Key Trends in Banking Products - CREDIT UNIONS
There are 5 main trends in banking products/services that credit unions in the United States are/will be adopting in the coming year: 1) artificial intelligence, 2) digital banking, 3) loan diversification, and 4) cloud security.
Because credit union banking products have been limited comparitively to large or small banks, trends specifically related to middle/middle upper class families cannot be pinpointed. However, we were able to assess that middle class families are the majority of credit unions' current customers. While we may not be able to concretely make the direct assumption that banking products are created directly for this demographic, it is still valuable to note the current customer trend in congruence with the current product trends and muse about the potential correlation.
Below you will find current trends in banking products that credit unions are developing, as well as trends in credit union growth and demographic stratification of credit union customers. In combination, this data should provide a clear picture of credit union product development and what their target consumer looks like.
While specific past trends in credit union banking products for mid-market consumers could not be located, we were able to identify future product trends (without demographic specificity) by looking at global research studies of banking trends and financial experts' predictions. We checked for leading news publications and press releases of Credit Unions in search of new products launched and found a handful of trends. We also found the top 5 credit unions and looked for any published information on their websites regarding trends in products that they launched and were able to find trends in product launches there. These 5 credit unions are Navy Federal Credit Union, State Employees Credit Union, PenFed, BECU, and SchoolsFirst Federal Credit Union. Via these channels, we were able to select the 4 most popular banking product trends among credit unions, which we have detailed for you below.
1. Artificial intelligence trend
In the coming year, more credit unions will implement artificial intelligence (AI) in their service sector. Virtual, computer-powered customer service agents will infiltrate banking services as "a response to the rise of conversational commerce as well as a more personal shift to digital banking" (Symitar). Credit unions hope this will also create more impactful engagement with customers and help prevent fraud.
2. digital banking trend
With the ever-increasing prevalence of mobile devices, credit unions will continue to develop more involved versions of digital banking for their customers. The top strategic priority of 2018 among US credit unions and banks was deemed "redesign/enhance digital experience for customer" in a recent study conducted for the Digital Banking Report. In the same suit, credit unions will continue to develop their online platforms for individual consumers, as well as extend service to business accounts in an effort to differentiate themselves as banking becomes more competitive.
3. loan diversification
Credit unions will offer more small business loans in an effort to grow those balances and will try to increase the diversity of the types of loans offered in response to the National Credit Union Administration relaxing regulations on number/type of loans. While we cannot relate this directly to mid-market consumers, we can assume that these actions will be enticing to such a demographic.
4. cloud security Trend
We expect a trend in increased digital information storage security so they can offer customers the highest level of financial safety. Credit unions will implement "voice authentication tools" in addition to fingerprint security in an effort to secure information for customer safety and satisfaction. Credit unions will continue to invest in cyber protection.
credit union demographics
While product-specific data in relation to mid-market consumers was unavailable, we were able to pull demographic data about credit union customers, showing that credit unions primarily service customers with household incomes between $48,264 and $66,783 (Filene Research). With mid-market defined at $50k-$150k income, many of these customers will fit the bill.
In the US, people overwhelmingly utilize banks over credit unions. Of the mid-market consumer base, this is the breakdown of credit union usage:
-Household income of $60,000:
10% Predominantly use credit unions
12% Use credit unions only
-Household income of $80,000:
15% Predominantly use credit unions
10% Use credit unions only
-Household income of $100,000
20% Predominantly use credit unions
5% Use credit unions only
The remaining percentages predominantly bank, use banks only, or do not bank. It is clear that bank usage far outweighs credit union usage. This may give us insight to credit unions' large remaining potential consumer base, as well as what their competition looks like.
Concerning age demographics, the stratification of credit union usage is as follows (these are NOT limited to middle class household incomes):
30.6% Credit union only
21.3% Predominantly credit union
31.1% Credit union only
35.3% Predominantly credit union
24.8% Credit union only
29.7% Predominantly credit union
13.6% Credit union only
13.7% Predominantly credit union
The remaining percentages predominantly bank, use banks only, or do not bank. Of age groups, we can see that people aged 35-49 are most likely to use credit unions over the over age groups.
We cannot make any direct assumptions about products targeted at this consumer base, but we can look at the correlation and muse about the potential of banking product trends to have been catered to credit unions' existing common demographic served.
growth trends for credit unions
It is important to look at growth trends for credit unions so we can continue to muse about possible correlations to products offered, although we are unable to make concrete trend evaluations with the information available.
Market research suggests that credit union numbers have decreased, but credit union membership has grown. According to the Credit Union Trends Report, "as of April 2017, CUNA estimates 5,926 credit unions were in operation, 27 fewer than March. During the first four months of 2017, approximately 96 credit unions ceased to exist because of mergers, purchase and assumptions, or liquidation." The report states that we can expect credit union numbers to continue to decrease as a result of competitive pressures from larger institutions.
Membership in credit unions overall has increased, however, with the majority of members gained "at credit unions with assets over $1 billion, due to organic growth and mergers" (Trends Report).
We might expect further growth for credit unions, however, as "new regulations that took effect in January 2017 expand credit unions’ capacity to make commercial and industrial loans and commercial real estate loans, together known as member business loans (MBLs)." As credit unions respond, we can see the aftershock in credit unions providing more small business loans and diversifying their loan portfolios, which may be enticing to mid-market consumers.
As credit union numbers drop and membership grows, the competition between credit unions and banks may shift, pushing credit unions to adapt and offer different banking products. While we cannot link the two directly at this time, it is important to hypothesize.
In summary, the 4 trends in banking products we are seeing and will continue to see this coming year are 1) artificial intelligence, 2) digital banking, 3) loan diversification, and 4) cloud security. We were unable to identify product trends specific to mid-market consumers, but we were able to find that credit unions primarily service customers with household incomes between $48,264 and $66,783 and the age range most likely to use credit unions are people aged 35-49. If we make the assumption that credit unions are catering to their current frequent users, then we can assume that the current product trends are in relation to these demographics. However, we cannot make this assumption with certainty based on the information available.