Navigating the Evolving Credit Union Landscape in 2024

The frontrunner CUs will prepare to capitalize on fluctuations in the economy, technology and regulations.

By Jody Bhagat | March 22, 2024 at 09:00 AM

Credit/AdobeStock

As we find ourselves nearly three months into 2024, several developments are shaping the credit union landscape faster than ever before. Greater member attrition, increasing digital migration, heightened regulatory scrutiny and the emergence of artificial intelligence are coming together against economic uncertainty. Credit unions face difficult prioritization in this fluid climate. One prediction seems sure: We'll see further divergence between top-tier credit unions and the rest of the pack over the next 18 to 24 months.

While most concentrate on driving efficiencies and cost reductions in 2024, progressive institutions are strategically boosting investments in critical capabilities for an edge. History shows this advantage can expand when competitors simply hunker down. What priorities should lead the agenda ahead? Here are four key areas credit unions should consider moving up on their priority lists.

1. Realizing tangible value from major initiatives.

Many credit unions have started on ambitious modernization initiatives across four areas: Data infrastructure, core system upgrades, digital platform enhancement or post-merger integration. For some, these resource-intensive undertakings are long-term plays focused on building essential competitive strengths over time. However, with mounting cost pressures, these complex attempts may demand that their efforts prove material, near-term returns that warrant ongoing expenditure. Credit unions should identify high-impact applications that can speed up the realization of benefits, re-evaluate transformation roadmaps for phased rollouts that extract value faster and combine them with operational efficiency programs.

Credit unions have to strike a balance between making progress on modernization while also demonstrating concrete dividends from early accomplishments. For instance, rather than rolling out a wholesale data transition over two years, credit unions could prioritize specific "use cases" based on a narrower collection of data assets. This generates ROI through better member intelligence while methodically strengthening the overall environment.

Leading credit unions recognize that transition for its own sake no longer cuts it. They have to maintain a sharp focus on step-by-step priorities that move them to modern systems while also fueling momentum through early wins.

2. Battling for deposits through member engagement.

The intense competition for core deposits is now a top priority for most credit unions. Rising funding costs, account outflows and thinning margins put institutions in a battle for any advantage to attract and retain deposits. However, promotional rates alone rarely work on their own anymore amid the current competitive landscape.

McKinsey research found two key demographics – young/high income and middle age/high income – account for over 60% of deposits prone to switching institutions. The former shows a switching likelihood 3x higher than the latter. Credit unions that understand and fulfill distinct member preferences can draw more deposits compared to rivals.

While pricing stays important, the focus should shift toward member engagement by providing customized solutions grounded in behavior and product innovation. Such personalization represents the main factors in securing future deposits.

Savvy credit unions engage members through tailored offerings – like "savings boosters" – that benefit both sides. Adoption of these tools can as much as double the credit union's ability to capture more wallet share through additional product relationships.

As credit unions empower members with more control through customized insights and tools, they build trust and loyalty beyond temporary rate incentives. The winners in this intensifying battle will be those that leverage rich member understanding to demonstrate they have each person's best interest in mind. Prioritizing engagement and trust now yields higher account balances later.

3. Journeys become the priority.

Members have many financial objectives, like increasing savings, reducing expenses or improving credit health. These goals evolve as people's financial situations change over time. These "jobs to be done" require more than a single move – they're a journey.

In 2024, credit unions will get better at identifying members' most critical financial journeys. They will then curate products, tools, trackers and content to quicken progress along those paths. Rather than promoting generic offerings, credit unions will facilitate members spelling out their goals and tailor solutions to streamline their achievement.

Of course this will be a phased approach, initially focusing on the top priority journeys detected. The key is coordinating across channels and products to smooth the complete trip. An added payoff for credit unions is heightened member loyalty and deeper relationships with those who allow the institution to assist them with these journeys.

4. Targeted proposals that showcase genuine personal value.

The era of bland, generic marketing banners is coming to an end. Today, members simply disregard credit union marketing banners, even with sophisticated back-end targeting. Even targeted banners on authenticated sites convert at around just 1%. Members feel credit unions are just trying to sell them something, so it's understandable that few people actually click them. The only real justification for using banners is that credit unions can display them at high volumes, meaning a small fraction of clicks still accumulates.

In 2024, we may see the inception of a new concept: Personalized engagement marketing. Credit unions can harness their knowledge of individual member transactions and behaviors to deliver personalized proposals that show precise personal savings based on spending habits. This is a big shift – fundamentally evolving the whole engagement process between credit unions and consumers.

This breed of data-driven personalization is an example of the future of credit union marketing. Leveraging the latest data and analytical capabilities, credit unions can put together targeted guidance that can foresee what members need. This tailored advice resonates not only because it comes from the member's own activity, but also because it's highly customized to the member's conduct and needs. Targeted guidance grounded in a person's behavior converts because it proves the credit union truly understands them and has a genuine interest in strengthening their financial life.

Looking Ahead

Credit unions face some tough choices in 2024. Compounding the fiscal strain is that these choices will have a lasting influence on a credit union's competitive stance and financial performance. Credit unions need to purposefully concentrate on their abilities that augment the value they provide members, and have that value be unique. Even with so much uncertainty, one thing holds steady – only slashing expenses won't suffice.

The frontrunners in this new credit union world will prepare to capitalize on fluctuations in the economy, technology and regulations. They'll cultivate skills not just to keep pace, but to refine their unique value. Credit unions that embrace change and original ideas can sidestep stagnation, even as fights escalate over deposits, trust and members.

With intensifying competition ahead in 2024, forward-thinking credit unions will prioritize building stronger member loyalty and service, expanding the gap with lagging institutions.

Jody Bhagat