As fintech platforms like Robinhood revolutionize the investing world, credit unions face a digital crossroads. With the growing trend of investors flocking to user-friendly apps, credit unions must adapt and innovate to remain relevant in an industry that's swiftly shifting under their feet.
Robinhood's success has redefined investment norms, capturing the attention of a demographic that finds traditional banking models less appealing. Here's an in-depth look at how credit unions could embrace this change and position themselves for a future where financial empowerment and technology go hand-in-hand.
Unpacking Robinhood's market impact
Many members are sending their deposits away from banks and credit unions to platforms like Robinhood, which is particularly favored by younger investors—the average age of a Robinhood user is 35, according to the Wall Street Journal.
Robinhood’s net deposits are also surging. According to data from Robinhood's 2024 fourth-quarter report, they increased to an impressive $50.5 billion, reflecting a 49% year-over-year growth from the assets under custody at the end of Q4 2023. Once members take their money to third party apps like Robinhood, they are rarely returning them to their financial institution. InvestiFi’s research indicates that 66% of individuals transfer money to their investment accounts at least once a month, and 24% seldom return these funds to their banks. This pattern not only underscores the capital flowing to investing apps but also signals a fundamental shift in money management preferences.
While already on the up and up, Robinhood’s ambitions seem to grow with its success. Speaking about Robinhood's influence, CEO Vlad Tenev expressed in a Yahoo Finance interview the company's goal to morph into a holistic wealth management platform.
Despite the traction Robinhood has gained, credit unions are uniquely positioned to redefine themselves in this new era. By aligning themselves closely with the financial ambitions of their members through innovative, user-friendly services, credit unions stand to reinforce their integral role.
Why digital investing is the solution for credit unions
To combat this momentum, credit unions must pivot towards incorporating in-house digital investing. By allying with forward-thinking technology providers, they can introduce cutting-edge investing platforms right into their online banking interfaces. Such initiatives could enable members to explore a spectrum of investing options, from securities to crypto, to guided investing, all within the trusted credit union environment they already know and love.
By integrating these services, credit unions can keep their members, and their deposits, from going to third party apps while also drawing new members to the institution who are interested in such services.
The strategic partner for a credit union needs to deliver convenience by offering direct investing from members preexisting checking accounts. This convenience will benefit both the credit union and its members as it will allow credit unions to keep those deposits in their financial ecosystem while tapping into non-interest revenue streams. With the right partner, credit unions can offer low barriers of entry to investing—and with tools for guided investing—even novice members can diversify their portfolios with confidence.
Education should also be the cornerstone of this new offering. A true partner will equip members with robust investment education resources, echoing a credit union's commitment to their members' long-term financial acumen and independence.
Through offering in-house investing services, credit unions can defend and expand upon their historic foundation of member loyalty and community enrichment all while setting a new standard for a future where financial well-being and accessibility are synonymous.
