The Credit Union’s Playbook for Financial Inclusivity and Sustainable Growth

Credit unions (CUs) are at a crossroads. They face various challenges: membership growth, an aging member base, appealing to younger demographics, regulatory pressures, and the need for operational efficiency and tech integration to compete with emerging fintechs.

Yet, these challenges offer a unique opportunity in lending and credit services. With the right strategy, fintech partners, and approach to the next generation of members, credit unions can drive business growth, increase appeal to younger generations, and fulfill their mission of financial inclusivity.

The Current Landscape for Credit Unions: Challenges Abound

One of the most pressing issues for credit unions is membership growth. The average credit union member is now in their mid-50s, a statistic that paints a concerning picture for the future. Less than 20% of Americans under 40 use credit unions, highlighting a significant demographic gap financial institutions must bridge to ensure long-term viability.

Younger generations, particularly Millennials and Gen Z, gravitate towards the convenience and flexibility of national and online banks’ online and mobile banking options. Survey data starkly illustrate this preference: only 26% of individuals aged 18 to 24 use credit unions, compared to 36% who favor national banks like Chase and Bank of America. Among those aged 25 to 34, a mere 14% are credit union members, while 28% bank with national institutions, and a notable 31% prefer online banks.

Those aged 55 and older are among the most loyal credit union members, including 54% of those between 55 and 64 and 60% of those 65+. This loyalty among older generations underscores the urgent need for credit unions to attract and retain younger members.

The task is far from simple. Gen Z and Millennials are digital natives who expect seamless online and mobile banking experiences. They demand the same level of technological sophistication from their financial institutions as their favorite tech brands. For credit unions, which have traditionally excelled in personalized service but lagged in digital innovation, this presents a formidable challenge — a challenge compounded by regulatory pressures.

The competitive threat posed by digital-first fintech companies is rapidly gaining ground, with many offering innovative solutions that appeal to tech-savvy consumers. With their deep-rooted community focus and high trust levels, credit unions must leverage these strengths while adopting new technologies to stay relevant. The task is to blend the old with the new, maintaining the personalized, community-centered approach that sets them apart while embracing a technologically sound approach to attract the next generation of members.

The Lending and Credit Opportunity

Amid these challenges, a unique opportunity exists. Lending and credit services can become a powerful tool for growth and member engagement, particularly among younger generations who face distinct economic hurdles.

Moreover, lending is a core revenue driver for credit unions. By expanding their lending services, CUs can increase their loan portfolios and generate higher interest income. The result is increased financial stability and the ability to attract new members seeking competitive loan products.

By offering tailored lending solutions that address the distinct needs of each member segment, credit unions can position themselves as indispensable financial partners. For example, younger generations, particularly Gen Z, face economic challenges like high student debt and lower real income due to inflation. Credit unions can appeal to these members by offering flexible, affordable lending options that appeal to their specific needs — options like low-interest student loans, first-time homebuyer programs, and innovative credit products that resonate with younger consumers.

The problem is that credit unions — and the entire lending ecosystem — are hamstrung by incomplete and often inaccurate assessments of creditworthiness. Consumers with thin or no credit files make up nearly half of the 100 million people who struggle to access mainstream credit. Much of this could be addressed with the inclusion of alternative credit data, such as payments toward rent, utilities, and other recurring bills.

This data broadens credit access to a wide range of credit “invisible.” Moreover, if credit unions could unlock that data within the digital “walls” of their institution, they would be able to access an entirely new segment of members to whom they could offer an array of lending products while also helping them enhance their credit profiles. It’s a move that benefits the entire credit and lending ecosystem and allows credit unions to maintain sovereignty over their members while attracting new key segments.

Competing with Fintechs Through Tech Integration

Credit unions have a wealth of data on their members, a resource that competing fintechs often lack. By pairing this data with the right technology, CUs can offer personalized, data-driven lending solutions that compete effectively with fintech offerings. Advanced analytics and AI can unlock insights about member behavior, enabling CUs to tailor their products and services to meet specific needs.

Positioning themselves at the intersection of inclusive lending and compliant technology allows credit unions to fulfill their mission while staying competitive. This approach not only broadens the membership base but also keeps members engaged over time without overwhelming regulatory complexities. Bloom stands at this intersection, providing credit unions with the tools to offer inclusive lending through compliant technology. By leveraging consumer-permissioned data (CPD), the Bloom+ solution enables CUs to broaden their membership base and keep members engaged with accurate, efficient credit reporting.

With Bloom +, credit unions empower consumers by allowing them to control the information used to construct their credit profiles. This includes incorporating bank transactions, such as rent and utility payments, typically absent in traditional credit reports but can be highly predictive of risk.

Bloom is a compliant bridge between consumers, credit unions, and bureaus. It offers low- and no-code options for FIs to help customers furnish data accurately and compliantly. This streamlined process ensures that alternative credit data gets reported correctly, providing a fuller picture of a consumer’s creditworthiness.

By adopting Bloom’s solutions, credit unions can enhance their mission of financial inclusivity. They can offer better credit options to underserved members, help them build their credit profiles, and provide more transparent and inclusive financial opportunities.

Conclusion

Credit unions face numerous challenges, but within these challenges lie significant opportunities, especially in lending and credit services. By leveraging technology, staying compliant, and focusing on inclusive lending, CUs can attract younger members, compete with fintechs, and foster a more financially inclusive ecosystem. Bloom’s solutions provide the tools to navigate these challenges effectively, positioning credit unions for sustainable growth and success in the years ahead.