Credit unions are frequently bombarded with messages about the importance of digital investment and transformation. Fintechs and challenger banks with brand-new, bespoke technology ecosystems are capturing a growing amount of market share, and people who would traditionally rely on credit union services are increasingly drawn to these low-cost, online-only banks. “Adapt or become obsolete” is heard so often that it begins to sound less like a warning and more like a threat. With so many avenues to digital banking—and the hefty price tag associated with most of them—it’s no wonder credit union leaders get overwhelmed at the prospect of launching new digital initiatives and prefer to stay the course, no matter how rocky it may be.
It is true that credit unions must roll out more robust digital banking measures or risk losing significant revenue. However, a hasty investment in expensive technology to go digital is misguided and often ineffective. While sophisticated technology can certainly be an advantage, I have seen throughout my career that growth happens not with technology alone, but because of the people, processes and entrepreneurial spirit driving it. Credit unions can make serious growth gains without busting their technology budgets if they play to their strengths.
Niche is the New Local
To compete with challengers, credit unions should expand upon their mission to serve communities that share a common cause, affinity, identity or goal with specialized digital experiences. This is really an extension of the foundational roots of the credit union mission for the modern digital world. To make this shift successfully, credit unions must understand that serving a digital niche means much more than simply digitizing the in-branch experience. Jim Marous of The Financial Brand said it well when he implored banks and credit unions to “deliver a seamless digital platform that goes far beyond a miniaturized online banking offering.” To do this, credit unions must define their target segment with precision and empathy and offer a specific, differentiated value proposition that cannot be easily replicated by other financial institutions.
This concept of identifying a digital niche is poised to be especially successful in underserved populations that are underbanked, unbanked and often overlooked. Fintechs and challengers have begun to make serious waves in these areas, providing flexible application and onboarding, low-cost products and supportive services that improve financial well-being.
There is no reason why credit unions cannot do this and do it better. In fact, the NCUA agrees and recently endorsed recommendations made to Congress to allow credit unions to expand services to underserved communities. Credit unions have already taken on unique initiatives to serve underbanked niches successfully, from undocumented immigrants to gig workers and beyond. These niches likely make up a significant portion of the 7.1 million U.S. households that were unbanked in 2019, according to the FDIC. 56% of unbanked households said they were unbanked because they felt they could not meet the minimum deposits required to open and maintain an account, and 31% said they simply do not trust banks. These numbers do not include U.S. households that have bank accounts but are not utilizing all of the services that they qualify for and would benefit from. As post-pandemic life remains increasingly digital and cash-based services are harder (or impossible) to access, these communities will need credit unions to follow them into online and mobile banking spaces and continue to offer the same compassionate, personalized service they have perfected inside their branches.
Credit Unions Need a Partner That Embodies Accountability
For credit unions, developing and launching better digital experiences is rooted in an accountability to the members and communities they serve. Not only does it make operational sense to meet the market need, it makes community sense—credit unions take seriously the mandate to support the communities that trust them. Innovation that is sustainable and attainable brings together previously disparate operations into one connected platform that credit unions can trust to anticipate and meet the shifting needs and challenges their members face.
This sounds like a simple concept, but traditional technology vendor sales models have worked against this idea of accountability in favor of transactional, project-based relationships. Any attempt to quickly meet a need or close a gap for members usually required navigating several vendors and being the middleman for communication between them. Massive spend, talent and energy are required to achieve a single outcome and risk lands almost exclusively on the credit union.
To reach specific niche segments, especially those that are underserved and not part of mainstream financial experiences, credit unions need partners that can take on accountability for moving their members ahead, not just catching them up. Credit unions must prioritize working with vendors that link their success to the success of the credit union, whether that be through digital adoption, efficiency or profitability. Vendors must be motivated by building strong relationships and providing good experiences for credit unions and their members, which often means taking on some of the risk associated with investing in new technology. Unmitigated risk can be paralyzing for small community credit unions. Excellent vendors will recognize this and provide structure and scaffolding to help their clients overcome the real (and perceived) obstacles associated with digital transformation.
Nymbus prioritizes this accountable partnership in our relationships with credit unions. We provide the people, processes and technology needed to amplify the capabilities of credit unions and extend their reach to new niche segments. By aligning on mutual outcomes instead of simply distributing software, Nymbus moves past traditional vendor thinking and creates supportive structures for credit unions that are ready to grow their digital footprint in communities. With the right mindset, resources and partners, any credit union can extend the success they have developed serving their existing communities into specific digital applications that meet the needs of underserved segments better than any fintech or challenger bank.