Credit unions (CUs) have long been a reliable source for credit products such as credit cards, mortgages, auto loans and personal loans. However, with the rise of non-bank and non-CU financial entities offering competitive deals, consumers are increasingly looking for better options.
In “Credit Union Innovation: How Credit Product Rates Impact FI Selection,” PYMNTS Intelligence draws on insights gathered from a survey of over 4,097 consumers, 100 credit union executives and 50-plus FinTech executives to examine consumer criteria for choosing credit products, which in turn determines their choice of financial institutions (FIs).
According to findings detailed in the joint PYMNTS-PSCU study, rates and terms are crucial factors for consumers when choosing a FI. In fact, more than 75% of account holders reported that their primary FIs frequently offer one or more of the four major credit products. However, when it comes to mortgages and auto loans, consumers are willing to shop around for the best interest rates and payment terms.
CU members, in particular, are more likely to switch accounts based on rates and terms compared to non-CU members. Additionally, consumers value the speed with which funds become available after applying for a credit product.
Against this backdrop, reducing the time between application submission, approval and availability of funds is becoming a key factor in attracting and retaining account holders, with nearly 60% of CUs acknowledging that product setup times are highly influential in consumers’ decisions to apply for credit products.
Consequently, CUs are actively reducing the duration for members to access funds from credit products, and 45% say they have already made significant strides, rating their efforts as very or extremely impactful in trimming down credit product setup times.
Specifically, over a third of CUs now enable members to access auto loan funds on the same day they apply, while 36% provide instant access to payday loans. Payday loans are short-term, high-interest loans that provide borrowers with upfront access to a portion of their salary in cash. The ability to access funds from payday loans instantly is crucial for individuals in need of immediate financial assistance.
About 16% of CUs executives also report that their members can use credit-builder loans and debt consolidation loans instantly or the same day, while 15% offer their members same day or instant access to business lines of credit.
While CUs have made progress in reducing setup times, they must also consider offering a wider range of credit products to remain competitive. FinTechs are already capitalizing on the demand for installment payment plans like buy now, pay later (BNPL), directly marketing these products to consumers.
To enhance membership, CUs should take note of the increasing appeal of these installment payment plans and incorporate them in their offerings to effectively attract and retain members. By staying innovative and responsive to consumer needs, they can maintain their position as trusted FIs dedicated to meeting the evolving demands of their members.
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