Members already do their banking on the go; credit unions need to hit the gas to catch up.
Have branch, will travel” is the new slogan for many credit union members.
A growing number of members prefer to take their favorite branch with them everywhere they go, keeping it handy for when they need to deposit a check, transfer money between accounts or review their balances.
If that sentence left you with the image of a person burdened by a branch on their back, think again. For a significant slice of your members, their favorite branch is the one in their pocket—your mobile app—assuming it offers all the same services as your physical locations. Therein lies the challenge, one that some experts say credit unions are failing: Your app faces high expectations and strong competition from other credit unions, banks, neobanks and fintechs, not to mention the PayPals, Venmos and Apples of the world.
For the past several decades, one of the best ways to determine someone’s primary financial institution was to ask where they did their checking. Now, the best determinant is which mobile banking app they use most.
“We’re seeing now a mobile-only generation,” says Preston Packer, chief marketing officer, FLEX Credit Union Technology, Sandy, Utah, a provider of core technology to more than 260 credit unions in 48 states. “Members don’t want to go between the browser and an app. … Whatever features have historically been available in that internet banking space, they expect those to be available in the mobile app.”
Members Already Mobile
Packer says credit unions need to focus on member experience within the app to meet those expectations and needs. “We’ve transitioned quite capably not just as an industry but also as a society to kind of this app base. The experience that a user has with those apps is going to determine whether they adopt it or not.”
A recent study by J.D. Power highlighted the fact that consumers have not been impressed with their mobile banking apps, even though they have been using them more. “Based on their experiences with other consumer apps and websites that anticipate their needs and offer a highly personalized customer experience, bank and credit card customers are expecting more from their digital solutions,” said Jennifer White, senior consultant for banking and payment intelligence at J.D. Power.
Lack of personalization contributed to a drop in consumer satisfaction from the previous year, the study found.
In the financial services industry, mobile banking is the only distribution channel that is growing. Branch use is declining, a drop helped by the pandemic, while web-based banking is holding steady. The shift has been led by younger members, but the pandemic and growing comfort with online services and shopping has increased mobile use by all ages.
For example, during the pandemic, the percentage of Americans who said mobile banking was their preferred method increased to 44% from 33%, with Gen Z hitting 56% and millennials 51%, says a report by the American Bankers Association. Only Gen Xers and baby boomers preferred online over mobile.
Sean Calhoun, VP/general manager of digital banking solutions for CUES Supplier member Fiserv, Brookfield, Wisconsin, a provider of payments and financial services technology, says he expects mobile will become the primary channel for most age groups in the future, and it’s the focus of Fiserv’s development efforts. “For Gen X and younger, it’s the channel people are using for their typical banking.”
Roadblock or Express Lane?
Soon it may be unnecessary to use the word “mobile” in “mobile banking.” Most members will simply refer to managing their money on their smartphones as “banking.” The transition started 15 years ago when Apple introduced the iPhone and has gained steam in the past five years as networks and phones have become more powerful.
By the end of 2020, 78% of people worldwide were smartphone users, and this year alone, smartphone shipments worldwide are projected to hit 1.43 billion units.
Financial services is just one of the many industries upended by the rise of the smartphone. For example, the news business has been shaken to its core since 2010, first by the shift to online news and then by the rise of news apps and social media. The loss of readers, viewers and advertisers has left media giants and local outlets scrambling to survive.
Two-thirds of all online news activity will soon be on mobile phones, and that presents many challenges for news organizations to be able to communicate effectively in the new format, says a report by Johanna Dunaway for the Shorenstein Center on Media, Politics and Public Policy at Harvard’s Kennedy School of Government.
Credit unions face similar challenges determining how to successfully offer their services in the palm of a member’s hand. But Packer notes credit unions have an advantage in the competition with fintechs and banks, because they know their members and have a relationship with them—in addition to having access to lots of valuable data, such as credit reports.
“What we have to do is take that relationship and use it so that the member does feel that engagement and they do feel like, ‘Hey, my credit union knows me.’ We have to take that information and turn it into actionable data,” he says.
Calhoun notes an important shift in member behavior: For mobile users, banking is no longer an errand that involves a trip, or something they expect to focus on; instead, it has become one of the many things that are done while multitasking.
“So, you want it to be an experience that gets them in, enables them to very quickly do what they want to do, and then they can move on with their day,” he says.
10-4, Good Buddy
One advantage of the mobile channel is that it also allows credit unions to communicate with members immediately and directly as part of their daily life. Calhoun says CUs can do this through texts or notifications, messages within their mobile app, or through features in the app, such as an “agent chat that allows the credit union to be there when the consumer might need them, inside their mobile app, as they’re trying to perform a banking function.”
He says a credit union’s focus on meeting members’ needs will allow it to provide better service than a fintech or neobank.
“I don’t believe we’ve seen the neobanks really want to have that high-touch relationship with their end users,” Calhoun says. “Their focus is on a good digital experience but it’s also very focused on automation and things of that nature, which is not necessarily where credit unions are looking. They’re looking for that engagement and relationship with their members.”
A report by CUESolutions provider Cornerstone Advisors, Scottsdale, Arizona, found nearly eight in 10 mobile banking users rated managing balance/fraud alerts as either “critical” or “important” features. The second most highly rated feature—by 74% of users—was the ability to turn payment cards on or off, followed closely by the 71% of users who said mobile deposit is a critical or important feature.
Calhoun says members will soon be able to view a more detailed history of their transactions that includes relevant data about where they made those purchases and perhaps even have the locations mapped with links to the merchant’s website or email address.
This would help members who have questions about a transaction and also eliminate many questions to member service representatives about contested transactions, he says. “I think offering the ability for a member to dispute a transaction in the mobile app … will be necessary for credit unions, beyond the ability to set up additional controls, set up alerts and view transactions.”
From Truck Stop to Oasis
Mike Duncan, founder/CEO of online and mobile technology company Bankjoy, says credit unions need to do more to replicate their member service capacity in a mobile world.
“The competitive advantage that we’ve seen credit unions have, which is providing really great service to people, is deteriorating because the mobile apps are not providing the bare minimum when it comes to online experience,” Duncan warns.
The personal touch—the knowledge of their members that has allowed credit unions to tailor services and experiences in person—needs to be provided digitally. “We’re not translating that good service into the digital world,” Duncan says.
He urges credit unions to think about how they can help members achieve their financial goals through the app delivery channel.
“Even though they’re not coming into a branch or not calling, when we have a personal relationship with them, how can we translate that personalized, tailored experience from the branch into mobile?”
Duncan says some legacy core banking systems have been a barrier for some credit unions because they haven’t made it easy to innovate and offer fully featured mobile apps. In some cases, that has forced credit unions to try to stitch together solutions of their own by working with up to a dozen vendors. That approach can be inefficient and time-consuming, so Bankjoy, founded in 2015, now works with more than 65 credit unions to circumvent these challenges.
Duncan says credit unions need to use “more targeted and segmented messaging to ensure they’re providing the right products and services to the right people at the right time.” He notes that there are many marketing tools available to help credit unions do this via mobile and online banking, “but they need to adopt these tools and do a better job targeting the people who need services.”
For example, he says credit unions should start providing mobile tools to give members a better understanding about how their money works and help develop better personal financial wellness.
“Most credit unions have not figured out yet how to grow beyond the basic table stakes features of digital banking to provide quality tools that are going to transform a member’s life,” Duncan says.
He notes that fraud is a growing problem that credit unions must help their members combat—ideally before an alert is even necessary.
“Criminals are finding more creative ways to take advantage of people, and instead of trying to break the systems and trying to break the technology, a lot of times now they’re just calling them up and they’re disguising themselves as someone from the credit union and asking for personal information they need to take over that person’s account,” he says.
He suggests credit unions fight back by providing more educational tools via app to highlight potential threats and make members aware of how they may be approached by criminals.
Locked Up Tight
By their very nature, mobile apps can actually help reduce fraud and make life tougher for crooks. The first step is the sign-in procedure, which can include requiring biometric matches, made easier by the latest iPhones and Androids, and two-factor authentication with SMS texts.
Packer says he’s careful about his privacy. “I’m the type of person that every account I own requires two-factor authentication, including a biometric. I have set up controls so that I’m getting notifications anytime the account is accessed.”
He notes that banking in a mobile app can be much safer than a laptop browser. “Phishing increased exponentially during the pandemic, but if you’re [banking] in a mobile app, there’s no risk of getting an email and mistaking that for the credit union’s mobile app. I’m not accessing a link or a web browser to connect to my [mobile] account. A perpetrator can’t download an app to my phone, but they can disguise a link that makes me think I’m going somewhere I know.”
Calhoun of Fiserv believes the biometric capabilities offered by mobile apps will continue to see more and more use. “I think that biometrics provide the best level of security that’s available, as opposed to a user ID and password. A mobile app secured with biometrics may also be an access point for other channels.”
He suggests many financial institutions would like to get rid of passwords and use the biometric security of their apps, so that “in the future, if you want to log into your web solution, there will be a component that takes place on the mobile application to verify your biometrics and then allows you to log in.
“The general view is that any place we can replace passwords is a better solution,” Calhoun says.
Packer notes that one of the primary ways credit unions can help members avoid fraud is by making it easy to turn their cards off for new transactions while still allowing already-authorized payments.
The AI Attraction
A few years ago, there was widespread agreement that online banking and mobile apps should include personal financial management tools to allow consumers to aggregate their various accounts, cards and investments. That approach has not succeeded, in part because it relied on individuals to carry out the work. But now artificial intelligence is making it possible for apps to offer real-time, plain-language financial advice that can help consumers manage their money and their expenses.
Calhoun says this contextual method of personal financial management offers more value than the aggregation approach tried earlier.
Duncan notes that people at every stage of their life have financial challenges that credit unions can help meet with targeted advice in their app. Bankjoy also offers a conversational AI feature that lets people just talk to the device and check balances or arrange transfers, much as they might talk to Alexa or Siri when they want to play music or turn down the lights.
Bankjoy additionally uses AI to do segmented and targeted advertising that builds on all the data a credit union has to serve members useful offers.
“What I want to provide is an experience in the user interface and design, ... [a] thoughtful experience that’s going to make people take a look at their app and say, ‘Wow, my credit union really gets it. They really care about my experience, and you know, a lot of banks and credit unions don’t do that,’” reflects Duncan. “You want to create this effect where this person is saying, ‘Hey my friend or family member should go check out this credit union.’”
And, of course, you also want to create an experience that will inspire users to go to their app store and give your mobile offering a high rating, since that’s a key place consumers will be comparing their options and seeking advice about what branch to put in their pocket. cues icon
Art Chamberlain is a reporter who focuses on the credit union system.