Digital Loan Offerings Become Cost-Effective Way for Credit Unions to Court Millennials

Offering new consumer-facing loan tools to digital-savvy customers doesn’t have to burst budgets.

Credit unions have a long-standing reputation for being customer-centric but are caught in the middle when it comes to offering the digital innovations today’s banking customers demand between their larger and smaller competitors. Major commercial banks generally have a larger budget to create or host consumer-facing financial tools, and FinTechs may have an agility advantage in this highly competitive space, especially smaller ones.

However, as millennials increasingly make up a larger share of open loan holders, credit unions have a unique opportunity to utilize their 86% satisfaction rate in appealing to this digital-first generation by offering more streamlined tools at the lower rates credit unions can generally offer.

Some are passing up this opportunity, as further PYMNTS studies have found a lag in personal loan innovations, even among credit unions considering themselves “early launchers.”

This oversight by some credit unions could sharply limit their attempts to appeal to millennials, who overwhelmingly cite convenience and ease of use as primary drivers when choosing financial institutions. At a possible lower cost of uptake and implementation than other customer loyalty offerings, tools to simplify mortgage and other loan applications may be particularly poised to draw in long-term (or even lifelong) customers in this demographic.

These solutions are already beginning to crop up in the space. One commercial credit union competitor, PNC, has been digitizing loan applications as a customer loyalty and retention strategy. In September, it announced a partnership with cloud banking software firm Blend, in order to digitize its mortgage process. The partnership’s goal is to streamline the process for both applicants and employees, and customers can submit a mortgage application as well as import payroll and other financial information onto a single platform.

Another consumer loan giant, JG Wentworth, is also investing in innovative loan offerings. Last month, it acquired personal loan FinTech Stilt in order to incorporate Stilt’s platform into its online capabilities. The acquisition will allow JG Wentworth consumers to choose between an all-digital and fully automated loan origination model, as well as one aided by the company’s call center.

Credit unions may combine their historically customer-first mission while being inspired by the digital-first strategies implemented by such larger competitors as PNC and JG Wentworth. However, while following the lead of larger financial institutions in offering more streamlined loan tools, some credit unions — especially more resource-constrained ones — may consider seeking a third-party partner that already offers tools that can streamline loan processes. By combining their customer service abilities with loan tools to service the needs of the digital-savvy customer, credit unions may capture clients at the all-important start of their personal loan journey.