By Ray Birch
RANCHO CUCAMONGA, Calif.—Banks have overtaken credit unions when it comes to consumer perceptions of service. And now fintechs could be doing the same when it comes to consumers’ view of a trusted partner, which has been a long-time strength of CUs.
Just as consumers’ definition of service has changed quickly during the pandemic, moving away from being based on friendly face-to-face interactions to a much greater emphasis on digital and speed, so, too, has the definition of trust, data show.
“That big hug credit unions give their members, making them feel safe knowing their cooperative is looking out for their best interests, does not matter as much anymore,” said Carrie Stapp, VP of integrated marketing and commercialization for Co-op Solutions, referring to findings from a 2022 study of consumer preferences among credit union members and prospects. The report was conducted by EY and commissioned by Co-op Solutions.
“What trust means to consumers anymore is are you going to give them the financial tools to meet their everyday banking needs,” Stapp said.
The finding comes at a time when CUs—as CUToday.info was first to report—for the third year in a row have fallen behind banks when it comes to consumer “satisfaction” with their financial institutions in the 2021 American Consumer Satisfaction Index (ACSI).
Moreover, as CUToday.info reported more recently, younger consumers have a stronger preference for national banks than for credit unions, according to a new survey.
An ‘Evolution’
Carrie Stapp
“The data are really starting to show us what is happening, that consumers’ daily definition of trust is changing,” said Stapp. “It’s an evolution.”
What the Co-op study reveals is an even greater threat from fintechs than what credit unions likely initially perceived. The report reveals fintechs are growing much faster in perceptions of trust than credit unions and banks.
“In our data we saw fintechs growing at a rate five times faster than credit unions when it comes to trust,” Stapp said. “More consumers are starting to trust fintechs and see them as their primary financial services partner.”
Why are fintechs growing faster than CUs when it comes to perceptions of trust?
“Historically, when it comes to building trust among consumers, all financial institutions have been focused on the traditional definition—data privacy, security, do they have my best interests at heart” responded Stapp. “And all that equity for credit unions is still strong today. But consumers’ definition of trust is changing. Now, what has equal billing with that traditional definition of trust is bringing consumers the digital tools and products they need in their daily lives.”
How Fintechs are Doing It
Stapp said fintechs are driving trust by saying, “We're going to give people the tools they need and make their daily lives and financial services interactions so convenient. And then we will then build on that by proving we can also manage their data with security and privacy—and we're going to serve up the right products and services to them in the moment they need them. That's really the big difference now.”
According to Stapp, the most effective strategy for credit unions in responding is to focus on bringing the tools to members they use in their daily lives and making them very convenient. Those tools include card payments that are simple, new forms of speedy lending, buy now pay later, P2P, bill payment simplification and more.
“And it’s about using all the data I have on my members. It’s about being there while I am shopping, at the point of sale, being in the moment with me,” Stapp said. “Those kinds of things are what are truly driving my definition of who my primary financial provider is today.”
What the Data Show
Stapp pointed to data that makes the issue clear.
“Our proprietary research with EY shows that 66% of consumers use digital payments, yet only 16% of members do this directly with their credit union,” she said. “Moreover, 78% of respondents don’t expect their credit union to have the digital products that are right for them, and 41% said they would consider leaving their credit union because the products and services don’t meet their daily needs.”
Stapp reminded how the pandemic has changed consumers’ use of digital, noting that has likely played a role in the changing definition of trust.
“Seventy percent of consumers say the pandemic has elevated their expectations of company’s digital capabilities,” she said. “More than 60% of Gen Z, Millennials and Gen X always prefer digital services to in-person, and 50% of Boomers feel the same way. Only 26% of Boomers prefer in-person over digital interactions, demonstrating the massive importance of meeting the daily needs of consumers.”
A ‘Bit of a Disconnect’
Stapp emphasized that many consumers are now searching for the financial services provider that can bring simplification to a banking lifestyle that is becoming more disaggregated with all the new payment options and banking solutions available.
“I think there is a bit of a disconnect,” said Stapp about what members are thinking and CUs are doing. “Members want you to help them with their daily problems. Help them understand how they’re spending their money in such a disaggregated life they’re living. I'm not going to give up PayPal. I'm not going to give up Venmo. Those are avenues for me to make my payments. But there's nobody who's stepping in to really be that hub and truly saying I'm going to really look at the member and really lean in regarding all of this technology and help me navigate…They don’t trust that their credit union is going to be the one that will do this, but more consumers are starting to trust that the fintechs will be the ones that can.”