For many years, digital banking platforms and applications have been improving while the use of cash in America and around the world has been declining. Recent advances in technology combined with social distancing measures have changed member wants and needs, and this is having big implications for credit unions and the role digital banking technology will play in their future.
Although some people in the financial world are debating whether cash is on the way out, what seems more likely is that cash will remain in play but take a back seat to digital banking options, digital wallets and even cryptocurrencies. What’s clear is that that the rise of digital banking and digital technologies is likely here to stay. Fortunately, if used wisely, digital banking can have many benefits for your credit union and members.
The reasons the days of cash may be numbered
There are several reasons digital banking solutions are soaring in popularity, and as a result, people are using less and less cash. Let’s look at some of the trends that are contributing to the rise of digital banking and the decline of cash in the United States.
- Smart phones: Technology is improving at an unprecedented rate and the ubiquitous use of smart phones gives everyone access to digital banking technology all the time. Having access to a high-powered computer in our pockets is affecting all sorts of interactions, from how we communicate with our friends to how we study, shop and bank.
- Fintech: Fintech companies are encroaching into the banking space and providing customers with services such as digital transfers, digital lending options, P2P payments, and digital investing possibilities via apps like Apple Pay, Google Pay, PayPal, Venmo and Robinhood.
- One-click pay: Amazon and Uber changed how customers expect to get goods and services. People are now accustomed to being able to pay for goods and services with one-click instant pay.
- The lockdown: There’s no doubt that the lockdown forced many people to question how they spend money and to shy away from cash transactions. While the initial reasons for not using cash had to do with safety, as people become more and more comfortable using digital banking options, the less likely they’ll go back to their old spending habits.
- Cryptocurrencies: The rise of digital currencies is shaking up financial markets, not just in the United States but around the world. Many governments are creating their own digital currencies or investigating how to do so. The more comfortable people become using cryptocurrencies, the less important cash will be.
- The younger generation: Change can often be driven by the young, and the decline of cash is no exception. Younger people and millennials who grew up with the internet are more comfortable using technology for financial transactions, so they have been quick to adapt to the changes in digital banking. Apps like Venmo have had success with younger people by using social features to attract customers.
As digital banking evolves credit union members are enjoying some clear benefits such as quicker transaction speeds, better security, and the convenience of being able to do everything from a phone or computer. Although the U.S. is not the leader of the pack when it comes to adapting digital banking technologies, we’re not far behind either. In fact, according to a study by the Pew Research Center, nearly a third of adults in America reported using no cash during a regular week, while another report by ForexBonuses.org found that in 2017, the U.S. was the fifth most “cashless” country in the world.
What are the implications for credit unions?
Personal interactions and helping members in the community have always been important for credit unions, and some people worry that the rise of digital banking will make in-person member service obsolete. While there’s no way to be certain, it’s important that credit unions find ways to continue providing the best services to their members, whether it be in-person or digitally.
By using the right digital core technologies that allow for seamless digital banking transactions and the flexible writing of software, credit unions can utilize digital tools that enable all sorts of Digital Member Service options, such as voice, video call, personal messaging and more. Plus, by leveraging data your credit union can provide personal member services that pinpoint your member wants and needs. In other words, going digital does not have to mean becoming impersonal.
The argument for cash and the importance of a core provider
Although it would be unwise to discount the importance of digital technologies when it comes to reshaping the future of banking and how credit unions do business, there is still reason to believe in the future of cash and in-person transactions as well. Cash in the United States is used by low-income and non-banked populations, as well as those who don’t have access to the internet or who live in rural areas. Eliminating cash could disenfranchise these populations significantly.
Instead, the future will not be so much about abandoning one system as about adapting and evolving with changes in digital technologies and utilizing them in the best way possible for your credit union. One way credit unions can take full advantage of digital banking technologies is by choosing the best credit union core provider to serve as the basis for their digital banking platform.
Digital banking allows credit unions the opportunity to give their members superior service on a bigger, broader and better scale than ever before. FLEX's Digital Account Services eGuide can help you improve your credit union's digital services.