How Credit Unions Can Embrace Innovation On a Budget
When it comes to banking and financial products, the average consumer has no shortage of options. From large national and community banks to credit unions (CUs) and emerging fintech firms, everyone is vying for the attention and dollars of your current members.
According to the banking research firm Raddon, an increasing percentage of ever-important Gen X and Millennial cohorts are choosing big and megabanks as their primary financial institutions. For instance:
- The percentage of Gen Xers who said a big bank was their primary institution increased from 38% in 2018 to 47% in 2020.
- And the same goes for Millennials, increasing from 52% in 2018 to 68% in 2020.
The good news is Rivel's database suggests greater numbers of bank customers (31%) are considering switching when compared to credit union members (21%). The better news is 64% of households say they would at least consider a credit union. And the best news is there are several ways your credit union can position itself as the prime landing spot for potential members. Here are a few ways credit unions can do just that without breaking the bank.
Understanding the Core Reluctance to Embrace New Tech
As member-owned, not-for-profit organizations, credit unions are inherently viewed as more trustworthy and less likely to engage in predatory lending practices. While this equity has always been a differentiator for credit unions, it's no longer sufficient as a standalone feature. That is, not while big banks and emerging fintech firms offer the latest and more sophisticated financial tools.
In an attempt to keep pace, some credit unions are relegated to stacking new technology on top of existing systems. This disjointed approach is notorious for haphazardly causing a poor user experience, unnecessary costs, and churning members. More so, when new solutions are simply stacked on top of new technology, the potential efficiency gains are minimized or completely negated.
To truly win at this game—or even be competitive—credit unions must enhance the world-class service members have come to expect with innovative banking solutions. And the path of least resistance is through open banking and open APIs.
Open banking allows your credit union to partner with solutions allowing you to leverage their technology instead of attempting to compete with them. Through this approach, your CU can gain access to the latest and most innovative financial solutions without having to build in-house. However, unlocking the power of open banking begins and ends with the right core software technology.
The Core of Success in the Cloud
Today, credit unions are also feeling the gravitational pull toward integrating cloud-based solutions into their business model. Even though credit union cloud computing isn't a new concept, it's often followed by a sense of hesitation among C-Suite executives. Here are five key reasons why hosting your core technology in the cloud is a good idea:
- Cloud core technology is more secure and offers enhanced data security.
- The cloud can help credit union IT staff work smarter and more efficiently.
- Cloud computing can lead to substantial savings by limiting the costs associated with outdated hardware and software.
- Cloud training is often provided by seasoned experts who are specialists in the product.
- While hosting your core tech in the cloud is excellent for disaster recovery and backup, it can also bolster the reliability of everything you do.
With all things considered, there is much success to be had in the cloud, and now is the perfect time for your credit union to embrace it.
Give Potential Members Greater Peace of Mind
Both fintech firms and credit unions are viable alternatives for those that are looking to deviate away from the big banks, especially millennials. According to 2021 research conducted by EY, PayPal was determined to be the most trusted financial brand for 1 out of 4 credit union members. While brand equity is important, fintech firms carry a notable amount of financial risk for consumers. Specifically, money held within fintech firms isn't insured by the FDIC, which exposes consumers to real risk.
Credit unions, on the other hand, do offer this protection, which can be positioned as a powerful differentiating factor. Along the same lines, cybersecurity and fraud protection are among the few factors that cut across generational boundary lines in terms of importance. In fact, security concerns were ranked at the top of the list for every generation. As your credit union introduces new technological solutions, you can implement a robust cybersecurity program to all of your members' delight.
Embrace Digital by Demand with FLEX
Successful credit unions have ditched the sentiment of fintech firms being competition and adopted them as partners. To do so, however, you must have the right technological architecture at the very core. This is where FLEX can help.
At FLEX, we are the premier credit union data processing solution and core provider for more than 260 credit unions. We offer a full range of state-of-the-art products that are tailored for every credit of any size. With FLEX's core technology, your credit union can embrace the latest innovations and technologies while ensuring a secure and seamless experience for each and every member. Regardless of where your credit union is in its digital transformation, FLEX can help you chart the best path forward, move key metrics in the right direction, and improve the member experience. Check out our Digital Account Services eGuide to see how.