Three ways credit unions can thrive in a challenging economic environment

One key metric driving consumer satisfaction with banks and credit unions is their ability to provide support during challenging economic times, according to the J.D. Power 2022 U.S. Retail Banking Satisfaction Study. Consumer expectations for this type of support include personalized offers, information on avoiding fees, and pertinent account alerts. Overall, financial customers are looking for advice and assistance that will help them save time and money.

Given the uncertainty of the current economic environment, many consumers are worried about a recession and how that could affect their financial situation. And that fear can be seen quite clearly in some telling statistics. From Q3 2021 to Q3 2022, applications for mortgages significantly changed as interest rates rose and budgets got tighter. Also, there has been a slight increase in difficulties for consumers handling debt: the delinquency rate over the same period for credit cards has inched up from 1.85% to 2.08% and for personal loans from 3.37% to 3.89%.

With the possibility of a recession looming, there are many challenges for financial customers in the current economic climate. But there are difficulties for financial institutions as well — and if they don’t take action to address them, it could affect their standing with consumers. Because of the current challenges, there are also opportunities for institutions to not just get by, but also improve their outlook by focusing on the following key solutions to position their business — and guide their consumers — towards future growth:

Leverage data to offer personalized support

The message from today’s banking customers is clear: They want personalized support from their primary financial institution, especially during an economic downturn. The only way to provide that type of personalization as a service is to leverage consumer data for real-time financial advice, offers, and rewards.

By taking a personalized approach to help individuals and households improve financial decision-making and money management, financial institutions can work to strengthen their relationships with existing consumers while also attracting new business. One way to do that is by using an end-to-end consumer lending, account, and card marketing automation solution. This type of program is an effective way to track and manage personalized communications.

Streamline the lending process

Beyond this kind of personalized support, consumers also expect a frictionless experience when opening accounts or applying for loans online. Today’s consumers expect a quick, simple digital application and decision making process when it comes to dealing with their finances — anything deemed too slow can drive their business elsewhere.

Recent research indicates that unless consumers are able to open a new account or complete a new loan application in less than five minutes, the potential for them to abandon the account opening process increases to as much as 60% or more. This is especially true for those banking customers in the Millennial or Gen Z market segments. A recent study showed that 75% of consumers who abandoned their online financial applications due to friction in the process were ages 25–34.

Financial institutions need to streamline these processes to create an easier, seamless experience for consumers. Creating efficient, intuitive processes supported by backend automations helps eliminate digital friction for consumers and can reduce the chances of application abandonment. If your financial institution is hesitant to invest in the complete transformation of core banking systems, consider taking an incremental approach. Any steps toward improving your lending process will likely yield immediate and long-term gains for your business.

Companies that are prepared will benefit from the consumer’s needs changing with the macroeconomic environment by ensuring their lending process results in multi-product solutions, faster decisions for borrowers, and less manual work for staff.

Modernize your collections strategy

As we look to the end of the pandemic, many loan accommodations that were made during the COVID crisis will be coming to an end. That means that, in the coming months, collections teams may be overwhelmed by even higher rising delinquency rates for all debt types.

Protecting a financial institution from delinquencies requires efficient processes for reaching out to consumers, setting up payment plans, and keeping up with changing regulations. By replacing legacy workflows with enhanced automation, analytics, and easy-to-use features, banks can enhance the overall efficiency and effectiveness of their collections process and help their teams save time. MeridianLink offers a service that does just that — MeridianLink® Collect, which is a secure, cloud-based collections platform that easily automates manual processes so employees can spend less time recovering late payments and more time maintaining a positive relationship with consumers.

Regardless of how the rest of this uncertain year plays out, consumers are still going to expect personalized support to achieve their financial goals. They will also need help managing potential delinquencies in bills or loan payments due to the tough financial times. Meeting consumer expectations by providing a frictionless digital experience is a time- and cost-effective way for financial institutions to stay competitive and accelerate growth in any economic climate.

Devesh Khare

Devesh Khare

Devesh Khare has served as Chief Product Officer of MeridianLink since 2022. Prior to that, he held the role of Vice President of Product Management, also at MeridianLink. Over his ... Web: meridianlink.com Details