Evolution More Dangerous than Revolution? How Digital Adoption for Credit Unions Matters.

Digital Evolution for Credit Unions
(Last Updated On: September 18, 2023)

Editor’s note: This is a guest post from our colleague, Adam Thompson, from StrategyCorps. We thought the message resonated, especially as members adopt more and more digital behaviors and expectations. Please enjoy his insights, then take a look at how they can help your credit union identify unprofitable members, then “onboard” them into revenue-generating activities!

While there’s a lot of talk about credit union industry or technology revolution, the fact is it’s generally evolution that transforms and lays waste to stragglers and the stubborn.

One area where digital evolution blew in with a vengeance was in consumer retail. At the turn of the century, major department stores were the anchors of where you shopped.

No one would consider building a shopping mall (there’s still a few) without one or two major retailers to draw the crowds.

But Amazon changed all that. Whether it was solid legacy names like Sears or Kmart, or upscale brands like Bloomingdales or Macy’s, businesses that thought they could outlast, outspend, or simply ignore this new digital retail “fad” hardly even bothered exploring the digital retail concept. Until it was too late.

Even specialized retailers like Circuit City, Radio Shack, and HH Gregg fell victim. Best Buy barely survived, like Macy’s, only by putting forth an enormous effort to rethink their locations and investing in a valuable digital experience.

Retail Digital Tsunami

The Challenge: Digital Evolution, Not Revolution

There’s no doubt that in the past two decades the banking and credit union industries have been through a great deal of tumult, and not all of it has been about digital transformation.

But the pandemic and the massive amounts of cheap, easy money that venture capital and investment bankers had access to, drove a massive effort to transform legacy banking.

As that tsunami recedes, we can see some of its impacts. A bit of damage to legacy banks, for sure, but it’s not the end of the world for the status quo. However, you can spot it in the distance.

A study from September 2021 by digital-adoption.com reveals that, of customers who switched financial institutions (FIs), more than 40% said that mobile banking was the reason for the switch, followed by 35% who changed their banks for online banking.

Main Reason for Switching Financial Institutions - Mobile Banking - Digital Adoption
Go look at your App Store ratings, right now. Source: digital-adoption.com

This is clearly member-driven demand for change.

Of course, part of the reason this is happening is because almost everything at this point has some kind of digital analogue. When Apple ran its ear-worm campaign for the iPhone – “there’s an app for that” – who knew that a decade later it would be literally true for virtually every industry. (Editors note: Ahem…)

Banking is no exception.

Read the (Mobile Banking) Room

There are more than 200 million people in the US – (some of) Gen X, Millennials, Zoomers – that are digital natives. Younger generations live through their phones, which have become powerful handheld computers linked to incredibly powerful mobile networks.

Primary Users of Mobile Banking - Digital Adoption
Source: digital-adoption.com

And the crazy thing is, the US is lagging behind other regions of the world in digital adoption of banking services. The possibilities for growth in this sector are enormous.

Number of Active Online Banking Users World - Digital Adoption

The US also has slower average connectivity speeds, which may account for some of the subdued adoption numbers.

Editors note: I discussed this topic on the Credit Union Geek blog in 2021 with the article 5G Doesn’t Matter. Slower speed is unlikely to affect low-bandwidth activities (like banking), but might make you less likely to just grab your phone if it isn’t the fastest “computer” you have.

However, some of it falls at the feet of legacy banks and credit unions that aren’t implementing enriched digital solutions for their customers and members.

StrategyCorps Subscription Model Client Story - Cover

Learn how one credit union made the change to subscription and the gains they saw following. Could you duplicate with your members? Get the data and honest insights needed in the Client Story.

Now Is The Time For Accessible Change

Certainly, the big national banks are deploying massive amounts of money to reinvent the banking experience. New lobby ideas, in-house digital banking teams, and state of the art apps.

But smaller FIs don’t have the resources to drive this digital adoption at such a scale.

That’s all right.

It isn’t about delivering a complete transformation and putting the legacy business at risk. But it is about beginning to move down the road with real efforts and products to show members that your credit union is heading in the right direction.

There are ways to make your data more actionable. There are proven solutions that can revitalize primary accounts for current and prospective clients. There are ways to transition from punitive fees – which are also on their way to the dustbin of history – to rewarding renewal revenue models.

Now is also the time for community banks and credit unions to reimagine how to create more value from their branches

And given the fact that net interest margins and earnings are growing for many FIs, and competition from neobanks and fintechs is on the downswing (for now), this is the time to develop an action plan.

Because as the unrelenting waves of digital challenger banks roll in, those FIs that continue to sit on their hands hoping for the best won’t be swept away, but may well be eroded away.

Editor’s note: Thanks and credit once again goes to Adam Thompson, Director of Sales at StrategyCorps. Minor edits made for readability and clarity.

Joe Winn - CU Geek

Blogger. Speaker. Futurist. Part-time Jedi.

Dedicated to helping your credit union, large or small, deliver mission-focused financial empowerment to your members. And make a positive impact on your community while you’re at it.