Payments modernization is the key to helping credit unions gain and retain younger members

Credit unions are struggling to attract younger demographics, which is unfortunate. By not engaging with these age groups, they are losing out on providing lower fees for banking services and lower interest rates on loans. This situation represents a missed opportunity for younger consumers and the credit unions themselves, as their business model and mission align closely with the core values of these younger generations.

All else being equal, credit unions would win any financial services popularity contest fought on these grounds. However, things are not equal with digital offerings, which are also extremely important to Generation Alpha.

This generation started using digital devices from a very young age. By the time they become major consumers of financial services, it will be in their nature to expect seamless digital experiences. Yet many credit unions, even some of the largest, do not yet offer alternative payment types like Google Pay, Apple Pay, Zelle, or Venmo. This plays into the perception among younger audiences that credit unions are less technologically advanced than other financial services providers.

Credit unions can give their members a seamless payments experience by offering alternative payments and mobile wallet options. These methods are vital for businesses competing in the digital economy.

Part of the reason credit unions struggle to keep up with the latest technological advancements is structural: the decision-making boards at credit unions have a lot on their agenda, and they also have various competing priorities for resources and budget.

A key insight on future improvements emerged from a recent conversation with a credit union vice president (VP). This VP expressed pride in the organization’s selective range of services, which leads to high member satisfaction scores. However, he also acknowledged that their limited payment options were a significant weakness in the collections process.

Credit unions frequently contact members with overdue payments by phone, but they typically ask them to visit a branch to make a payment. As we move further into the digital age, the effectiveness of this approach is quickly declining. A much more efficient solution would be to allow members to make repayments over the phone using a debit card or other available payment methods.

This scenario highlights the importance of investing in new payment channels, even if it means incurring some costs for processing in-the-moment payments, which may be a few dollars per transaction. The cost of missing repayments entirely is significantly higher. It also indicates that credit unions could effectively introduce new payment options through their collections process. This could include offering payment methods such as debit cards, Apple Pay, and Google Pay, plus experimenting with self-service options for overdue members, as resources permit.

Fraud is becoming an increasing concern for credit unions. The rise of digital banking has introduced new vulnerabilities, which fraudsters exploit in sophisticated ways. To combat this threat, credit unions must prioritize ongoing education for their members about fraud risks and invest in modern, multilayered security measures powered by artificial intelligence.

The right payments partner for credit unions embarking on this journey will provide more than just robust and secure technology solutions. They will also offer consultative support services and expertise to ensure the project is delivered efficiently, managing costs and resources effectively.

In addition, an ideal partner will stay ahead of emerging trends and regulatory changes, providing ongoing support and innovation to keep the credit union competitive and secure in a rapidly evolving financial landscape. This holistic approach ensures that credit unions can focus on their core mission of serving their members while confidently navigating the complexities of modern payment and fraud prevention systems.

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