• Steve Round, Founder at SaaScada


• 28.03.2023 06:30 am
#banking

Back in 1800 BC, people believed that temples were the safest places to store money, so they became the first banks. For centuries, their goal was the protection and growth of wealth for traders and wealthy families.

Credit unions and building societies grew out of a very different aim. The first credit unions and building societies were founded in the 18th century by friendly societies. These societies were created to enable communities to pool their contributions to mutual benefit, provide insurance, and facilitate peer-to-peer lending. Today those same ideals remain.

As member-owned, not-for-profit financial services organisations, credit unions and building societies exist to help people with a common bond – whether it’s a local community, industry, or other unique quality that brings people together in a community of common interest. Put simply, it is people pooling together their money and lending to each other at a fair rate of interest. But as operating costs skyrocket, how can these smaller firms compete against goliath financial institutions and serve their members effectively?

Getting on a level playing field

Credit Unions do have an extensive understanding of their members. But, in today's banking landscape, customers expect a full suite of online services and digital banking features alongside traditional branch services.

Big banks with deep pockets are leading the way here, as they can drum up millions or create digital banking services that meet customer needs – such as personalised lending solutions, promotional offers tailored to customer spending habits, or budgeting alerts.

To modernise and reach a level playing field, credit unions must be smart, using the very best value for money technology that will allow them to deliver first-class ‘banking’ products to their members. That means choosing technology that enables them to create feature-rich products and services that help members to better manage their money.

That same core banking technology can harness data to give better customer insights, allowing credit unions to supplement their strong understanding of their members with data on their financial behaviours. This analysis will help them develop competitive new products and services while still serving a common purpose for its members.

Collaboration for better outcomes

Big banks aren’t always known for playing nicely together, but for credit unions, collaboration can be a real differentiator. For example, in Greater Manchester credit unions have banded together to create the SoundPound consortium in response to the cost of living crisis – providing a safe solution for local people who are facing a squeeze on their household finances.

This form of collaboration with local counterparts to exchange ideas and leverage synergies means unions can offer products or services to members that would otherwise be way beyond their budget. Today, many credit unions are looking at the benefits of a central services organisation, where they can share the back-office resources. This enables each credit union to focus on its own members, whilst reaping the cost savings and efficiency benefits of scaling on operational matters.

Until recently, this approach would have been incredibly tough. But with advances in cloud technology, it is now easier for credit unions to work together to source leading-edge core banking systems to create more competitive, innovative banking products and services for their members – allowing them to compete with traditional banks and neo-banks.

Leveraging their most valuable asset

While they may not have the stacked wallets of big banks, credit unions have the willingness to work together to leverage the synergies that come from sharing core banking technology that can drive not only digital services, but also gather real-time data.

This gives credit unions a hugely valuable asset, enabling them to enrich their understanding of their members’ financial needs and tailor products accordingly. It can take many forms, from funding higher education, to helping members avoid exploitative payday loans, or simply creating products with flexible wallet options to help the ‘sandwich generation’ juggle the financial needs of both their children and elderly parents. All these things positively impact the community, while still making sound financial sense for members.

Staying true to purpose without compromise

In challenging economic times, it can be tempting to hunker down and ride out the storm but for institutions such as credit unions, this is when they are often needed most. Staying true to purpose does not mean offering ‘banking lite’ products and services. Leveraging fintech partnerships will enable credit unions to deliver personalised and seamless products and services, gain new members, and improve technical infrastructure – all whilst remaining true to purpose to support their community of members.