Why Credit Unions Should Think Beyond the Branch

CUs should make smooth and comprehensive digital transformations a central priority in the coming years.

By Omar Jordan 

The digital banking experience. (Source: Shutterstock)

Credit unions are in the middle of a sweeping digital transformation that is fundamentally changing how they provide services and interact with members. The future will be built around automation, accessibility and the digital tools necessary to facilitate this shift.

What if credit unions shifted the resources currently allocated to maintaining their physical branches toward digital services? This change in emphasis will no longer be optional in the coming years. Consumer expectations are rapidly moving away from brick-and-mortar banking experiences and toward a much more streamlined, on-demand approach to managing money.

Although credit unions will always be people-focused businesses, there’s no contradiction between this fact and the digital transformation that’s taking place in their industry. In fact, failing to provide the digital resources that consumers are demanding is the surest way to disappoint members. While in-person banking isn’t going to disappear overnight, credit unions should make smooth and comprehensive digital transformations a central priority in the coming years.

Meeting Evolving Member Needs

The way people bank will never be the same: 78% of banked Americans prefer to do their banking digitally, while the proportion of consumers who have “no interest in branches at all” increased from 26% in 2020 to almost one-third the following year, according to PwC’s 2021 Digital Banking Consumer Survey. This shift is especially pronounced among young consumers, many of whom are digital natives who are accustomed to doing their business online.

To meet members’ shifting needs and priorities, credit unions have to digitize processes like account opening and loan applications, as well as providing digital features such as peer-to-peer payments, mobile check deposits, automated bill pay, and budgeting tools. Credit unions will also need to offer engaging and user-friendly digital experiences, the frictionless integration of physical and online banking, and flexible services built around each member’s unique needs and financial goals.

As their digital transformations accelerate, the most successful credit unions will conduct these transitions on the basis of the same principles that have earned their members’ loyalty over the decades: Transparency, convenience and a commitment to each member’s financial health.

Securing a Competitive Advantage

Digital transformation won’t just benefit existing members – it will also help credit unions identify and enter new markets, which is critical for sustainable growth in the coming years. An overreliance on physical banking is a severe inhibition for credit unions, as it limits member access and prevents institutions from casting a wider net for new members. There’s no reason for credit unions to have dozens of branches – all of which cost huge sums of money to run – when many of their core functions can be handled online.

None of this is to say the banking experience should be any less human: According to Capco, the majority of customers still prefer one-on-one conversations with bank representatives, for instance. The best way for credit unions to set themselves apart from their competitors is to provide all the accessibility and functionality of digital banking with the personal touch that has always been at the heart of their business model. And as long as branches remain part of their banking ecosystem, credit unions should blend physical and digital experiences (with features such as branch locators and appointment scheduling).

In the banking industry, credit unions have always offered a unique value proposition: Community-focused financial services that address each member’s individual needs more effectively than other institutions. Credit unions are especially attuned to the expectations and concerns of their members, which is why they have to provide the digital infrastructure that will help members manage their financial lives more efficiently and conveniently.

Deploying Technology Effectively

The digital transformation requires credit unions to thoroughly reevaluate their internal and member-facing tech stacks, which will likely necessitate significant investments of time and resources. This is where fintech can play a critical role. According to a 2021 Cornerstone Advisors survey of bank and credit union executives, the proportion who regard fintech partnerships as important for their institutions shot up from 49% in 2019 to 89% in 2021. These partnerships provide a level of digital functionality that allows smaller operations to compete with big banks and major financial institutions.

The more quickly credit unions can get through the growing pains of digitization, the more quickly they will be able to take advantage of the full range of benefits offered by the most innovative technologies in the sector.

The digital transformation will permanently change how credit unions engage with existing members and find new ones, but their essential ethos should remain the same: Meeting all their members’ financial needs with the highest level of service in the sector. Instead of demanding that members come to them, credit unions must go where members are – in the digital world rather than a branch down the street.

Omar Jordan

Omar Jordan is the Founder and CEO of the fintech Coviance (formerly LenderClose) in West Des Moines, Iowa.