Co-op Solutions report urges credit unions to adapt to changing consumer needs

The white paper, based on two surveys from EY and Mastercard, looked at the psychology behind consumer payment behaviour

Credit unions will have to adapt to changing consumer priorities – by considering options such as member-centred approach and a focus on micro-transactions – a US report warns.

Published in May, the 2023 Co-op Credit Union Growth Outlook warns that trust in financial services in the USA is no longer defined based on safety and security but on capabilities.

Drawn up by Co-op Solutions with global consulting firm EY and Mastercard, the report looks at how financial consumer and member behaviours, preferences, challenges, and activities have changed. It draws on two surveys – one of 2,001 current credit union members and 1,019 credit union prospects across all regions of the USA conducted by EY, and another on customers’ payment and purchasing behaviours conducted by Mastercard involving 406 credit union members and 736 non-members.

The paper also looks at the psychology behind consumer payment behaviour, and found that union relationships are increasingly fragmented. According to the study, credit union members have on average three times the number of financial relationships as non-credit union members, suggesting the sector is not fully meeting members’ most urgent daily financial needs.

Furthermore, it adds, while price remains a top consideration, both members and prospective members show a preference for financial products that offer additional convenience features along with rates that are on par with the market.

Another trend has been the growth of digital payments, now the primary driver of daily interactions and member engagement, with 45% of respondents citing engagement as the top reason for maintaining a primary relationship with their financial services provider.

The research also found a direct correlation between daily money management and long-term spending and savings impacting members’ overall financial wellness. As such, it advises that micro-interactive offerings emphasising convenience can generate recurring value streams that improve member conversion rates into long-term value products like mortgages, loans and investments.

Based on these findings, the study recommends that credit unions focus on three key areas: engaging every day, giving guidance and earn member balance sheet.

To boost engagement the study suggests credit unions pursue a deeper connection with their members by understanding their needs, winning their attention, engaging them where they are, and repeating this cycle.

In terms of earning member balance sheet, the study suggests that credit unions help members manage their daily financial needs, adding that credit unions are well positioned to support their long-term financial wellness goals. By assisting with their members’ everyday budgeting activities and savings objectives, credit unions can help them overcome the obstacles brought by the cost of living crisis and get back on track with longterm planning and financial goals.

Finally, in order to earn member balance sheet, the study argues that credit unions can earn from of a member’s financial relationship by offering solutions that combine competitive rates and pricing with outstanding convenience – all designed around personalised member needs.

The paper also advises credit unions to “rethink their overwhelming reliance on rate-based solutions like lending and embrace a new model of member centricity that begins with serving members’ daily financial transactional needs”. It also points out that “daily, micro transactions are the gateway to long-term relationship value in the form of macro revenue streams like mortgages, home equity loans, auto loans, and investments”.

Micro transactions can also help credit unions experience lower costs of acquisition, higher member cross-sell rates, and improved efficiency in service delivery, all leading to greater long-term growth and profitability, concludes the study.