TransUnion strongly believes in credit unions and their mission to serve their members. That's why we're interviewing experts about how credit unions can stand out in an increasingly competitive market. This is the second installment of the series. Read our interview with Sean Flynn here.
Credit unions are known for their commitment to serving their members, and digital transformation helps them protect that legacy, says John Wirth, TransUnion's Vice President of FinTech.
In this interview, he talks about the advantages credit unions bring to the table and how they can build on those strengths to meet consumers' demands.
Question 1. What are the key trends impacting credit unions today?
John Wirth: Credit unions historically have done a phenomenal job of understanding and serving their members. The struggle, however, is how they remain relevant in the digital age. FinTechs and other lenders are offering digital options that are resonating with consumers. To compete, credit unions must offer the same options.
We hear from credit unions that their membership is aging, so they must focus on attracting and retaining new members, especially Millennials and Gen Z, who fall outside their traditional landscape. Another challenge is how to diversify from indirect auto loans, offer more products and build direct relationships with new members.
The solution to both challenges is providing an engaging digital experience that enables members to do more online, while increasing their chances of getting approved for loans, receiving the best offers possible, and extending loans to them in real time. That's becoming a big consumer preference.
Finally, liquidity is a challenge. Credit unions are dealing with loan-to-share ratios at all-time highs. Growing deposits is significant, and that also goes back to attracting new members, while retaining — and remaining relevant — to existing members.
Q2. How can credit unions accelerate their digital lending strategies to meet members' demands for more online and mobile options?
John Wirth: Definitely introducing prequalification online. For credit unions, part of providing the best value to members is enabling them to go online and see what's available to them without negatively impacting their credit score. Beyond just offering prequalification, credit unions should consider upgrading their underwriting so they're providing members with the best offers possible.
That often requires moving from single score to dual score and from traditional data to trended data for a more refined view of members' risk. With better intel, they can approve more loans, but more importantly, offer better value to members.
If you think about it, historically, there's been a disincentive for consumers to shop around and find the best price and product mix. Today, consumers are empowered to see what's out there. When members hop around to other lenders' websites, they're able to see what else is available in the market and quickly gain a sense of the value their credit union provides.
Q3. How do trended and alternative credit data enable credit unions to have a greater impact on their members and the communities they serve?
John Wirth: Credit unions pride themselves on serving in the best interests of their members. From the members' perspective, credit unions can deliver on that promise by approving members for a loan and providing the best offer possible. That's exactly what trended and alternative credit data, combined with advanced analytics, is enabling lenders across the market to do.
Ultimately, it enables them to approve more members without taking on more risk, to price more accurately, and to present offers that are more attractive to their members.
Q4. Credit unions are facing increased competition from FinTechs and other lenders, so what sets credit unions apart?
John Wirth: From a social perspective, credit unions have built good will because they are mission- and community-focused, and they exist to serve the underserved. They're trusted more than other lenders.
From a business perspective, they have a long, rich history with their members. They've developed an intimate knowledge and understanding of them, and they have historical data on them. They understand lending across the different verticals or different lines of business. Plus, they have their branch networks they can leverage to attract deposits, provide advice around different investments, and grow their community.
They have many strengths and resources that they can tap, which could give them a leg up on the competition. With consumers moving toward digital channels and since members are looking for a faster, more responsive service that doesn't require a face-to-face meeting, they need to build on top of their historical legacy and combine it with a robust multi-channel digital experience.
Q5. What's your perspective on the future of data and analytics for credit unions?
John Wirth: It's all very positive. Many forward-thinking credit unions are already adapting to the market, by building out their own digital channels or by partnering with some of the digital lenders. Still, a large part of the market has yet to begin their digital transformation.
Providing an exceptional consumer experience is paramount, through both mobile devices and a website. The third piece is upgrading their underwriting through the use of advanced analytics and broad data assets.
After all, what's the point of spending all the money on building out digital channels and real-time fulfillment if you're still, for example, doing single score underwriting? You might provide a digital experience, but you can't approve as many members or you're not able to price offers competitively.
I think once credit unions build out those capabilities, they will be positioned to compete like they haven't been able to before, and still honor the legacy of what they've been building over decades.
TransUnion enables credit unions to offer more real-time, compelling offers online — without all the risk. Visit our credit union page for more ideas or fill out the form below to connect with a member of our credit union team.