The Financial Brand Insights - Fall 2022

No. 9: ESG for Offense and Defense As more stakeholders, including regulators, board members, employees and members, monitor brands for their environmental, social and governance (ESG) efforts, credit unions are considering changes. An increased focus on diversity, equity and inclusion (DEI) is one of the early areas of focus. Credit unions admit to having low levels of knowledge around ESG, however. Very few (1%) claimed to have expert-level knowledge of the issues surrounding ESG, while 69% said they had some or almost no familiarity with ESG. 1

No. 6: Increasing Importance of Technology and Data One of the most pertinent benefits of technology is access to data.

The window of opportunity for financial institutions to win the data war with Big Tech is narrowing, says McKinsey. Whereas banks and credit unions may have greater access to information around financial transactions and creditworthiness, Big Tech has insight into many more and growing slices of the data pie. They know location and device information, preferences and opinions, good and bad purchase experiences, online interactions and social network activity. With Big Tech’s foray into financial services, they are amassing highly structured transaction and credit data. With this much data and the ability to marry it with technology, Big Tech threatens to create a business model that will deliver a superior customer experience, drive operational efficiency and dramatically shift market share. It’s no wonder that:

claimed to have expert-level knowledge of the issues surrounding ESG

said they had some or almost no familiarity with ESG 1

1% ONLY

69%

listed the increasing importance of technology as a top-three trend to act on in in the next three years

with the largest number saying it is the No. 1 trend to act on 1

37%

18%

No. 10: Nontraditional Lending Consumers are taking advantage of new forms of lending, such as buy now pay later, small-dollar loans/ payday alternative loans, solar loans and other forms of point-of-sale financing, and cash advances offered by large employers (e.g., Walmart). To compete, traditional financial institutions are looking for opportunities to power their digital loan growth through partnerships. Below are some actions steps CUNA Mutual Group recommends for doing just that: • Identify and close any internal digital lending capabilities gaps

No. 8: Emergence of Decentralized Finance (DeFi) Credit union leaders are paying close attention to the rise of digital currencies and blockchain as potentially disintermediating forces. While DeFi is capturing a lot of attention in the press, and financial institution leaders are thinking about the opportunities it presents, it doesn’t appear to be a top priority for strategic action. No. 7: Changing Workforce The war on talent and high front-line turnover are the area’s most impacting the credit unions that participated in the research. To respond to changing expectations of employees, multiple credit unions told our researchers they are embracing work- from-home and hybrid models, reviewing compensation packages (especially benefits), changing hiring processes to find higher-quality staff and using technology to drive efficiency. listed acting on shifting workplace trends as the top trend to act on 1 15%

• Create a dedicated collaboration team focused on the success of the partnership • Start small – utilize pilots or targeted rollouts before scaling up • Vet potential partnerships thoroughly • Evaluate and adjust the approach as necessary

• Weigh pros and cons and decide on your approach to fintech lending partnerships • Align on success metrics so expectations are set from the start

Conclusion One thing is certain: Financial institutions are competing in a complex and dynamic market, and it would be nearly impossible to discuss all the forces shaping financial services in one article. Perhaps a participant in the CUNA Mutual Group research put it best when they said, “In order to compete, we will need to increase investment in technology that members not only want but expect from their financial institution. If you don’t keep up, you get left behind.” 1

CUNA Mutual Group will continue to work with partners like McKinsey & Company to monitor and analyze external forces. The insights help us advise our credit union constituents on everything from strategy and business planning to product refreshes and other strategic initiatives. ▪ 1 CUNA Mutual Group, “CU External Forces Research,” Apr. 2022 2 Experian, “State of Automotive Finance Market Report,” 2021 3 CUNA Mutual Group and McKinsey & Company, “Ten Forces Shaping U.S. Financial Services,” June 2022

of credit union leaders surveyed ranked the emergence of DeFi as a top-three trend to act on.

1% ONLY

ranked it as the No. 1 trend to act on 1

0%

25

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THE FINANCIAL BRAND INSIGHTS FALL 2022

THE FINANCIAL BRAND INSIGHTS FALL 2022

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