Sep 22 '21

Humanizing the Digital Experience: How Virtual Financial Coaching Can Help Credit Unions Win Again on Member Service

Evan Siegel
Evan Siegel
VP of Financial Services AI

Why should a person open an account or apply for a loan with a credit union? Google “why choose a credit union.” The most cited reasons from experts such as NerdWallet and U.S. News are that credit unions have stronger customer service and more competitive interest rates. In 2021, however, the customer service differentiator is debatable, and the interest rate advantage is not compelling.

The days where great bank service meant short branch lines and a staff that knows the member’s name are gone. Today, the digitally native millennials and generation Z, the largest demographic, define winning service as leading technology. Innovations such as “cardless” ATMs, Wells Fargo’s Control Tower, and BofA’s Erica trump relationship banking. In fact, for younger generations, calling customer service or walking into a branch is “too much effort and forced person-to-person interaction” (how terrible!).

Credit unions face a systemic scale disadvantage in the technology acquisition race with mega and regional banks that have multibillion-dollar IT and innovation budgets. It is no wonder that the University of Michigan American Consumer Satisfaction Index (ACSI) has ranked banks ahead of credit unions for the last two years. With the pandemic depressing branch traffic, most likely permanently, credit union’s member service disadvantage will only grow.

With their key competitive differentiators neutralized, credit unions face an existential crisis. But they need not panic. There is a defensible, winning strategy that builds upon credit unions’ historic strength in deeper relationships and better member service.

COVID dealt the credit union movement another strategic blow – historically low interest rates. With savings account interest rates at a measly 0.04% and mortgage rates below 3%, credit unions are left with no room to offer a rate that presents a compelling reason to buy. And the collective wisdom of the bond market, with ten-year treasuries yielding below 1.5%, means that the “smart money” is betting that low interest rates are here to stay for the foreseeable future.

With their key competitive differentiators neutralized, credit unions face an existential crisis. But they need not panic. There is a defensible, winning strategy that builds upon credit unions’ historic strength in deeper relationships and better member service.

That strategy, however, requires credit unions to double down on their stated mission, which usually says something like “a lifelong partner in member financial success” or “committed to member financial well-being.” Building a long-term relationship and delivering guidance to help members achieve their financial goals is the ultimate customer service. A recently released J.D. Power study noted that overall customer satisfaction increases 229 points (on a 1,000-point scale) when customers are offered advice that completely meets their needs. Member receptiveness to financial guidance is likely high since, according to the Financial Health Network, 60% of credit union members are financially struggling.

Building a long-term relationship and delivering guidance to help members achieve their financial goals is the ultimate customer service.

When it comes to helping people achieve their financial goals, credit unions are better positioned than banks to deliver that promise. Credit unions, with their nonprofit structure, exist to serve their members, who are the organization’s owners. In my current role as a technology executive, I speak with dozens of credit union leaders each month about their financial wellness efforts. It is clear to me that the deep commitment to member financial wellness and goal achievement is in the credit union DNA. They are quick to invest in financial wellness and education efforts. U.S. News agrees, noting that credit unions lead in financial counseling and financial literacy resources. By contrast, the largest banks, which command the majority of market share, are shackled with Wall Street’s quarterly earnings yoke.

Prior to my current role, I ran a team of financial health coaches at a megabank. Even though the team was beloved by customers, earning sky high satisfaction scores, and was featured in the bank’s brand advertising campaign, I had to battle to keep the team alive. Finance executives wanted proof of a positive short-term ROI, while compliance executives worried that bankers could go off-script, introducing too much risk. Ultimately, the team was disbanded.

Ensuring that products and channel touch points support member financial goal attainment is a heavy lift, but one that does not require credit unions to recklessly throw resources at the objective. Firms can make major strides implementing this defensible strategy by deploying the latest technologies, a member segmentation strategy, and the unique capabilities of each channel.

  • Advise priority segments in branches – Credit unions can exploit their member relationship advantage by delivering ongoing in-person advice and guidance to their priority member segments (e.g., affluent or emerging affluent). Staff turnover, compliance risks, and the inherent complexity of ongoing financial guidance has made this a difficult strategy to execute – until now. Advances in AI-powered digital engagement solutions by companies such as eGain enable a credit union branch specialist to execute a flawless financial check-up. The AI guides the specialist, based on key member CRM data and check-up answers, to ask the next best question. The result is a succinct, yet holistic assessment where the AI recommends the next best product to help that member achieve their financial goal. Equally beneficial, all branch specialists execute like top performers.
  • Reimagine your digital channel with Virtual Advisor – The banking industry’s sales strategy for the digital channel is to create online brochureware and require consumers to read all the copy and determine the best product for themselves. Just as in the branch channel, AI solutions from firms such as eGain offer a better member experience. The same tool that guides staff in the branch channel can serve all members as their Virtual Advisor, delivering financial check-ups and next best product recommendations.
  • Provide Financial Well-Being for all via Virtual Financial Coach – CUNA recently approved a Unity Statement on the credit union movement’s commitment to advancing financial well-being for all. The good news is that AI-powered digital engagement solutions are changing the landscape and enable credit unions to meet the CUNA challenge. These low cost and quick-to-implement solutions deliver advice that is personalized (driven by conversational AI), ongoing, and always compliant (bots do not go off script). They incorporate gamification and A/B tested behavioral change tactics inspired by behavioral science. Moreover, the digital solutions enable targeted marketing at those key moments of member need and provide full journey reporting.

Will people use a fully automated digital solution to improve their financial situation? Looking at the available data, the answer is an emphatic yes. A recent Aite Group survey of 2,413 consumers found that 58% are interested in using a virtual financial coach to help them meet financial goals. Commonwealth, a non-profit organization working to strengthen the security of financially vulnerable people, had concluded in its new research that conversational AI plays a pivotal role in improving financial security. It found that people who experience financial hardship are three-times more likely to use a financial app than people that did not encounter financial difficulties. Finally, 69% of the individuals who use GreenPath Financial Wellness’s Virtual Financial Coach to help them review their credit report find an error and use the coach to dispute the error, proving that digital solutions are not only used, but also deliver tangible value.

The environment has possibly never been more threatening to credit unions. The good news, however, is that they can use their current strategic disadvantage as a case for action to boldly move to a more defensible strategy -- one where the credit unions lead the financial industry with a value proposition that delivers the advice people need to secure financial wellness and achieve their long-term financial goals. Given advances in AI and digital engagement solutions, the investment to implement such a strategy is manageable, while inaction is unimaginable and may result in the credit union movement slowly withering.