April 14, 2021 at 09:00AM

Loyalty is the lifeblood of financial services, paying dividends for credit card networks, FinTechs, big banks and credit unions (CUs). Initiating, and maintaining, a sticky customer relationship means that CUs can bring new products and innovations to their members, creating new revenue streams without having to chase new member acquisitions just to replace attrition.

But incumbent financial institutions (FIs) are finding that in some cases, customers are leaving for digital-first competitors in order to take advantage of what they perceive to be better features and terms. And only about 9 percent of CU members have recommended their institutions to their children.

To that end, PSCU Senior Vice President and Chief Growth Officer Brian Scott said that CUs, to stanch defections, need to leverage technology that magnifies their strengths and guides members along their “financial wellness” journeys. “The more financial services somebody uses from their credit union, the harder it is for them to leave,” he told PYMNTS. “Credit unions need to focus on getting more products and more financial services tools into the hands of their members.”

It’s all too easy, he said, for CUs to “sit back” and become, in effect, savings and loan institutions, rather than crafting full financial partnerships with their members. Auto loans, deposits and other traditional offerings are strong revenue contributors. But they are not enough, Scott said — especially not during times of economic hardship. He pointed out that as many as 60 percent of CU members have indicated that they are struggling financially through the economic havoc brought about by the pandemic.

CUs have been more keenly focused on educating members along their financial journeys. Positive stories and word of mouth can shore up trust, bring in new members, and even get parents and grandparents on board with bringing younger generations into the CU fold. Those educational efforts must extend across all touchpoints of interaction between CUs and members — online and offline — in a proactive manner.

“The credit union has enough data and information on people to know when things are going well; we’ve built our own predictive models,” Scott said. “We can predict when somebody’s struggling financially, or even when they’ve got a new job, and now all of a sudden they’re more financially affluent than they were. They have more disposable income. We can see how it impacts their spending.”

With that data in hand, he said, the CU can pinpoint when a group of members may need an auto loan, for example — or, conversely, when times are tight and when they may need assistance.

“Because of patterns, we can see it coming,” Scott recounted. “People building up debt, people starting to make minimum-only payments right at the same time that they are getting paid. These are indicators that someone is struggling financially.”

Proactive Mindset 

With a proactive mindset, reaching out during delinquencies — or even just before slipping into delinquency — can actually turn what might be a rough time in a member’s life into a proactive experience with the CU.

“It’s not just collections,” said Scott. “It’s more about managing delinquency. There are a lot of reasons people can be delinquent or behind on payments. It could be that they just forgot. Or it could be that they’re facing financial difficulty, and I think that being able to manage and understand and help through that process is what collections is all about. We’re not just collecting on the loan — how can we help people make payments or set up payment plans?”

Methods of outreach before getting into the actual collections process, including phone calls and other efforts, can help ensure that some payments come in, while also fostering trust between the borrower and his or her credit union. Looking ahead, Scott said that amid waves of consolidation, credit unions remain financially healthy, with mergers and acquisitions happening in pursuit of scale.

“Financial services is a scale business, and complexities are being introduced into the industry around risk management,” he told PYMNTS. “It’s harder for a smaller financial institution, whether it’s a bank or credit union, to be able to effectively deploy all the tools to defend against hackers and data breaches.”

In recent years, he said, credit unions have been sharing back-office services, HR teams and technology teams in pursuit of scale. It’s a trend that is still in its infancy, but one that will gain traction over the next few years. “Credit unions will play more in the FinTech space” through mergers, acquisitions and partnerships, predicted Scott, “as opposed to thinking about neobanks and startups simply as competitors.”

CUs Cement Loyalty By Helping Members With Financial Wellness …

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