The ongoing pandemic has forced credit unions to pivot toward digital processes as members and businesses alike tackle more of their banking-related activities remotely. Many CUs found themselves quickly shifting to new solutions and operating procedures to accommodate branch closures or social distancing mandates, and the strategies they have developed to cope with this new reality have persisted even as they begin reopening.
Digital transformation is emerging as the backbone for CUs providing the innovations their members seek, and implementing new technologies is becoming ever more critical to credit unions’ bottom lines. The American Bankers Association found that 82 percent of consumers favored banking digitally over visiting brick-and-mortar locations, even before the pandemic began, and a separate study found that 88 percent of credit unions surveyed in early 2020 planned to invest more in such technologies than they had during the previous year.
However, this does not mean that credit unions’ digital shifts have been free of hiccups. Recent research suggests that they lag behind firms in other sectors when it comes to adopting innovations such as cloud computing, automation and even artificial intelligence (AI) and machine learning (ML), meaning many must boost their digital efforts even further to win over new members and meet existing ones’ expectations. The following Deep Dive explores the digital trends that have shaped CUs’ innovation plans in 2020 and examines how many of these shifts will continue in the year ahead.
The Drive Toward Digital
CUs had big plans to boost their digital innovations when 2020 began. PYMNTS’ March Credit Union Innovation Index found that many credit unions were interested in implementing digital offerings to prevent members from defecting to tech-savvy competitors such as FinTechs. Their concerns were not without merit, as the Index found that 21 percent of CU members were at least somewhat interested in leaving their credit unions for challenger banks.
The pandemic’s onset in late March dramatically hastened credit unions’ digital pushes, however. The crisis initially forced many financial institutions (FIs) to temporarily shutter their branch locations or to alter their in-person services and business hours, leading many to seek out innovations to help members transact and engage with their CUs. PYMNTS’ Credit Union Innovation Playbook: New Payment Flows Edition revealed that peer-to-peer (P2P) and voice assistant payment capabilities took center stage in many credit union executives’ innovation plans, with 55 percent and 66 percent, respectively, saying they were interested in focusing on these technologies. Other studies have noted similar credit union shifts, with many CUs aiming to invest in AI-backed technologies, such as chatbots.
Cloud-based innovations also emerged as a bright spot for credit unions, allowing many of them to help employees operate remotely and cater to members adhering to stay-at-home or social distancing measures. One February report showed that CUs were already ahead of other FIs in terms of adopting cloud-based technologies and application programming interfaces (APIs), with 47 percent of all credit unions having invested in the former and 53 percent investing in the latter.
Addressing Digital Adoption Challenges
Credit unions have experienced some growing pains during their digital transitions, however. PYMNTS’ research shows that many had planned to execute their digital strategies over the course of several years, but the pandemic’s immediate effects on brick-and-mortar services — long considered strong points for CUs — tightened their digital timelines considerably. Enabling seamless security is also a more pressing concern for credit unions as more members flock to online and mobile channels, with a recent study finding that just 17 percent of credit unions in the U.S. can securely verify their members’ digital identities in real time using a single process.
Balancing their investments in digital and physical services is also likely to be challenging for CUs in the coming year as a vaccine arrives and consumers begin returning to some of their old habits. PYMNTS’ Credit Union Innovation Playbook: Challenger Banks Edition found that before the health crisis began, many members valued the ability to access in-person services. It revealed that 42 percent of CU members viewed being unable to access physical banking locations as a reason that banking with challenger banks would make their customer experiences worse. Another study showed that members who rely on digital channels alone are generally less satisfied than those who solely utilize in-branch services or a mix of the two, further illustrating that brick-and-mortar locations are still likely to play a critical role in CUs’ future operations.
The past year has been trying for credit unions, forcing many to quickly implement new technologies and adjust their plans rapidly to suit more and more members who are going digital. As CUs work out some of the kinks that have accompanied this rapid growth, they must ensure that they smoothly pave the way for additional digital innovations — including those that can augment the brick-and-mortar experience as well as online and mobile banking initiatives.