An April survey released by the National Endowment for Financial Education found that 88 percent of Americans – nearly nine in 10 – say the COVID-19 crisis is causing stress on their personal finances. What are they worried about? Everything. People are stressed about their emergency savings and retirement funds, income fluctuations, their ability to pay bills, job security; paying off debt and volatility in the financial markets.
While the credit union movement can’t do much about the virus itself, it can ease some of the economic disruption by helping people recover a sense of financial wellbeing during difficult times. Helping members cultivate financial wellness during a crisis is an opportunity to build member relationships that capitalize on the traditional strengths, digital advances and elevated member experiences credit unions have been working on, while also building genuine relationships that will outlive the current pandemic.
Your Members Need You
Everything about the COVID-19 crisis feels unprecedented. The labor market shows a pandemic total of more than 47 million unemployment claims, with 11.1 percent of American workers out of work in June. Nearly five months in, federal unemployment stimulus payments are approaching expiration with a new round of benefits up in the air. Anecdotally, we see businesses closing and families using their savings, charging up credit cards or raiding their retirement. Even routine money-handling has become taboo, driving consumers to abandon cash and in-person point-of-sale card payments in favor of digital wallets and contactless EMV.
But it’s not just solutions to individual dilemmas that consumers are seeking. People want holistic advice as well.
In the early days of the crisis, big credit card issuers started cutting credit lines. At the very moment cardholders were relying on their credit to cover expenses and provide a small measure of security, card issuers were pulling the plug. That so many credit unions have maintained their members’ access to credit and even allowed them to forego interest or skip a payment is a perfect illustration of why member-first financial services matter. Credit unions aren’t just providers of financial services; they’ve got their members’ backs.
Empower Members Through Financial Wellness
In times of crisis, financial wellness takes on new importance.
In the 12 years since the Great Recession, financial services have made some great strides. It’s now possible to apply for a loan, send money to a friend, turn your credit card on and off, or invest automatically using change from your transactions – all using a mobile device that barely existed in 2008. Our evolving use of data, too, allows financial services providers to know more about consumers – even predictively — than ever before.
How can credit unions, as financial services providers with a mission to help their members, actually promote financial wellness in difficult times?
Find new ways to help members meet the unprecedented challenges they face. Continue to support your members that were hit hardest by COVID-19 – the unemployed, furloughed workers or those struggling with increased debt. At CO-OP Financial Services, we’ve seen credit unions rise to the challenge with emergency rate reductions, innovative credit and loan offers, and increased withdrawal and deposit limits – real help for the real problems members are facing.
Provide long-term solutions to help members recover their financial health. The COVID-19 crisis isn’t going to last forever. As members rebuild their financial lives, credit unions can create the tools that facilitate recovery. Many of these programs already exist. For example, Patelco Credit Union in California has been in the process of putting financial wellness at its core. They’ve eliminated $1.5 million in fees, restricted NSF charges, and created personal and auto loans that offer incentives to encourage members to pay on time, which is especially critical now, when people are seeing their credit scores impacted. Town & Country Federal Credit Union in Maine offers a savings accelerator auto loan that diverts a member’s first three payments to a savings account, to encourage members to start a savings habit.
Become the Primary Financial Relationship
For all the proliferation of financial services we’ve seen pop up – fintech apps, digital wallets, online lenders, digital banks – where have members actually placed their trust? So far, no single institution owns the entire member relationship. But this is our golden opportunity: to become our members’ Primary Financial Relationship. Achieving PFR status means designing products and services around our members’ lifestyles – from the key life moments like going to college or purchasing a home, to their everyday banking and financial needs. To maintain that PFR status, credit unions must ensure that financial well-being is positioned at the heart of everything they do.
While it is uncertain when or how this crisis will end, credit unions have more than a century of experience helping people pull through difficult financial times and they are a sure bet to become strong financial partners to a nation working to recover. If we can innovate the solutions that members need now, reach out to people who are struggling and need help, act as genuine partners and build trust, this could be the start of a beautiful relationship—and the open door to a future of financial health for all of us.