Beating recession fears in 2023 means focusing on credit union basics

The word is out on expectations for a recession in 2023, and according to the Credit Union National Association (CUNA) the downturn may just be light enough for credit unions to escape with minimal damage.

CUNA Senior Economist Ligia Vado asserts that her team’s latest Economic Update is based in part on the Federal Reserve’s accelerated increase in the federal funds rate to tame the inflation that has dominated the U.S. economy in 2022.

The recession forecast is based on the two common economic indicators – two straight quarters of decline in gross domestic product and an inverted yield curve. Unfortunately, over the last five decades, yield curve inversions of that size are a precursor to recessions within six to 12 months. The COVID-19 pandemic continued that trend.

Regardless, based on the timing of the yield inversion, Vado told the Credit Union Times the CUNA team believes the recession will likely start within the first half of 2023. “The recession will be relatively mild,” she says, while “the downturn will be nowhere near as short and sharp” as the recession in 2020 when the pandemic began or as “deep and extended” as The Great Recession in the late 2000s.

“Members’ healthy financial condition is one of the most important reasons why if, indeed, there’s a recession next year, its impacts on credit unions will be much less severe” than the Great Recession.

Taking action to counter recession fears and strengthen engagement

While there are reasons to be wary of a recession, there is also opportunity to make your credit union even better.

According to financial research firm Broadridge, two-thirds of consumers believe most companies need to improve their customer experience initiatives. If the results from the COVID pandemic lockdown weren’t enough of a realization, that statistic should wake up everyone to the necessity of making member experience a top priority for credit union cooperatives heading into the new year.

Great member experience today extends beyond not making crucial mistakes. Members increasingly judge their cooperative on qualities such as ease of engagement, responsiveness, empathy, and transparency. Focusing on those traits will have a direct influence in helping credit unions attract new members while growing and cultivating loyalty and trusting relationships. Not following through on those traits can result in a decrease in those advantages and a contraction in membership.

To attain high-quality member experience, credit union executives need to take action on all levels of their organization to zero in on improving experiences at each and every point of emphasis pertaining to user experiences. Statistics back up this necessity: the 2020 Credit Union Innovation Index found that nearly 22 percent of credit union members would consider dropping their financial institution for lack of innovation. Even pre-pandemic, the Index found that more than 35 percent of respondents indicated an interest in payment-to-payment services.

Expectations rising for member experience

Consumers’ journeys have grown more complex with their financial institutions in the last decade. Researching a new product, service, or provider doesn’t just start and end in one’s local branch. People want an easy, simplified, and streamlined experience through the particular channel they prefer, and at a time that is convenient for them.

More than 80 percent of consumers claim a positive experience will urge a future buying decision, says SaaS provider Zendesk, while 61 percent say a negative experience would result in immediate relationship sentiment. Two negative experiences will result in 76 percent customer attrition. Data shows a consumer is willing to share personal information if it simplifies future engagements.

More than three-quarters of consumers want to have the option of engaging with someone with the touch of a button, however 70 percent also want to have the capability to find the answers and info they’re looking for on their own, Zendesk added. Two-thirds of all consumers expect all experiences to be personalized, and if they aren’t, consumers are willing to transfer elsewhere if that level of service is not available. In fact, 60 percent of consumers claim they have higher standards since the pandemic.

Member experience and personalization strategies for credit unions

Opting to go without a financial and organization-wide commitment to innovation, credit unions risk missing chances to optimize and differentiate their organization in an ever-increasingly competitive financial services market. Staying focused on member service opportunities involves a hardened and dedicated commitment from the top of the organization to the bottom.

A Total Expert survey found that 65 percent of respondents do not use their institution’s data as often as they should to educate and cross-sell to members. Additionally, 19 percent claim they don’t use data-driven insights at all. These findings are telling in that many credit unions still have a long way to go to fulfill their mission of satisfactorily personalizing their member experience initiatives.

Members ultimately desire personalization. A global financial services consumer survey by Accenture in 2019 found that one in two consumers have a strong interest in financial advice that is tailored to their personal experiences.

Credit unions are in a unique position and perspective following the lessons of the pandemic to begin focusing more on partnering with members around their financial objectives and life and family journeys, as opposed to just transactions and product sales. There will be a move from internally-centered efficiency strategy towards a member-centric engagement strategy, manifesting positive, practical change in the lives of its members.

Effective tactics for credit unions to improve member experience

Enticing and maintaining credit union members entails learning who they are, where they are, and what they want. Once this information is acquired, you can then offer the financial inclusion and health tools and software necessary to exceed your members’ expectations.

Across a wide range of consumer types, credit union members possess an inherent collection of interests and priorities. The 2019 Accenture study, however, mentioned some mutual tactics to build successful relationships with them:

• Integrated products and services for primary needs: Consumers liked one-stop shopping for checking accounts, CUSO mobile small dollar loans, auto loans, mortgages, and insurance.
• Personalized offerings: One in two consumers want customized products and services like financial advice and mentorship based on their spending habits and tendencies.
• Optionally-shared consumer data for better deals: If a member trusts the security of the financial institution, consumers would willingly provide personal information for discounts or expedited service.
• Inclusion of physical and digital channels: Consumers wanted omnichannel experiences incorporating branches and digital channels, including CUSO fintech. According to Segment research, 69 percent of customers desire a consistent experience with a company across all physical and digital channels, from their local branch to social media.

Increasing self-service support offerings

Although included in the tactics mentioned above, placing member experience in the hands of the members themselves deserves more attention. According to Zendesk, a full 69 percent of consumers want to resolve as many issues as they can manage alone through self-service as opposed to spending all that time waiting for that customer service rep on the phone. By offering members ways to solve their own issues, credit unions can make their members’ engagements easier while improving the overall experience.

In addition to more traditional solutions for self-service, augmented reality (AR) invites a greater element of self-service personalization as consumers find more immersive ways to interact with their preferred brands and everyday experiences with their financial institutions.

Innovations in language processing and conversational artificial intelligence have powered chatbots to be more effective and conversant while automation can assist consumers in finding more accurate information without ever having to speak with a human representative.

Despite the significant social and economic downturn, many companies have opted to invest in customer experience tools, and as a result they are predicting increases in their budgets. The Financial Brand’s Jim Marous even cited Acquia’s Customer Experience Trends Report statistic finding that 62 percent of companies predicted their budgets will increase at least 10 percent.

You can improve your credit union’s member experience best by creating a data-centric strategy that embraces innovation like CUSO fintech for your membership and increases in-person and digital personalization of products and services. By investing and taking action on on behalf of your members, credit unions can build a multi-channel experience that will only increase engagement, loyalty, and trust.