For consumers looking for banking services, and to save or borrow, credit unions (CU) have traditionally held a revered place. They’re recognized for their community-centric ethos and good customer service. However, recent developments suggest a loss of this competitive edge. This article aims to shed light on this developing challenge and outline practical opportunities for improvement.
Credit Union or Bank – Understanding the Choices
The pros and cons of whether to choose a bank or CU are generally well understood. They are well illustrated by an article by Lindsey Crossmier in InvestorPlace Beacon, published late February. Stand-out differences include CU membership requirements, often based on location or occupation. However, once this barrier is overcome, members typically enjoy lower loan costs and higher savings rates than those offered by banks. On the flip side, banks boast a wider range of products and services, and very few have membership requirements.
Credit unions do face intense competition from online-only banks, whose lower operational costs enable them to offer attractive rates for borrowing and saving. Further, banks have been quicker to adopt modern technology, a domain where CUs have historically lagged. This gap, however, is narrowing as credit unions increasingly embrace collaboration to introduce cost-effective digital infrastructure.
Modernizing for the Future
Credit unions are proud of superior customer service. Yet recent findings dilute this belief. Writing in Consumer Reports, Scott Medintz refers to 2023 data from California identifying CU as among the top culprits for imposing “junk” fees, particularly for overdrafts and non-sufficient funds (NSF). This revelation suggests a wider nationwide trend and seriously impacts the reputation of credit unions.
The need for CU to improve is clear and opportunities to do so are straightforward:
- Introduce Fairer Fees – revisit fee structures so they are transparent and fair, to significantly boost member confidence
- Elevate Customer Service – excellence in service must permeate all levels of the organization, not just the front-facing branch staff.
- Digitize Operations – digitization of back-office functions can lead to greater efficiencies and better member experiences. Improve everything from loan processing to member communication.
- Leveraging Specialist Third-Party Services – Strategic partnerships with specialist third-party providers can help CU enhance their offerings cost-effectively and efficiently. Regulatory compliance is an example of where this really pays off.
The Retail Foreign Currency Opportunity
Another area ripe for differentiation is foreign currency and travel money services. Historically overlooked, this segment offers a lucrative opportunity, especially given the uptrend in international travel for the US. By offering an easy-to-use service for foreign currency transactions (via mobile app, for example) CU can meet a growing member need and tap into a growing revenue stream. Money 4 Travel by Essiell exemplifies such a white-label service that seamlessly integrates with credit unions’ operations, prioritizing convenience for both members and staff. In-branch simplicity also provides more time for staff to relate to members, with a genuine opportunity to cross sell additional services.
Money 4 Travel is a leading specialist foreign currency service, delivering more than transactions. It’s a bridge between traditional member care and modern financial solutions. For CU, adopting such innovative services means more than just keeping pace; it’s about setting the pace, showing they meet member needs and demonstrating care for their financial well-being. Money 4 Travel, it turns out, is about much more than money for travelers.
By Declan Morton, staff writer at Money 4 Travel and Essiell Ltd.
For reference
Maximize Your Money: Credit Union vs. Bank? Explore Pros, Cons and Make the Smart Choice.
By Lindsey Crossmier, InvestorPlace Beacon, February 28, 2024
When It Comes to Junk Fees in Banking, Credit Unions Can Be Among the Worst Offenders
By Scott Medintz, Consumer Reports, March 4, 2024
