INNOVATION & TRANSFORMATION: CREDIT UNIONS
State of the Unions Can America’s credit unions adapt their unique customer relationships to the digital age? They can and must, say Matthew Williamson and Ruby Walia of digital experience consultancy Mobiquity, and Cyrus Taheri, from Mambu Firstly, a quick history lesson. Credit unions (CUs) have roots stretching back to 19th century Germany, where the first rural cooperative saving and lending institution was started in 1864 by social reformer Friedrich Wilhelm Raiffeisen to help farmers collectively even out good and bad years. The first to be incorporated in the US was in New Hampshire in 1909 and the Massachusetts law that enabled it to happen was later used as the model for President Franklin D Roosevelt’s Federal Credit Union Act in 1934, which allowed CUs to be formed in all states to ‘promote thriftiness and prevent usury’ as part of his famous New Deal measures during the Great Depression. The now 5,000 or so not-for-profit and member-owned cooperatives, historically linked to an organisation or place, play a vital and significant role in the US economy, with latest estimates showing they have combined assets of $1.9trillion and some 125 million customers. But they now face challenges around the need to balance their traditional USPs of iron-clad customer relationships, embedded in their local communities, rock-solid trust and ultra-low operating costs, with increasing customer demands for ever-more digital capabilities, which have been accelerated further by the COVID-19 pandemic. Although there are some notable exceptions, there is a commonly held view that CUs are struggling to keep up with their banking peers when it comes to innovations. The 2020 American Customer Satisfaction Index showed credit unions’ rating falling behind the banks’ for a second consecutive year, and much of that disappointment was linked to the payments experience. That prompted Alloya Corporate Federal Credit Union, based in Naperville,
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Illinois, which provides services to 1,400 credit unions in addition to its own members, to launch Alloya Insights: Faster Payments community in February 2022. The network aims to help it and fellow CUs better understand the evolving landscape of faster and real-time payments ahead of the launch of the Federal Reserve’s FedNow instant payment service next year. By then, the Fed may well have come up with a strategy for a central bank digital currency – and crypto is another area of payments in which CUs trail. That’s not to say that the credit union community is backward or unwilling to evolve. For example, Alliant, an 86-year-old Chicago credit union with £14billion in assets and more than 600,000 members, has already added the ability to use digital payment apps like Apple Pay, Samsung Pay and Google Pay. Now, heeding further demands from its customers, Alliant has introduced an account supported by a contactless debit card, a mobile app and an online banking platform. And Leverage, a for-profit subsidiary of the League of Southeastern Credit Unions, has partnered with Los Angeles-based payment processor CheckAlt to roll out a loan payment app for users of its Leverage Payment Solutions. Benefits to CUs utilising CheckAlt include application programming interface (API) capabilities that allow for a direct integration into their core systems, enabling them to streamline the tasks of processing consumer loan payments and settling funds into a ‘one-stop shop for payment processing’. As the deal allows access to CheckAlt’s online payment app, LoanPay, customers of participating CUs can also set up their loan repayment plans. Matthew Williamson, global VP of digital experience consultancy Mobiquity, is convinced CUs can deploy their
The strength of CUs is the connection they have with their customers… the challenge is how they provide the digital capabilities that are so attractive to customers, while retaining that emotional bond Ruby Walia, Mobiquity
traditional values to flourish in a digital environment, and so offer their customers the best of all worlds. He says: “Credit unions have always had a really strong customer relationship. In our line of work, we talk about know your customer, not just in the regulatory sense, but in the sense of actually understanding your customer’s needs, wants, desires and what they’re going to do next. CUs ffnews.com
