CU Management Feature: Open Bank Data Unlocks New Digital Experiences

Leveraging external data sources and personal finance tools tailored to meet individual member needs can give credit unions a competitive edge.

This article originally appeared on CUManagement on January 26, 2022.

Over the last couple of years, credit unions have experienced impressive growth. In 2020, membership surged by nearly 30% worldwide, and this past year, total assets topped $2 trillion as membership hit a new record of 128.8 million.

But while members have had more borrowing power than ever while rates remained flat, credit unions have been stuck with record deposits and focused on growing their loan portfolios.

Consumers’ digital expectations have changed and matured during the pandemic, so now is a great time for credit unions to re-energize technology efforts and focus more intently on delivering digital experiences that put members first.

Combining Digitization & Personalization  

The days of mass email blasts and generic marketing are long gone. Members don’t want to be pushed irrelevant products and services. They want experiences that add value to their everyday lives and improve their financial health. In fact, a recent report from Salesforce surveying 15,600 consumers and business buyers globally found that 66% of respondents expect companies to understand their unique needs—yet 66% also say they’re generally treated like numbers. Credit unions are no exception to this.

Moreover, 71% of consumers feel frustrated when a shopping experience is impersonal and 70% of millennials—the largest generation with the most purchasing power—are frustrated with brands sending irrelevant emails. The overwhelming majority of consumers (91%) say they are more likely to shop with brands that provide offers and recommendations that are relevant to them.

Dominating conversations across every industry, the COVID-19 pandemic led to a shift in consumer behaviors that are becoming permanent. The most mundane activities have turned digital, forcing those few reluctant consumers to go outside their comfort zones—and they don’t appear to be going back.

According to a recent FICO report, 71% of U.S. consumers are now willing to open a bank account digitally. Credit unions are also at greater risk of losing out to mobile payment apps like Chime, Venmo and Cash App, which are now in use by four in five Americans, according to NerdWallet.

Consumers Are Googling Financial Advice

Amid global lockdowns, Google reported a spike in searches last year for financial services and questions. Consumers are increasingly relying on internet searches for financial guidance, with one of the most common searches looking for financial calculators. According to Google Search Volume, over two million people in the U.S. search for financial calculators every single day, with home lending/mortgage, auto lending and retirement ranking highest.

The good news is a research study by Chimney found that 90% of financial institutions’ websites have financial calculators, helping to increase traffic and improve their funnel. The bad news is that most calculators have failed to keep up with the times; they do not personalize the experience, nor are they designed with the member in mind.

This is dangerous if credit unions want to remain relevant. According to Forrester, 89% of digital businesses are investing in personalization, meaning consumers will soon anticipate it across all digital interactions, including their credit union’s mobile banking app and website. If credit unions fail to deliver the digital experiences their members expect, members will find it elsewhere.

Open Financial Data Unlocks More Comprehensive Digital Solutions

Life’s most important financial decisions now happen online, placing credit unions in a unique position to promote smarter financial decisions through digital tools and advice. But this requires a significant investment in a variety of new technologies.

While credit unions sit on a significant amount of member data, do they really have a complete financial picture? Integrated credit score solutions have gained traction because institutions can gain a more comprehensive picture of a member’s financial health. But what about the rest of the financial picture—their home, investments or employment?

To effectively personalize a member’s digital experience, investments in open banking data and external data must be made. This allows credit unions to access more financial data without extensive integrations. Such data can then offer insights into the member’s financial needs. Not only does this help credit unions tailor interactions to the individual member, but they can more easily guide members successfully through their financial journeys.

The likeliness of credit unions improving digitization efforts in 2022 is high. In recent years, leaps have been made to adjust and deliver new technologies to meet members’ evolving needs. Additionally, NCUA (National Credit Union Administration) has made steps towards improving the regulatory environment around digitalization so that member satisfaction and experiences are not hindered.  

One challenge remains: Disruptive fintechs are setting the bar high for member experience expectations. They have more resources and fewer regulatory requirements (for now), so they can innovate faster than credit unions.

To overcome this challenge, credit unions can partner with the fintechs driving this change. Rather than spending precious and limited internal resources, institutions can leverage fintech solutions to deliver the intelligent experiences members love. In fact, we are already seeing increased activity around credit union-fintech partnerships. Even credit union service organizations are investing heavily in fintechs as a way for the CUs they serve to innovate without exhausting resources. This will enable credit unions to deliver on their mission of providing exceptional member service. Together, fintechs and credit unions can build deeper relationships with members by transforming and personalizing their banking experience with the help of meaningful data.

Matthew Covi is the CEO and co-founder of Chimney, a financial tools provider based in New York. For more information, visit https://chimney.io.

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