How consumer behaviour is changing and what it means for credit unions and building societies

Over recent years, consumers have become more financially savvy. The emergence of challenger banks and e-money has created strong competition with traditional institutions, with constant innovation in the market to draw in customers.

The many options in the market means that customers are spreading their money across different accounts to meet a range of needs, with the average bank account per person rising from 2.5 in 2014 to 2.8 in 2020.

Changes in consumer behaviour due to pandemic

The COVID-19 lockdowns had a huge impact on how people manage their money. Physical cash usage reduced massively, with just 17% of UK consumers regularly paying in cash in 2020. Cash didn’t fully recover from the pandemic, with 57% of all transactions made via card in 2021.

With less opportunity to visit an ATM and contactless payments encouraged, users have become more reliant on digital banking services to manage their spending behaviour.

Financial literacy and spending behaviour

The shift towards digital banking provided many opportunities for credit unions and building societies to provide a truly tailored service.

Credit unions and building societies are an excellent alternative to high street banks, especially for those who are restricted by their financial situation.

With a smaller customer base, many of whom have similarities, behavioural patterns of members can be identified so the institution can provide real education and guidance on FAQs and spending behaviour. This increases trust in an institution, which in turn creates member loyalty and increases retention.

It also allows institutions to grow with their members, slowly implementing more digital practices at a pace that their customers are comfortable with.

Building society and credit union digital transformation

Managing money is not a one size fits all solution when it comes to consumers. However, credit unions and building societies can get ahead of the high street banks when it comes to digital transformation.

Not only can they introduce digital transformation at a pace more convenient for their members, the information they hold on members, while a much smaller data set, may be more insightful than a high street bank’s.

Lending decisions

Commonalities between members mean that more parameters can be set when it comes to lending.

Introducing technologies that streamline processes can be automated to suit the unique needs of individual credit unions or building societies and their members.

More accurate risk profiles can be created, producing more intelligent lending decisions, and a higher return on investment as members are more likely to repay following an accurate lending assessment.

Embedded financial services

By integrating digital banking into an existing ecosystem, smaller institutions can provide a banking experience that truly competes with the high street banks. Essentially, members want immediate access to their finances, as well as support for their account as a personal crisis can occur at any time.

Instead of a costly build, credit unions and building societies can partner with a solutions provide like Optimus Cards, to integrate existing technology that can be tailored to the specific needs of them and their members.

Institutions can produce a digitally savvy member base without alienating those who prefer more traditional banking methods.

If you’d like to learn more about how Optimus Cards empowers financial institutions through digital transformation, get in touch today.