Why digital transformation is pivotal for credit unions

Credit unions have always been member-first financial institutions that offer exceptional customer service in the banking sector. In an era of sweeping consolidation in banking, credit unions remain community-oriented institutions that provide the high-quality, personalized services their members expect. But this history doesn’t mean credit unions should remain stuck in the past – if anything, their consistent member-first ethos means they have to provide the latest products and services consumers are demanding.

This is why credit unions have never been more focused on digital transformation. At a time when members’ financial lives have increasingly migrated online, it’s necessary to provide streamlined, accessible, and secure digital products that offer greater convenience without sacrificing outstanding customer service. Digitization doesn’t just create financial tools that give members more options for managing their money – it also generates valuable data on member preferences, pain points, and behaviors, which enables credit unions to personalize services and address problems quickly.

There are several stubborn myths surrounding digital transformation, such as the idea that it requires large IT teams and significant investments in R&D. Too many credit union leaders think they’re incapable of keeping pace with the tide of digitization in banking, but this isn’t the case – all credit unions have the ability to offer robust digital services that help them compete, retain members, and attract new customers.

Meeting a rapid shift in consumer demand

How and where we bank will never be the same – over three-quarters of Americans prefer to do their banking digitally, and there’s no reason to expect this proportion to decline in the coming years. According to data from the FDIC, the use of mobile banking surged from 15 percent in 2017 to over 43 percent in 2021. Meanwhile, the number of Americans who primarily access their accounts through bank tellers collapsed.

The COVID-19 pandemic accelerated the use of digital financial services, and younger generations are particularly interested in doing their banking online. A 2022 Chase survey found that 87 percent of consumers use banking apps at least once per month, while 90 percent prefer to manage their finances “all in one place” (a proportion that’s higher among younger consumers). Banking customers also want a broader range of digital services, such as peer-to-peer payments, online bill payments and credit checks, and mobile wallets – all of which can be included on apps and other digital platforms.

Although credit unions are increasingly focused on digitization, consumers still report that large national banks offer better digital experiences. But this is no reason for credit union leaders or members to be discouraged – there are plenty of ways for community institutions to narrow the technology gap and offer customers excellent digital services.

An unprecedented opportunity for credit unions

Credit unions have deep roots in their communities, and they’ve spent decades earning the trust of their members. This has allowed them to navigate periods of economic turbulence (including the one we’re in right now) and crises like the COVID-19 pandemic, and it will sustain them through the ongoing digital transformation of the banking industry. Instead of viewing the necessity for digitization as an obstacle to overcome, credit unions should recognize that it’s an extraordinary opportunity to better serve their members and attract new business.

A recent Accenture survey of 49,000 banking consumers around the world reports that just 30 percent regard their main bank’s customer service as excellent, while 23 percent rate it “highly for its range of products and services and for the competency of its tailored financial advice.” At a time when 72 percent of banking customers say personalization is “highly important” (a proportion that’s even higher among younger generations) and customers want more services than ever, it’s clear that too many banks aren’t meeting these needs.

Digitization will help credit unions improve all the above: customer service, personalization, and services. It will also give them greater insight into consumer preferences and frustrations – for example, 86 percent of customers who want personalization say they’re willing to provide feedback on their experiences. Credit unions can then use the insights from this data to provide services that will maximize value and convenience for members.

How to fully leverage the digital transformation

The digital transformation is a dynamic and multifaceted process that requires credit unions to establish relationships with new partners, focus on cybersecurity, and reorient their operations and workforces. An essential element of the digital transformation is the use of cloud-based SaaS services instead of trying to develop software internally. Many credit unions recognize that outsourcing technological development is critical – almost twice as many credit unions as banks expect fintech partnerships to be a “strong driver of growth for the next few years.”

Fintechs provide comprehensive and user-friendly digital services while reducing costs, as they make operations more efficient, replace error-prone manual processes, and handle installation, maintenance, etc. While fintech partnerships eliminate the need to make huge investments in IT teams and other types of human capital, credit unions still have to make sure their workforces are prepared to implement and manage digital resources. This means change management is crucial for credit unions – employees should be capable of integrating new technology with their workflows and developing skills such as cybersecurity awareness to keep networks safe.

Three-quarters of banking customers say fraud is a key reason to switch banks, which is a reminder that cybersecurity has to be an integral part of the digital transformation. Credit unions can protect themselves with multi-factor authentication and password managers, consistent software updates, and cybersecurity training for all employees. Cybersecurity is also vital because it allows members to confidently share data with credit unions, which can be used to improve their experiences and generate market insights.

It’s clear that the digital transformation won’t be slowing down anytime soon. While this means credit unions have to be capable of adapting, it also means they have a unique opportunity to build healthier relationships with members and keep banking in the community.