Digital Transformation in Credit Unions

Banking customers today are digitally savvy; they have an online presence and like to self-serve. In fact, 78% of banked Americans prefer digital banking via mobile app or website.  From a credit union perspective, what are the reasons to cater to this digital audience? In this blog, I’ll share the top considerations when embarking on (or continuing) a digital transformation in credit unions.

Regardless of the many revenue, cost and control advantages of digitalization, the basic underpinning of going digital is simple. Your credit union members expect it.

During the pandemic, previously digitally reticent members realized that financial needs could be, and must be, met remotely. After brick-and-mortar locations reopened, the general population preferred to stay with self-serve convenience at their fingertips.

Digitalization Drives Revenue Through Cross Marketing, Member Satisfaction and Increased Controls

Upsell, Cross-sell and Offer New Products Digitally

It’s important to make sure that credit unions provide balanced and appropriate marketing during online sessions. Even if members aren’t online, they can be marketed to—as long as they’ve granted notification permissions. Credit unions can push notifications that cross-sell, upsell and share new product opportunities, which will drive top line revenue.

Digital Simplicity and Ease of Use Increase Satisfaction

Research studies—and common sense—show that member satisfaction scores are higher than through calls when self-service capabilities are simple and easy to find. Your service agents are likely doing a good job. Psychological drivers are the root cause of this phenomenon, not problems with your team.

For example, members may experience embarrassment when interacting personally with collection and recovery agents. If the debt “conversation” can be automated or virtual through chat-bots, or even online chat, members experiencing delinquency may feel more comfortable addressing the situation. Online self-service capabilities or chat reduces the psychological difficulties associated with person-to-person interactions, and potentially increases cure rates.

Practicality also supports the digital experience. Consider the ease of going online to accomplish a task at any time. For members, an online solution is far better than struggling with restricted service availability and call menus, dealing with hold times or navigating convoluted authorization processes.

Digitalization Reduces the Variability of Controls Across the Business

The controls of digitalization can result in operational efficiency and risk mitigation. Online account opening origination, general servicing, and collection/recovery all benefit from highly controlled disclosure, documentation and capture workflows. When relying on a non-digital channel, required control variability increases; this includes business operation, compliance, operational risk and financial controls.

Front-End Interface Must Match Back-Office Activities

Digital positives quickly turn to negatives if the credit union does not “get it right” on the path from front-end user experience to actual back-office automation. I often ask executives about how many online activities are operating as metaphorical fax machines instead of integrated data, information and transaction processing workflows.

The “fax machine concept” is not only frustrating to the user and your team, but also is inefficient and ultimately, costly.

When a member has trouble digitally navigating, whether they’re trying to self-serve or open an account, the user experience can be frustrating. Providing members with a frictionless, automated journey from end-to-end is incredibly important. Otherwise, you’re just providing a partial solution by digitizing member-facing or back-office activities without integrating the full process.

Automation requires up-front and ongoing investment, but also leads to long-term operational process improvements such as scale and scope economies.

Different Members Will Have Different Digital Expectations

Across the board, credit unions are wonderful at putting members first, but establishing a digital relationship is often new terrain. The meaning of a digital relationship varies by member segment and what those segments are seeking.

For example, I have two teenagers. Each has established genuine, real digital relationships. My daughter’s relationships come mostly through social media. Online gaming is where my son makes connections.

The “relationship need” varies for my son and daughter; social and friendship for my daughter, and collaboration and teamwork for my son. Yet, many of their relationships through social media and online gaming will always be virtual. My kids will never meet most of these people in-person.

Putting this example into the context of digital relationships for your member base provides a different way to think about developing and maintaining digital relationship focus. Digital relationships are unique, depending on the specific need of the member. If you miss the way a member wants to interact with you digitally, you could spoil the hard-fought loyalty that you’ve built over the years.

Serving Members in Financial Distress

A credit union’s use of digital communication actions can benefit members, particularly in times of financial distress. As stated earlier, the psychological benefit to many members is that interacting digitally reduces embarrassment. Member service representatives are still needed, of course, but the greater the proportion of their time spent on complex matters, the greater the value add to members and the organization.

Additionally, credit unions have the data and capability to model financial stress scenarios. Armed with this information, you can engage with members who have not yet informed you about their difficulties.

Your members are attracted to the unique appeal of your credit union and often feel like an individual, not an account number. They may appreciate regular communications from you. If your members have provided permission for digital notifications, you can also help them proactively.

Because of digitalization, you can send struggling members educational materials, either generated internally or from local and government assistance programs.

You can digitally communicate with your member about collections and recovery including specific offers or options for promises to pay or exploring relief plans. The “sting” of the face-to-face or voice-to-voice interaction is removed and what remains is the assistance you provide to your members.

Digital Transformation in Credit Unions

Ultimately, there are so many positives to “go digital” from revenue, expense, and control perspectives that they can’t all be listed here. Similarly, member satisfaction in your digital environment comes from various efforts and digital options.

If you have already started your digital transformation or if you’re just beginning your journey, consider the points made in this article. Don’t hesitate to contact us to delve deeper into the pros and cons of moving to a digitized world.