Banks have devoted ample time and resources to introducing digital options, including mobile payments, to satisfy their changing needs. However, credit unions have not kept up with this pace—putting them at a competitive disadvantage. It’s time to turn the tide and make a move to mobile, if not more.
One reason this is so: “Slowness to innovate new products and services” ranks at the top of the list of reasons why members are dissatisfied with their credit union, according to PYMNTS.com’s February Credit Innovation Study. This sentiment appears to be even more dominant than it was in 2019—and nearly one-third of Millennial and “bridge Millennial” (older Millennial) consumers (31 percent) claimed they would be willing to leave their credit union for financial institutions that offer more innovative products and services.
Moreover, innovation notwithstanding, credit unions’ reliance on current customers’ children maintains their membership ranks. If statistics are any indication, such a strategy is ineffective. Sixty percent of respondents to one survey of more than 500 credit union members over the age of 65—conducted by Google Surveys—said their adult offspring had chosen to bank elsewhere rather than at their parents’ credit union. Similarly, a study from FICO found that credit unions see attrition in Millennials as they leave home, with the percentage of Millennial consumers using a credit union dropping from one in five for those under age 25 to just 10 percent for those age 25 to 34.
Even more concerning, a study by Foresight Research found that while 12 percent of consumers planned to switch financial institutions in the two years before the COVID-19 pandemic, 22 percent intended to do so now. Almost three in four of these respondents are GenZ or Millennial consumers—and most respondents cited a desire for more innovation—again including mobile payments—as a rationale for making the change.
Mobile is Key…
Not surprisingly, innovation in the form of introducing and supporting mobile options —including mobile payments/wallets and mobile banking—is an essential strategy for credit unions that want to push back against attrition and widen their appeal to consumers, no matter their demographic group or the credit union affiliation of their parents. According to PYMNTS.com’s Credit Union Innovation Study, 26.7 percent of “potential switchers” were interested in mobile wallets/payments, and 35.4 percent were interested in mobile banking capabilities.
Clearly, the option to make payments in mobile fashion—at any time and from anywhere—is a strong enticement for consumers to remain with or join a credit union, especially if other services are on par with those available at larger financial institutions. But adding a mobile payments component does more than benefit credit unions by increasing customer “stickiness and loyalty” and bringing new members into the fold. It can also reduce costs, as fewer members will need to interact with employees to handle payment tasks.
It is also important to note that working with payment solutions and services providers to add and execute mobile payments can make the process easier. Perhaps not surprisingly, credit union executives believe this is the case, with 41 percent of credit union decision-maker participants in the Credit Union Innovation Study noting that partnering with such an organization is “critical to success.”