Credit Unions: Generating Value Through Digital Ecosystems

Modern-day credit unions are getting on board with sizeable shifts in the finance industry, leveraging fintech partnerships to improve their technical infrastructure and deliver personalised experiences to customers.

While national and international banking institutions are shutting down branches in various towns and cities, credit unions – by and large – are seeking the best of both worlds, retaining their in-person presence while digitising core services to reach a new, technologically-enabled demographic of customers. 

Perhaps this is why Zur Yahalom, SVP and Head of Financial Services for North America at Amdocs, believes “2024 will prove to be the year of the credit union”. 

Through strategic collaborations with fintech partners, credit unions are finding a new way to compete with major banks. 

For Steve Round, Co-founder at SaaScada, the “greater availability of core banking technology has been a game changer for credit unions, allowing them to better understand members’ financial needs and tailor products accordingly, and at pace”. 

Indeed, the number of new fintech startups proliferating the market has increased in recent years too, giving credit unions more options when looking for the right solutions. This, as Round puts it, helps them “deepen relationships with existing members, attract a new generation of members, and unlock new revenue streams.”

Not only does this help credit unions compete with bigger players, he adds, but enables them “to make braver decisions to ensure members’ needs are being delivered”. 

Delivering on member experiences 

Of course, one thing credit unions have always prided themselves on in comparison to larger banks is having a localised niche. Now, as the technological demands of their clients shift, credit unions must meet these changing needs to keep their customer-centric values alive. 

As stated by Yahalom: “Partnerships with the right fintechs enable credit unions to provide even more specialised solutions to certain targeted segments, such as doctors, realtors, retailers, etc.

“By offering specialised bundles of services, credit unions can drive new revenue, better engage their customers and increase loyalty. The more credit unions serve their community clients and the more services they can offer, the better poised they will be to succeed.”

Much like larger financial incumbents and new challenger banks, it’s the adoption of data and AI that is top of mind when it comes to deepening personalised offerings, while cloud computing services are enabling credit unions to improve efficiency and reduce costs.

What’s more, offering superior mobile banking applications is helping credit unions give their customers access to the right financial solutions as and when they need them. 

Leveraging the latest technologies has, according to Yahalom, helped credit unions to “better saturate local markets typically underserved by large financial institutions”.

As a fintech provider, Amdocs has placed a significant focus on its niche, family-first and business-first banking models, which credit unions can tap into to offer services and maximise their customer offerings.

And, when credit unions can marry “pre-existing knowledge of their customer base” with fintech capabilities, they can “further develop personalised offerings that help meet clients’ financial goals,” notes Yahalom.

“This can include more convenient banking through an app, automation tools and resources specific to their client demographic, and even fraud protection services that ensure clients have a safer, more secure banking experience,” he adds. 

Meanwhile, Round feels it’s imperative that credit unions “choose technologies that provide a 360-degree view of customers”, enabling them to deliver hyper-personalisation and feature-rich services.

In addition, a collaboration between credit unions themselves is something Round would encourage – in other words, “pooling their resources to better support their communities”. 

This is particularly relevant for credit unions serving the same communities and customer demographics. 

“By working together to source leading-edge core banking systems, credit unions can create more competitive, innovative banking products and services for their members – allowing them to compete with traditional banks and neobanks,” adds Round.

Capitalising on the big bank retreat

Of course, while innovation and digitalisation are supporting credit unions in their bid to match the services of larger incumbents and neobanks, perhaps it’s what they aren’t doing that is giving them an edge. 

As previously mentioned, credit unions are retaining their in-person presence in towns and cities, providing personal services in locations from which banks are withdrawing.

Round calls this an “opportunity for credit unions to fill the void” and, so far, they are. 

He continues: “Credit unions are supporting overlooked and underserved communities – and why shouldn’t they take advantage of that?

“There are many people whose lives still revolve around in-person banking and cash, predominantly the most vulnerable groups in society, such as people on lower incomes, the elderly and rural populations. So, it’s vital to ensure people are not locked out of financial systems by a no-compromise cashless society that relies only on digital banking.”

While the in-person benefits of credit unions are important to reach customers reliant on cash-based transactions, particularly those not as technologically-enabled as others, Yahalom feels retaining an in-person presence is important for credit unions to show they still know their customers. 

He explains: “Many customers like to have a local branch as part of their financial services experience. It may not be their primary mode of consuming services, but knowing there is a branch nearby with a familiar face that can be available during a time of need is a critical factor for many people.”

Indeed, big banks that still operate branches in remote areas may not be as empowered to solve customer issues outside the standard modes of operation. This differs from credit unions where, more often than not, employees are “empowered to be creative and find the right solutions to serve their clients”, according to Yahalom.

“It’s still very hard to replace the human touch of a local teller who knows the customer and greets them by their name,” he continues. 

“Technology is coming a long way in personalising services and Gen AI can help in making digital experiences feel personal to the point that it can be difficult to tell if you are interacting with a person or a machine. 

“Those financial institutions that can truly harness technology and create unique and personal experiences are expected to reap the rewards of customer loyalty and appreciation. 

“However, getting these experiences right is far from trivial, and we believe balancing between human and digital experiences will continue to be the right path for the foreseeable future.”

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