among Gen X (46%) and Boomers (52%) than younger consumers. Fear of becoming a victim of fraud was expressed by 34% of Gen Z and 28% of millennials.”


Dahlgren said, “Credit unions must not only be careful with customer data but savvy with it. Nothing bothers members like irrelevant product and service offers. Boomers have little interest in college savings programs, and Gen Z members are unmoved by annuities. Thoughtful, targeted product and service offers help build trust among members.”


For many members, financial services are a mysterious black box, Dahlgren conveyed. “Gen Z is often mystified by practices that are second nature to older members. Some boomers are baffled by digital channels that are all new to them.” He suggested financial institutions provide more guidance by leveraging one of traditional banking’s customer service strengths—face-to-face interactions in the branch.


“Financial services leaders that put their members at the center of everything they do with reliable, responsive service; scrupulous protection of their personal data; and smart digital tools will reap the rewards of a long-term relationship,” said Dahlgren.


When looking at all the competition in the payments space today, how can credit unions stand out?


“Credit unions are competing with more than just other banks and credit unions when it comes to payments,” Goldwasser said. He pointed out consumer apps like Cash App and Venmo are also competing for member’ payment activity and, as a result, their deposits. “Most payment app users leave funds sitting in their accounts and not in their primary checking accounts at the credit union.”


Most credit unions do not offer the same level of P2P and intelligent bill pay services that come from the consumer apps we see today, and that needs to change, Goldwasser pointed out. “If credit unions want to compete in the payments space, they need smart payment solutions that provide the same value that members are getting from outside apps. This will not only bring deposits back from outside apps but will also contribute to building stronger relationships between the credit union and the member by meeting all their financial needs in one place.”


Next up in the final installment of this three-part series: How do tech companies not overwhelm FIs with new products and services? How can credit unions compete for accounts?