For years, the banking industry has been in flux. The last two decades have seen massive consolidation, economic turmoil and changes in consumer behavior and expectations. The pandemic created radical shifts in the industry with more consumers using mobile banking, cash applications like Venmo and a striking move to a society that desires contactless payment methods.
Digital payments have now become the central access point for consumers to their primary financial institutions. For most consumers, the day-to-day relationship with their financial institution is solely through the use of their primary card. This is a fast-evolving challenge for all financial institutions.
At the same time, there has been a rise in the popularity of credit unions. Being member-owned, credit unions are more responsive to community needs and community engagement. Members can see that their money is being used in the community where they, the members, live and work. Many credit unions offer lower fees, better interest rates and a higher quality of service to their members.
What is giving credit unions an advantage is a legacy of customer service, and community empowerment and partnership. This is particularly true among newer generations of consumers – those born in the age of computers and fluent in the advantages of technology. But those newer generations place more emphasis on social justice, and the appeal of credit unions is their local focus and history of funding local businesses, local education, local homebuyers and local organizations.
And I would argue that credit unions are in a better position to retain member loyalty for what is coming next.
Though it was happening incrementally prior to March 2020, the pandemic accelerated a move to a society with consumers opting to pay for their purchases through digital payment methods. The primary reason for this is convenience and efficiency for both consumers and businesses. During the pandemic, especially during the hectic first months when science didn’t fully know or understand how the virus spread, cash usage fell to virtually zero. Once that happened, even in the first few months, people got used to only using cards, apps and websites to purchase, make payments on and pay for services.
Likewise, the bank branch of the future will provide a much more digital experience than it has in the past. Even today, the reasons to walk into a branch are increasingly rare since so much can be done virtually.
Both of these shifts favor credit unions. With more digital transactions, offering lower fee structures is essential for credit unions. Also, credit unions are focused on the individual, versus banks that are structured to focus on the institution. As a result, credit unions take on fewer risks while serving individuals and small businesses, as opposed to banks that primarily serve large investors. As credit unions have adapted and can compete with banks in terms of technology adoption, they are able to reach a wider consumer base and provide a legacy of high-quality services to a larger number of people.
Credit unions are also nimble enough to rethink the purpose of a branch location. Since credit unions are tied to the communities they serve, branches can become centers for community meetings, financial education, first-time homebuyer presentations or places where new businesses can make presentations to prospective investors. They represent a financially secure alternative for consumers, especially during difficult economic times.
In a quickly-changing world, credit unions have the ultimate asset for success: The ability to be versatile and responsive to member needs. As the leader of a payments company, I can see how credit unions have evolved and responded to extraordinary change in the financial industry. I can say with confidence that I’ve never been more optimistic about credit unions than I am right now. The opportunity for even greater growth is at hand. I can’t wait to see the industry seize it.
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