Sponsored by CUES Supplier member FIS
Today’s credit unions face a loyalty problem. The annual churn rate for members can be as high as 25%, and 28% of consumers are open to switching to a new financial institution. That number is even higher among younger consumers: 40% of 18- to 21-year-olds and 35% of 22- to 37-year-olds are considering a move to a different institution.
Much of this attrition can be attributed to competitors, including retailers with co-branded cards and fintech companies offering easier account holder experiences and more lucrative benefits. Instead of focusing solely on card-based rewards, these competitors respond dynamically to their customers’ activity and offer flexible rewards like cash back. Traditional credit unions are working hard to keep up; many are trying to compete by offering higher and higher reward cash-back benefits.
Credit unions are also experiencing attrition due to COVID-19, which is driving the need for digital solutions that facilitate immediate, contactless interactions. Fintech disruptors are not only making it easier for consumers to switch financial service providers, they are offering real-time access to account information, rewards and redemption options that today’s digitally savvy consumers expect.
Staying Relevant in a Shifting Marketplace
To stay relevant and effectively attract and engage members, credit unions must move away from competing on card-only loyalty. They must embrace a more holistic view of member loyalty and implement technology enabling a broader loyalty strategy that:
- Incents account holders for their entire banking relationship, encompassing all accounts and services from credit and debit cards to loans and investments
- Offers a variety of differentiating rewards that add value to the relationship, such as lower interest rates, fee waivers, discounts and cash back
- Provides targeted, personalized promotions that drive long-term engagement
- Responds to changes in the member relationship in real-time
- Generates data analytics and revenue growth plans to help increase portfolio growth
Combining Benefits Is Good for Business
With market competition growing, card-only loyalty programs that work for smaller credit unions may not be enough for larger institutions to retain and grow their member base. Complementing transactional, card-based benefits with a solution that rewards the entire account holder relationship can help larger institutions stay competitive, increase account holder retention and drive profitability.
Mladen Vladic is head of loyalty solutions at CUES Supplier member FIS.