By Ray Birch
RANCHO CUCAMONGA, Calif.—It’s time credit unions step away from being “passive” in driving member relationships and follow another lead from fintechs, according to Co-op Solutions.
Citing data from a new study, Carrie Stapp, VP of integrated marketing and commercialization for Co-op, told CUToday.info fintechs have now claimed the top spot in “active” consumer relationships.
That trendline comes at the same time CUToday.info has reported that credit unions have also fallen behind banks for three straight years in the American Customer Satisfaction Index (ACSI) study. The study’s data reveal the primary reason is digital—banks have used their deeper pockets to invest in mobile apps perceived by consumers to be better than similar credit union apps.
“Whereas credit unions are No. 1 in passive member relationships, fintechs have achieved the top slot in active relationships,” said Stapp, citing data from a joint research project commissioned by Co-op Solutions in partnership with EY and the Filene Research Institute.
The research looked at changes to consumers’ financial behaviors and their preferences and activities, as well as the challenges faced by credit union leaders over the past year.
Leaning into ‘Active’
“Active versus passive. It's important to credit unions to really lean into that active stance,” said Stapp. “When we talk about active, we're talking about being present in members’ daily lives. This is really about all the ways to do that.”
Stapp emphasized that credit unions no longer can put out attractively priced products and wait for members to react, the build-it-and-the-will-come approach.
Carrie Stapp
“Members and consumers are using their financial services throughout their day,” Stapp reminded. “So, at the point of sale, transferring money to friends and family, whatever it may be. The passive side of the house within financial services is more tied to those things that only occur occasionally—a loan payment once a month, a review of your overall financial portfolio...You are missing all of these opportunities to meet your members’ needs in their daily lives.”
Stapp said the products members don’t touch every day, such as a mortgage, which despite its significance in consumers’ financial lives, are waning in consumers’ reasons for choosing a PFI.
A ‘Real Threat’
“Those products that are more passive in their lives, those things that they don't touch every day, those used to be really important. Such as, ‘I made an important decision. I bought a house and I trusted this financial institution’,” Stapp explained. “Today, consumers are so much more active with financial services that are in front of them daily. How many times did I swipe my card? How many times did I buy something on Amazon. That has become a real threat to owning the primary financial relationship.”
For credit unions that have not yet recognized this important shift in consumer perception, they are missing a great deal, cautioned Stapp.
“If you're not there in those active payment relationships, you start to miss all of those signals,” she said. “All of those opportunities to be there in the moments that matter most for members and to be their next choice. Especially as point-of-sale lending is starting to grow, it becomes more and more and critical that credit unions lean into this and understand the importance of being present daily as an active piece of a consumer's life.”
Growing Recognition
Stapp believes more credit unions each day are recognizing the need to be more present in members’ daily lives.
“I think that they're starting to really see this,” she said. “I think the challenge they come across is that much of their revenue models are built around lending,” Stapp explained. “So, these active relationships, and the revenue associated with them, don't always automatically replace that. For the credit union it then becomes a balancing act with their resources and expense base.”
She said this shift has left many credit union leaders wrestling with a host of questions.
“For example, how do I invest in all this when I'm struggling with talent and my expense base,” said Stapp. “I think what they're struggling with is how do I do it. And I think they question how they are going to compete with fintechs that are building all of these new things.”
What It’s Not About
When credit unions ask Stapp that question about competing, she said she responds by telling them it’s not about disrupting all of the digital tools members are utilizing, like PayPal or Venmo or Apple Pay or Amazon Pay.
“It's not about that,” she explained. “It's about being the hub that brings all of that disaggregated financial services world into an aggregated environment and making sure you're the payment behind it all. For example, if a member is using Apple Pay, I need to make sure that my card is the one that's funding that transaction through Apple Pay. And if you're not the payment source, then you're likely not going to be the source of the deposit, right? And then you, at best, just become a pass-through.”