Credit unions are financial institutions aimed at people who want to save money, get a loan, or pay bills. From a first glance, credit unions are comparable to typical banks since they offer similar financial products. However, a closer look indicates that you can get a different experience from credit unions compared to banks.

So, what exactly are credit unions?

A credit union is a non-profit financial institution that offers financial products to its members. Unlike traditional banks that investors own, credit unions are owned by the members who buy their products. For example, if you open an account with a credit union, you become a partial owner regardless of the initial contribution. Thus, credit unions are owned by their customers.

Credit unions offer multiple financial products, including loans, checking, savings accounts, and credit cards. They primarily generate revenues through interests and account fees, which are reinvested into the products offered.

One major unique feature of credit unions is that they are established to serve specific regions, communities, and businesses. As a result, they are known to offer better in-person services at their physical locations.

While quality in-person customer services boost satisfaction and retention, maintaining them during the COVID-19 pandemic has been challenging. With the social distancing guidelines and stay-at-home orders, most people have resorted to online services to avoid physical contact that may lead to COVID-19 transmissions. With limited opportunities for face-to-face interactions, credit unions are struggling to bring in new members while at the same time keeping the existing ones engaged and satisfied.

Although the overall credit union membership has continued to grow, according to the 2021 Credit Union Trends Report, the growth rate is slower than pre-pandemic. For instance, the report shows the number of members in August 2021 increased by 0.2% compared to 0.4% in August 2020. Besides, credit union members are experiencing economic hardships following the closure of businesses, disrupting their savings and loan repayment patterns.

The Need for Changes

Government regulations requiring the closure of physical branches have forced credit unions to embrace other means of engaging and connecting with their customers other than in-person meetings.

Here is how credit unions have been trying to adapt:

1. Embracing digital technologies to offer online services

Most credit unions have developed digital channels and encouraged their customers to use them to get assistance faster. Examples of digital media include contacting customer care through official social media accounts, sending emails, or using the contact details from the website. Some use chatbots to automate responses to frequently asked questions, while others use text messages. Digital adoption has been the most significant change since many businesses are transitioning towards online transactions.

2. Directing their attention towards crypto

Credit unions have been recently seeking approval to directly hold digital assets, such as cryptocurrencies. A federal regulator clarified last year that credit unions are in fact allowed to provide crypto services to customers through third parties.

Through partnerships with crypto service providers, customers can buy, sell and hold digital assets — provided they meet certain requirements.

This is a much-needed step towards innovation that, if omitted, could lead to credit unions becoming a forgotten thing of the past.

3. New ‘emergency relief’ loans

Since credit unions are non-profit institutions, their financial products are often designed to address local communities’ needs and demands. One major problem associated with COVID-19 was the massive loss of jobs and reduced incomes. Noticing that the community members were experiencing financial hardships, most credit unions created new emergency relief loans to help customers cover urgent financial needs. As we explored in this article, scarcity of money can lead to physical and mental problems, such as headaches, ulcers, high blood pressure, anxiety, and depression. Therefore, emergency relief loans have been a major attraction to new and existing credit union members.

4. Launching financial education resources

Most people lack financial literacy, which affects their investment decisions. As a result, credit union customers are more likely to appreciate institutions that provide appropriate financial education resources to aid decision-making and choices. The Financial Brand published a report indicating that 58% of customers will turn to their primary financial institution for financial education, and 38% reported that they would find financial education programs to be “extremely” or “very” valuable. These findings indicate that providing financial education resources to existing and potential customers will likely increase a credit union’s appeal, thus winning more members.

5. Starting a Referral Program

Starting a referral program effectively encourages the credit union’s current customers to spread the word about it to their peers and colleagues. Research by Nielsen revealed that 92% of consumers are more likely to trust recommendations from friends and family than any other form of advertising. Thus, a referral program can increase membership and generate more revenues.

What’s obvious is that credit unions, as well as banks, have to make an effort — now more than ever — to adapt to the inevitable changes to come in the financial services industry.

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