The COVID-19 crisis swept across the world and devastated lives and many parts of the economy. Add that together with swift alterations in consumer and credit union member behavior, and the result turned into a historic hurricane of change that has fragmented members’ financial relationships.
New findings, published in the “CU Payments Outlook” research, which was conducted by global consulting firm EY and commissioned by CO-OP Financial Services, revealed that the pandemic accelerated a years-long trend of consumers’ disjointed relationship with their financial services provider. In this study of 3,000 credit union members and potential members, the research revealed that 88% of credit union members are currently digitally engaged with their financial services provider.
But there’s a problem, because those primary financial relationships (PFRs) are not necessarily with a credit union. What the research found was the relationships are mostly being created with fintechs.
The fintechs are built under the premise that they can act faster and adjust their service models quicker than traditional providers, such as credit unions. The research indicated that reimagining payments strategies could be the key for credit unions to gain back ground to meet member demands.
“There is a great opportunity for credit unions to build on their trust and gain more member engagement and growth through a strategic focus on payments,” Todd Clark, president/CEO of CO-OP, said. “That is why CO-OP is investing heavily in an advanced digital ecosystem that helps credit unions bring elegant, personalized payments solutions to market quickly in alignment with post-pandemic expectations.”
The research found that payment products such as P2P and mobile wallets are at the core of the transactional relationships members and consumers are looking for. The research said that “payments represent 80% of a consumer’s interaction with their financial provider.”
In fact, when it comes to payment providers, PayPal ranked highest for credit union members as the most trusted brand, and their own credit union ranked second.
Researchers said this trend of trusting fintechs and other digital payments providers over what credit unions can offer will continue to grow unless credit unions reenergize their payments strategies for today’s consumer.
“Nearly nine in 10 credit union members are now completely comfortable meeting their financial needs via digital channels, and notably, with non-traditional providers,” Financial Services Digital & Customer Growth Leader at EY Americas Nikhil Lele said. “A lot of this is due to COVID-era insistence on remote, contactless and friction-free financial services. Consumers saw how quickly businesses can pivot to digital when they’re motivated. The resulting expectation for rapid, on-demand innovation is here to stay.”
According to a statement from CO-OP Financial Services, the survey data supported the strategic concept that payments will be the path to primacy. Some of the findings included:
- Among current credit union members, just 34% have contactless payments with their credit union, while 45% have it with a fintech provider.
- Thirty-one percent of members use P2P payments with their credit union, while 44% use P2P payments from a fintech provider.
- Just 29% of members use their credit union’s mobile wallet as compared with 43% that use a fintech’s wallet service.
“Being intentional about payments strategy calls for credit unions to consider the lifestyle of a member or prospective member, and that is a significant mindset shift,” Samantha Paxson, chief experience officer for CO-OP, said. “For decades, financial institutions – from major banks to small cooperatives – have been focused on the key milestones along a person’s life. While being there for life stage moments like buying a house is still important, it is no longer enough to cement PFR. Credit unions can gain significant market share of both members and prospects by investing in and offering lifestyle banking products, payments chief among them.”
Download and read the full report, “CU Payments Outlook,” here for free.