2022 is the Year for Credit Unions to Personalize or Perish
It’s no secret that the financial industry is evolving. In order to stay relevant, credit unions need to focus on delivering a personalized experience for their members. Lee Allen, the Director of Strum Platform, and I spoke about the need for credit union to unfreeze their brands, using personalization as a cornerstone, in a recent webinar.
Why? Have you ever heard the term “Evolve or Die?”
Credit unions have fallen behind banks for three straight years in the American Customer Satisfaction Index (ACSI) study. How consumers define “excellent service” has evolved from the long-time credit union strength - the in-person, friendly face - to preferences for those attributes plus a strong online presence and mobile app that offers a great experience…anytime, anywhere.
“In the next 12 months, 47% of consumers are likely to open an account at a neobank compared to 44% of consumers planning to an account at a community bank or credit union.”
But traditional banks are not the biggest threat to credit unions on this front. According to MANTL 2021 Banking Impact Report, in the next 12 months 47% of consumers are likely to open an account at a neobank compared to 44% of consumers planning to an account at a community bank or credit union. In 2021, three of the top 10 mobile banking apps by most downloads weren’t traditional banks at all. The top was Chime, and the other two were Albert and Varo.
Credit unions must understand how the marketplace dictates what members demand. The credit union of the future should be laser-focused on the individual, using data and technology to personalize the experience for every member. If not, we can expect more neobanks to take over our market share.
And credit unions must look outside the financial services category for inspiration - because that's where members' expectations are being set. Take a closer look at companies like Spotify, Uber, and Netflix. They have shifted their focus from the underlying transaction to the overall experience. Companies are leveraging artificial intelligence and data to create highly personalized experiences, which is what drives value.
One critical opportunities for credit unions is to go behind the firewall - and use this private channel to be more relevant, with a more personal touch. And to provide meaningful financial wellness information that give value to, and makes a difference, for members.
Upstart, a lending platform, is shaking up “the way we’ve always done it” when it comes to looking at traditional credit evaluation techniques to determine a consumer’s credit risk. Their AI and machine learning technology takes into consideration factors like educational background and employment history, information that is not reflected in a credit score. Upstart expects to do $1.5 Billion in auto loans in 2022.
This is especially relevant, and targeted to, for a generation who eschewed credit cards to stay out of financial trouble while inadvertently failing to build the traditional credit histories needed for the next phase of their lives.
Imagine how meaningful it would be for a potential borrower to hear that the responsible choices they have made in their lives count more than some number assigned by a faceless credit bureau. Think of the impact to that borrower of being seen as a whole person, even though it's just a different algorithm doing the looking. Think of the positive brand impression that creates.
“Credit unions are exactly where this kind of innovation should be found.”
This technology is available to credit unions. You can use machine learning on your existing members to make more accurate, and often much more advantageous, loan offers without changing your institutional risk profile. As organizations that are in the business of democratizing finances and elevating members’ financial health, credit unions are exactly where this kind of innovation should be found.
Going even further, credit unions should be using their wealth of data to generate entirely new products and services. What potential is hidden in your member data to make a difference for families and drive growth? Strum Platform is a business intelligence platform that visualizes and puts these, and other insights at your fingertips.
The most successful credit unions in the future will be those who see their members as individuals. They will appreciate their members’ unique journeys, and will make decisions accordingly, across all organizational functions. Personalization in a competitive requirement, no longer a competitive advantage, and credit unions who prioritize it will win the future.