Credit Unions Lead Connected Financial Experiences

As consumers seek new connected financial experiences, more are turning to their local credit union for answers.

Few organizations are as well positioned as credit unions for creating connected financial experiences.

This comes from decades of cultivating one-to-one relationships with members in ways that banks and other financial institutions (FIs) aren’t as adept with, and digital is taking it up a notch.

“The word that’s most closely associated with the term ‘connected experience’ is personalization,” PSCU President and CEO Chuck Fagan told PYMNTS’ Karen Webster.

Fagan said to realize the potential of connected payments to satisfy members and cement loyalty, it takes reams of data “to link the experience that the consumer wants.” From banking to payments to all touch points between individuals, small- to medium-sized businesses (SMBs), and their FIs, “that personalization piece is what’s bringing connected experiences to the forefront.”

With no end to the speculation about 2023, Fagan said he sees it as a watershed moment for lending, as the pandemic’s digital shift has permanently altered pathways and perceptions.

“Lending, I think, is going to be the big push in 2023,” he said. “It’s just the traditional way of lending as we’re used to it, going into branches over the years and all of that has to change.”

“We’ve done it before,” he added. Whether it was the introduction of the Apple Card or buy now, pay later (BNPL), “those areas that are more instantaneous in the decision-making process and get consumers through a purchase — through an experience — fast and efficiently, that’s what we’ll see continue to evolve as we look into 2023.”

While it remains to be seen if 2023 will live up to its ominous press, consumers are “still in decent shape,” Fagan said.

“But baseline, the financial institution doing their part to connect the experience and, at least from a credit union’s perspective, having that financial well-being as part of that connected experience is really timely for what the consumer may go through over the next 12 to 18 months,” he added.

Read more: Credit Union Innovation: The Race to Meet Consumer Demand

Build Your Own Banking

What will become decisive in the coming year is where and when payments options are presented in the commerce flow for an optimal “build your own” experience.

“At least in the credit union segment, they’re pulling together FinTechs and multiple organizations to try and create a seamless experience, incorporating that data throughout that build with these different partners,” he said. “I think it becomes a big piece of the solution if they can do it right.”

PSCU is itself pursuing this kind of multifaceted innovation agenda, building certain solutions in-house and partnering with others for deep digital expertise to create personalized credit union (CU) products and services for a member base with a changing set of expectations.

As a credit union service organization (CUSO), PSCU’s work ends up benefitting its owner CUs and propagating new levels of digital personalization for smaller CUs lacking the resources.

“Once they get that sequence of players that create the optimal experience, then I think you really can use the data from a call center, the data from branch visits, the data from digital visits, to determine preferences and then build that member experience around what they learn,” he said.

Fagan called this “journey mapping” — a critical element of what FIs more broadly must embrace to deliver the relevant loan or card offer to the ready consumer at the ideal moment.

This is becoming crucial as the Generation Z demographic group ascends to the cohort du jour, and everyone from merchants to banks to CUs learns how to serve younger borrowers or cardholders who have behaviors that differ greatly from their older millennial siblings.

Noting that Gen Z defines loyalty and community differently than any group before, Fagan said “if they’re not getting the personalization they’re looking for, they’re not hesitant to bank with a Facebook [or other entity] who you or I probably wouldn’t trust. That’s just what they’re into.”

See more: Holiday Spending a Focus of New PSCU Payments Index Report

Tough Times Make Strong Companies

There’s no escaping the fact that 2023 will be a year of challenges, and CUs that have mastered the digital shift now have to manage for a year that is likely to be economically intense.

Saying that lending and mortgage refinance has been particularly strong in the past few years, Fagan is cautioning CUs to batten down for a potential storm in credit markets.

“Credit unions have been able to ride the lending wave while rates were so low, but they’re going to have to look to other means,” he said. “One of those things: Be on top of delinquencies. It’s my hope we don’t see that drastically go up, but that’s one of the likely outcomes” of a recession.

Even so, he also warned about the dangers of doing nothing if the economy tanks. From such times has come huge growth historically, and CUs must position for that as well.

“Don’t look to pull back, look to accelerate. Take the opportunity to enhance what are very antiquated lending practices. Let’s get into using data to make some of those informed decisions,” he said, adding, “I would say look at it as a year that could transition us into that true future of connected experiences” to lock in loyalty from consumers by using data and innovation.

“You get strong companies that come out of difficult times, and credit unions are well positioned to do that,” he said.

How Consumers Pay Online With Stored Credentials
Convenience drives some consumers to store their payment credentials with merchants, while security concerns give other customers pause. For “How We Pay Digitally: Stored Credentials Edition,” a collaboration with Amazon Web Services, PYMNTS surveyed 2,102 U.S. consumers to analyze consumers’ dilemma and reveal how merchants can win over holdouts.

Candice Cearley

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