Credit Union’s New Competitive Landscape: Shifting from Digital Transformation to Digital Optimization
“Meet your members where they are — online.” We’ve heard this mantra so many times that it’s become cliché. That’s because digital transformation — the leading strategic initiative for the past decade — is entering a new phase. It is no longer a competitive advantage to merely offer digital-first services. To be successful, credit unions need to differentiate their online and mobile offerings. We are officially entering the digital optimization era.
Digital banking options are largely table stakes by now. Most credit unions have options to open an account, apply for a credit card and even start the loan process online or via a mobile app. In fact, statistics show an overwhelming preference for digital-first banking now. Forbes Advisor’s 2022 Digital Banking Survey found 78% of US adults prefer to bank online or via a mobile app. Credit unions that haven’t digitally transformed are now at a significant disadvantage.
Now that most credit unions have at least basic digital offerings, the landscape shifts toward which one offers the best banking solutions. Which credit union makes account opening quick and applying for a mortgage easy. Digital banking might feel like a major change from traditional branch-based service, but the underlying fundamentals remain the same. It’s all about the member experience.
Digital Experiences Have to be Quick and Easy
And member expectations are only becoming more demanding. The convenience of opening an account or applying for a mortgage online was a big plus during the pandemic. But if that process takes too long today, members give up. Research from the Financial Brand shows that at the 5-minute mark, 60% of members abandon and find another financial institution. In today’s competitive environment, which credit union can afford to let 40% walk away?
Digital friction is another major challenge driving business away. In fact, 48% walk away once they experience digital friction according to Bain & Co. If applying for a loan is confusing or complicated, that’s nearly half who opt out.
Think about how many more deposits a credit union can add by delivering a great account opening experience. How many more loans can you convert if applying is quick and easy.
Better yet, streamline decisioning and underwriting. We live in a world that wants instant gratification. There are solutions today where credit unions can automate risk assessment and underwriting to greatly accelerate not only the application process but the full loan conversion cycle.
Consistency Builds Member Loyalty
Consolidating the tech stack has become an emerging strategic initiative to help credit unions drive more efficiencies and cut costs. The proliferation of apps for every digital service offering creates tremendous IT complexity that is only proliferating over time.
While the operational advantages of consolidating the tech stack are compelling, the even more important reason comes back yet again to the member experience. A consistent experience across a credit union’s multiple offerings is the best way to reduce friction and simplify digital-first services. Make sure it is consistently quick and easy. A consistent experience inspires trust and underscores your credit union’s focus on members.
Ideally, look for a solution that can offer account opening, credit card onboarding and digital lending, including mortgages, within one single workflow. Bonus points for a solution that adds in lucrative cross-selling to offer insurance, deposit accounts and other incremental revenue opportunities such as treasury management, just as members or businesses need them.
The shift from digital transformation to optimization will help credit unions differentiate themselves to ultimately attract and retain more members. This will require a long, hard look at current digital offerings. Many credit unions already have digital account opening in place, but can it onboard members in under 5 minutes? Without digital friction? And with interest rates expected to fall further, isn’t now the best time to reassess and optimize digital lending? Those that do will maximize their deposit and revenue potential – and grow!
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